The S&P/ASX 200 Index (ASX: XJO) has returned to its recent strong form, gaining 1.6% last week. Early sales data for May boosted the market on Friday, alongside positive sales results from retailers. According to the ABS, retail sales rose 16.3% in May, with large rises in spending on clothing, footwear, personal accessories, cafes and restaurants.
The technology sector also contributed to gains with the All Technology Index (ASX: XTX) up 1.75%. The resources sector lost ground during the week, with gold miners suffering as investors adjusted risk appetites.
Here we take a look at the 5 ASX shares that sustained the biggest share price losses last week.
Pilbara Minerals Ltd (ASX: PLS)
The Pilbara Minerals share price fell 14.5% last week to close the week at 26.5 cents. The lithium miner was removed from the S&P/ASX 200 late the previous week as part of S&P’s quarterly rebalance.
Lithium prices have continued their downward trend, hitting a fresh low in June as Chinese demand remained subdued despite domestic businesses returning to work. Lithium is an integral component of batteries for electric vehicles. Demand for lithium is expected to pick-up in the second half of 2020 as increased adoption of electric vehicles drives increased demand for battery components.
Pilbara Minerals owns the Pilangoora Lithium-Tantalum project, which has a 23 year mine life. A multi-stage mine expansion is planned with stage 1 currently in production. The stage 2 phased expansion study is nearing completion.
The company is currently moderating production in response to soft market conditions. An extension of China’s electric vehicle subsidy program is expected to boost the lithium-ion battery sector and improve market conditions in the medium to long term.
Mayne Pharma Group Ltd (ASX: MYX)
The Mayne Pharma Group share price dropped 13.6% last week with shares finishing the week at 35 cents. This is the second week in a row that Mayne Pharma has been amongst the worst performers on the ASX. There was no news out of the pharmaceutical company last week to prompt the drop in price, however Mayne Pharma was removed from the ASX 200 late the previous week as part of the quarterly rebalance.
The pharmaceutical company had a disappointing first half performance which saw revenues decline 17%. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 47% to $34.6 million. A net loss after tax of $17.5 million was reported driven by lower earnings and restructuring costs.
Mayne Pharma has faced strong competition on its key generic products. The US generic market has been challenging with aggressive contracting behaviours driving price deflation. The company has been focused on reducing its cost base and rationalising its generic portfolio. Annualised savings of $20 million have so far been recorded.
Fortescue Metals Group Limited (ASX: FMG)
The Fortescue Metals share price tumbled 6.9% last week to close the week at $13.79. Despite last week’s drop, the Fortescue Metals share price is up 93% from its March low. Last week Fortescue announced an emissions reduction goal to reach zero net operational emissions by 2040. This goal includes a reduction in emissions in existing operations by 26% from 2020 levels by 2030.
The miner is a core supplier of iron ore to China, where steel production increased 1.3% year on year in the 4 months to 30 April 2020. Fortescue has reported strong demand for its products with steel inventories drawn down as economic activity recovers. The iron ore price has remained fairly resilient throughout the pandemic.
As at 31 December 2019, Fortescue generated net profit after tax of (NPAT) of US$17 billion. The company used US$9 billion of capital for debt repayment and US$6 billion for dividends. Fortescue is targeting a gearing ratio of 30% to 40% of gross debt. Since FY16, the company has reduced its gross gearing ratio from 45% to 24%.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
The Sydney Airport share price dropped 6.3% last week to finish the week at $6.05. The price drop was at least partially prompted by the May air traffic performance numbers, which were released last Friday. Total passenger traffic in May was 92,000 passengers, down 97.4% on the prior corresponding period.
Some 29,000 international passengers passed through Sydney Airport in May, down 97.7%. Domestic passengers totalled 62,000, a decrease of 97.2% on the prior corresponding period. The decrease in passenger traffic is expected to persist until government travel restrictions are eased.
In April, Sydney Airport secured $850 million of additional bank debt facilities and announced no half year distribution would be paid. Sydney Airport has also implemented a range of cost reduction activities and is targeting a 35% reduction in operating costs for the 12 months from 1 April 2020.
Star Entertainment Group Ltd (ASX: SGR)
The Star Entertainment Group share price fell 6.1% last week to close the week at 6.1%. The was no news out of Star Entertainment last week to prompt the fall, however fears around a second wave of COVID-19 infections may have spooked investors.
Earlier this month, Star Entertainment announced the reopening of Star Sydney on a limited basis. Private gaming rooms have been reopened in addition to a number of food and beverage venues. The reopening is limited to up to 500 loyalty club members on an invitation only basis. Additional visitation is permitted across other areas including hotels and fine dining restaurants with up to 50 seated customers.
Group operating expenses are expected to be around $20 million for the month of June. This is above the $10 million advised while restrictions remain in place. The incremental increase in costs is largely comprised of employee costs related to the staged reopening of Sydney and Queensland venues.
Although venues are reopening, restrictions mean that business volumes will be significantly below normal levels. Star Entertainment is focused on conservatively managing the business as it prepares for a return to more normal conditions as restrictions unwind.
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Motley Fool contributor Kate O’Brien owns shares of Mayne Pharma Group Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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