Warren Buffett released his eagerly anticipated letter to shareholders at the weekend and, as always, it offered up some great advice to investors.

But before we get to that, let’s just take a quick look at the performance of Buffett’s Berkshire Hathaway (NYSE:BRK.A) business.

The letter shows that 2022 was another successful year for the Oracle of Omaha. Although the book value of Berkshire Hathaway’s shares rose by a modest 4% over the 12 months, this was materially better than the return of the S&P 500 index (including dividends), which was negative 18.1%.

That’s an annual outperformance of 22.1% for the year, which is business as usual for Buffett and Berkshire Hathaway. Since 1965, Berkshire Hathaway’s book value per share has increased by an average of 19.8% per annum, which is double the S&P 500 index’s return of 9.9%.

To put that into context, a single $500 investment into Berkshire Hathaway in 1965 would now be worth $14.8 million. Whereas that same investment in the S&P 500 would be worth a touch under $110,000. What a difference!

So, what is the key to generating Buffett returns? One of the keys is starting early.

‘The weeds wither away in significance as the flowers bloom’

Compounding is your best friend when you’re investing, and the earlier you start, the more your friend can help you. Combine that with finding a few winning ASX shares, and you’re on your way to growing your wealth.

In his latest letter, Buffett spoke about the difference great investments can have on a portfolio. He opined:

In August 1994 – yes, 1994 – Berkshire completed its seven-year purchase of the 400 million shares of Coca-Cola we now own. The total cost was $1.3 billion – then a very meaningful sum at Berkshire. The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays. All Charlie and I were required to do was cash Coke’s quarterly dividend checks. We expect that those checks are highly likely to grow. […] These dividend gains, though pleasing, are far from spectacular. But they bring with them important gains in stock prices. At yearend, our Coke investment was valued at $25 billion.

Assume, for a moment, I had made a similarly-sized investment mistake in the 1990s, one that flat-lined and simply retained its $1.3 billion value in 2022. (An example would be a high-grade 30-year bond.) That disappointing investment would now represent an insignificant 0.3% of Berkshire’s net worth and would be delivering to us an unchanged $80 million or so of annual income.

The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.

The post Beginner investor? Warren Buffett says start early! appeared first on The Motley Fool Australia.

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• How to generate passive income the Warren Buffett way with ASX shares
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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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The share price of S&P/ASX 200 Index (ASX: XJO) industrials company Downer EDI Ltd (ASX: DOW) is plummeting after it posted disappointing half-year earnings.

Right now, the stock is down 20.58%, trading at $3.145.

Downer share price crumbles on disappointing earnings

Here are the key takeaways from the engineering, construction, and maintenance business’ first half results:

• $68.1 million of profit ­– a 20.3% fall on that of the prior comparable period (pcp)
• $6.1 billion of revenue – up 2.9%
• $129.8 million of earnings before interest and tax (EBIT) – down 22.5% on the pcp
• Basic earnings per share (EPS) slipped 21.8% to 9.3 cents
• 5 cent per share final dividend declared – down from the pcp’s 12 cent offering

The company said that, while it posted higher revenue, its earnings were impacted by unprecedented weather, labour shortages, and contract and project losses in its utilities segment.

Its utilities segment saw its revenue lift 12.3% to $1.1 billion. However, its earnings before interest and tax and amortisation of acquired intangible assets (EBITA) plunged to a $5.2 million loss.

Meanwhile, its transport segment saw a 1.2% increase in revenue to $2.7 billion while its EBITA fell 14.5% to $88.7 million. Finally, its facilities segment brought it $2.3 billion of revenue and $99 million of EBITA – up 11.8% and 11.1% respectively on the pcp.

Downer’s expenses also rose 3.3% last half to $178.2 million.

What else is going on with the company today?

As readers might remember, Downer revealed a major accounting error in December. It has provided an update on the mistake today.

The company has investigated the errors and is confident the misreporting is only related to one specific contract. All up, the error meant its post-tax earnings were overstated by $22.2 million between April 2020 and June 2022.

The utilities management team responsible for the contract has been replaced while the company has restated its earnings for the impacted period.

What’s next?

The Downer share price might also be being weighed down by the company’s second guidance downgrade of financial year 2023.

It previously dropped its forecasted profit after tax and before amortisation of acquired intangible assets (NPATA) to between $210 million and $230 million

Today, it dropped its outlook for the measure once more to between $170 million and $190 million.

The latest downgrade comes on the loss of a utilities contract, risk of water project losses, a slowdown in Government minor capital works, and the impact of storms and flooding in New Zealand. Though, the company expects the latter to provide opportunities in financial year 2024.

Downer share price snapshot

Today’s plunge sees the Downer share price in the year-to-date red, having fallen 14% since the start of 2023. It’s also currently down 37% over the last 12 months.

For comparison, the ASX 200 has risen 4% year to date and 3% over the last 12 months.

The post ASX 200 share Downer crashes 21% on lower profit and guidance appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Income investors rejoice! The latest Woodside Energy Group Ltd (ASX: WDS) dividend has been declared, and it’s a big one!

This follows the release of the energy giant’s full-year results for FY 2022 this morning.

What happened during FY 2022?

In case you missed it, this morning Woodside posted a 142% increase in operating revenue to US$16,817 million. This was driven by a combination of higher realised prices, additional volume from the BHP Group Ltd (ASX: BHP) petroleum merger, and a strong operational performance.

On the bottom line, things were even better, with Woodside’s profits more than tripling. It reported a 223% increase in underlying net profit after tax to a record of US$5,230 million.

And while its dividends per share didn’t quite grow as quickly due to its increased share count from the BHP merger, it was still a significant jump year over year. Especially in comparison to what we’ve seen from fellow ASX 200 shares during earnings season.

The Woodside dividend

The Woodside board elected to increase its fully franked final dividend by 37% to a record of US$1.44 per share.

Including its interim dividend of US$1.09 per share, this brought the full-year Woodside dividend to a record US$2.53 per share. This was an increase of 87% year over year and represents a total distribution of US$4,804 million.

In Australian dollars, Woodside’s final dividend equates to $2.14 per share, whereas its full-year dividend equates to $3.75 per share. The latter represents a massive 10.8% yield based on the current Woodside share price.

The good news is that it isn’t too late to snap up this final dividend. Woodside shares will trade ex-dividend on 8 March. After which, eligible shareholders can look forward to receiving this dividend the following month on 5 April.

The post The Woodside dividend has just been boosted by 87%. Here’s what you need to know appeared first on The Motley Fool Australia.

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• Woodside share price higher on record US$5.23b profit
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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It’s been a pretty nasty start to the trading week for ASX shares and the All Ordinaries Index (ASX: XAO) so far this Monday. The ASX seems to be suffering from some Monday-itis today, with the All Ords currently down by a significant 1.27%.

But one All Ords share – Bubs Australia Ltd (ASX: BUB) – isn’t joining the pity party just yet.

Bubs shares closed at 28 cents each last week. And that’s where the ASX dairy company will be staying, at least for a while. While the ASX is falling today, Bubs shares are (perhaps mercifully) frozen at 28 cents each.

This morning, just before market open, Bubs released an ASX announcement to the markets. This informed investors that the Bus share price would be suspended from trading.

Here’s what the statement said in full:

Trading in the securities of the entity will be temporarily paused pending a further announcement.

And that’s it. That’s all we know for now.

So why is the Bubs share price frozen today?

So what might be going on with Bubs today? Well, it’s really not clear. However, Bubs shares have been under pressure ever since the company’s latest quarterly update was made public at the end of January.

As we covered at the time, this saw Bubs report revenues of $14.3 million for the three months ending 31 December 2022. That was a 28% drop from what the company reported last year. Half-year revenues also slid, but only by 1% to $37.9 million.

Cash outflows came in at $13.5 million for the quarter, which reduced the company’s cash balance from $64.6 million to $51.4 million.

Upon the release of this update, the Bubs share price cratered by a nasty 11.11%. The company has now fallen almost 21% from where it was before this report was released at today’s pricing:

So perhaps today’s announcement could relate to a capital raising program or some other measure to boost Bubs’ balance sheet. Or it could be something else. We’ll just have to wait and see what Bubs pulls out of its hat. Watch this space.

The post Why is the Bubs share price on ice today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Bubs Australia. 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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The Aeris Resources Ltd (ASX: AIS) share price could be one of the best opportunities in the ASX mining share sector.

For readers that haven’t heard of it before, it’s predominately a copper miner. But, it has exposure to other commodities including gold and zinc.

While its headquarters are in Brisbane, its portfolio (including exploration targets) is across the country in Queensland, Western Australia, New South Wales and Victoria.

The ASX mining share is well-placed for growth

At the end of the FY23 second quarter, it had $67.2 million of cash on the balance sheet and it was debt free. Its balance sheet is in great shape to pursue multiple growth activities.

The business said that it has a “strong pipeline of organic growth projects, an aggressive exploration program and continues to investigate strategic merger and acquisitions opportunities.”

In its FY23 second quarter update, it noted resource upgrades at Golden Plateau (Cracow project) and Turbo (Jaguar project). It also mentioned high-grade copper intersections from drilling at Avoca Tank and Kurrajong (Tritton project).

The ASX mining share is also working on other areas to add resources to grow the business. For example, its Barbara exploration efforts will include a mining study that could result in a potential underground operation “of similar scale to Mt Colin”.

All of the above bodes well for the future Aeris Resources share price, in my opinion.

Copper demand to boom?

Various reporting suggests that copper demand is going to increase significantly as the world moves towards decarbonisation and electrification.

For example, CNBC noted that electric vehicles, solar, wind power and batteries for energy storage all require copper. An electric vehicle needs 2.5 times as much copper as an internal combustion engine vehicle, according to S&P Global. The growing electricity grid will also need a lot of copper.

S&P Global suggested that copper demand will nearly double to 50 million tonnes by 2035.

To me, this suggests that the copper price could rise as well, though I’m not going to try to predict how far it could go.

Compelling valuation

The Aeris Resources share price has risen close to 40% since this article, which suggested that the copper miner could have a good year in 2023.

I still think that the ASX mining share is on track for pleasing shareholder returns from here.

The forecast on Commsec suggests that Aeris could achieve earnings per share (EPS) of 15.1 cents in FY24 and 15.6 cents in FY25, putting it at under 5 times the estimated earnings for those years.

If those forecasts are correct (or conservative) and if Aeris reaches a price/earnings (P/E) ratio of (just) 6, it would be a share price return of over 20%.

Also, with a possible P/E ratio at such a low number, any dividends would end up being a very large dividend yield, though there’s no talk of dividends yet.

Imagine if Aeris keeps making 15 cents per share of EPS and it targets a dividend payout ratio of 50%. A dividend of 7.5 cents per share would be a cash dividend yield of 10.1% and 14.5% assuming the Aussie company generated and attached franking credits.

For now, the ASX mining share’s cash is better spent on growth expenditure.

The post I think this ASX mining share is a hidden treasure waiting to be discovered appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Two ASX tech shares are making big moves today.

Albeit in opposite directions.

The S&P/ASX All Technology Index (ASX: XTX) is down 1.4% following sharp losses posted by tech stocks on the NASDAQ Composite Index on Friday.

But that hasn’t deterred investors from bidding up fintech stock Praemium Ltd (ASX: PPS), which was up 11% in earlier trading and remains up 7.12% at the time of writing.

Bigtincan Holdings Ltd (ASX: BTH) isn’t receiving the same love today. Shares in the company, which provides an AI-powered, online sales enablement platform, are down 3.77%, having earlier posted losses of more than 8%.

Both ASX tech shares are making these big moves after releasing their half-year results for the six months ending 31 December.

Here’s what investors are mulling over.

ASX tech share sinks as losses mount

Kicking off with the earnings results for Bigtincan Holdings, the ASX tech share reported some mixed results for H1 FY23.

On the plus side, revenue from ordinary activities increased 31% from H1 FY22 to $60.2 million.

And annual recurring revenue (ARR) of $130 million represented a record result.

This helped drive a 74% lift in adjusted earnings before income, taxes, depreciation and amortisation (EBITDA) to $2.1 million.

But investors look to be selling off the ASX tech share amid rising costs.

Operating expenses for the half year came in at $70.1 million, up 38% year on year. This saw the company book a loss after income tax of $18.2 million, compared to a loss of $10.5 million in H1 FY22.

That was reflected in a big fall in diluted earnings per share (EPS). That came in at negative 3.97 cents per share, down from negative 2.46 cents per share in the prior corresponding period.

Commenting on the results pressuring the ASX tech share today, Bigtincan CEO David Keane focused on the company’s boost in recurring revenues:

We are pleased to deliver another record ARR result in 1H FY23, with the Company continuing to deliver market leading products, win important customer deals, and progressing our commitment to materially improved adjusted EBITDA…

1H FY23 our Multi-Hub strategy continued to benefit the business with Multi-Hub ARR growing from 17% in the previous corresponding period, to 29% of total ARR at the end of 1H FY23.

The company reconfirmed its full-year guidance.

Which brings us to…

Praemium share price lifts on profit growth

The Praemium share price is charging higher post its half-year results.

The ASX tech share reported the divestment of its international operations was completed on 30 June. Its Australian segment is now the company’s sole focus.

Investor interest looks to be piqued today by a big lift in statutory net profit after tax (NPAT) to $9.1 million. Revenue of $35.4 million was up 17% year on year.

Praemium also reported record half-year EBITDA of $11.4 million, up 52% from H1 FY22.

Also during the six-month period, the company paid a 5 cents per share, fully franked special dividend on 10 August. And it kicked off a $25 million share buyback, with $6.6 million deployed as at 31 December.

Funds under management on the investment platform grew 6% from 30 June to reach $42.7 billion.

Commenting on the results boosting the ASX tech share today, CEO Anthony Wamsteker said:

The 2023 financial half-year has seen key strategic decisions pay off with increased profitability and enhanced shareholder returns. This result, derived from strong net funds flow, margin expansion and discipline on costs, has delivered a step change improvement in operating leverage.

The post 2 ASX tech shares making massive moves right now on earnings updates appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bigtincan and Praemium. The Motley Fool Australia has positions in and has recommended Bigtincan. The Motley Fool Australia has recommended Praemium. 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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The Origin Energy Ltd (ASX: ORG) share price has rocketed to its highest price since the onset of the COVID-19 pandemic amid the company’s takeover talks.

The energy producer and retailer is currently the subject of a long-standing takeover bid from a consortium made up of Brookfield Asset Management and MidOcean Energy.

Right now, the Origin share price is $8.16, 0.99% higher than its previous close. That’s also its highest point since February 2020.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is plummeting 1.4% right now.

Meanwhile, the company’s home sector – the S&P/ASX 200 Utilities Index (ASX: XUJ) – is down 0.29%, with stock in peers AGL Energy Limited (ASX: AGL) and APA Group (ASX: APA) falling 0.51% and 1.52% respectively.

Let’s take a closer look at what’s been going on with the Origin share price lately.

Origin share price hits 3-year high on Monday

February has been a big month for the Origin share price, and an ultimately fruitful one at that.

That’s despite the stock plummeting 3% on the back of the energy giant’s half-year earnings, released on 16 February.

Within them, Origin revealed a $44 million underlying profit – down 83% year-on-year – and a 4% drop in earnings, coming in at around $1 billion. It also declared a 16.5 cent final dividend – up 32% year-on-year.

Fortunately, the stock gained back its earnings slump, and then some, when the company’s suitor seemingly surprised the market by only lowering its takeover bid by 10 cents per share following an extended period of due diligence.

The offer now stands at $8.90 per share. That will be reduced by the value of any dividends paid to Origin investors before the deal closes, including the company’s recently declared final payout.

Origin still thinks the offer could deliver significant value to investors and, thus, will continue engaging with the consortium.

The Origin share price is currently 7% higher than it was at the start of 2023. It has also gained 43% since this time last year.

For comparison, the ASX 200 has lifted 4% year to date and 2% over the last 12 months.

The post Why did the Origin share price just hit a 3-year high? appeared first on The Motley Fool Australia.

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• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why Origin, Santos, Service Stream, and WiseTech shares are racing higher
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• Origin Energy share price drops on underlying profit tumbling 83%

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brookfield Asset Management. The Motley Fool Australia has positions in and has recommended Apa Group. 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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Shareholders of AMP Limited (ASX: AMP) will soon be allocated their entitlement to the 2022 financial year final dividend.

AMP investors have had to wait for a few years since the last dividend payment. But a return to profitability and successful divestment of assets has meant that AMP has some money to return to shareholders.

AMP dividend details

AMP announced with its 2022 financial year result that it’s going to pay a final dividend of 2.5 cents per share, with a franking credit level of 20%.

This came after the business generated an underlying net profit after tax (NPAT) of $184 million. Its statutory net profit after tax was $387 million, which was a large turnaround from the $252 million loss in FY21.

The announced dividend is part of a $1.1 billion capital management program, which has also involved a share buyback.

In terms of the dates, the AMP dividend is going to be paid on 3 April 2023.

However, the ex-dividend date is 1 March 2023. That means that investors who want to receive the dividend need to own shares before this date. In other words, an investor needs to own shares by 28 February 2023 (tomorrow) to receive the dividend from AMP.

AMP also said that there is an option to utilise the company’s dividend re-investment plan (DRP). The financial share said that the DRP election date is 3 March 2023 at 5pm, with no discount applied to the DRP price.

Will there be more payments to come?

When talking about its capital position and shareholder returns, AMP said that it continues to maintain “prudent” levels of capital given the challenging macroeconomic environment.

Its FY22 capital position of $3 billion includes $1.4 billion to meet regulatory requirements, a $699 million board buffer to cover potential impacts of operational, market, or regulatory change as well as product-related risks, and $923 million of surplus capital.

Target capital levels are expected to “reduce” after the completion of the remaining AMP Capital sales.

Of the $1.1 billion capital return to shareholders, it is working on a $350 million share buyback, with $267 million completed at 31 December 2022.

The announced dividend will return $400 million.

AMP said that there will be other capital management initiatives in FY23, with up to $350 million to be announced to complete the $1.1 billion commitment.

Whether it’s a dividend or share buyback, it seems AMP is planning to send more capital to shareholders in 2023.

AMP share price snapshot

Despite the positive news, the AMP share price is down 17% since the start of 2023.

The post Hoping to bag the newly reinstated AMP dividend? Read this appeared first on The Motley Fool Australia.

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• 7 ASX 200 shares with ex-dividend dates next week
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Are AMP shares finally cheap enough to buy following Thursday’s 13% crash?
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• The AMP dividend is back! Here’s what you need to know

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Kogan.com Ltd (ASX: KGN) share price has rebounded from a poor start.

In late morning trade, the struggling ecommerce company’s shares are up 3% to $3.52.

This follows the release of its half-year results earlier today.

Kogan share price higher despite sales decline

• Gross sales down 32.5% to $471.1 million
• Revenue down 34.3% to $275.6 million
• Gross profit down 41.8% to $62.9 million
• Statutory loss after tax of $23.8 million
• Adjusted loss after tax of $9.6 million

What happened during the half?

For the six months ended 31 December, Kogan reported a 34.3% decline in revenue to $275.6 million.

This reflects a decline in active customers and significant weakness in its Exclusive Brands and Third-Party Brands sales caused by consumers shifting back to in-store shopping following the pandemic. Though, it is worth noting that this didn’t stop rival Amazon Australia from growing its sales very strongly during the last 12 months.

One thing that has been impacting Kogan over the last couple of years has been its failure to manage inventory efficiently. It loaded up on stock during the COVID ecommerce boom and was left with excess inventory when shoppers shift back to previous habits.

The good news is that Kogan accelerated the right-sizing of its inventory during the half, with group inventory levels reducing to $98.3 million from $137.9 million at the end of June and $159.9 million a year earlier. This allowed the company to achieve operational efficiencies during the first half. Variable costs fell 39.6% to $59.4 million and fixed costs reduced by 9.9% to $55.5 million.

However, this couldn’t stop Kogan from posting a statutory loss after tax of $23.8 million for the half. On an adjusted basis, the company’s net loss came in at $9.6 million.

Management commentary

Kogan’s under-fire founder and CEO, Ruslan Kogan, commented:

We’re pleased to be emerging from a turbulent few years. The ship has steadied, we have a renewed focus on the ruthless efficiency that’s underpinned our entire existence, and we have doubled down on delivering great value for customers.

The first half delivered on multiple fronts. We were pleased to welcome 500,000 Brosa subscribers to the Kogan.com community following our acquisition of one of Australia’s largest online furniture retailers. Our Verticals, namely Kogan Mobile Australia, Kogan Mobile New Zealand and Kogan Money Credit Cards, grew YoY as we provided services at incredible prices. Mighty Ape saw the successful transition of Gracie Mackinlay to CEO and received multiple awards for exceptional customer service. And Kogan First continued to grow as we delivered more and more value for our most loyal customers.

Outlook

Although its sales were still down 33.2% in January, Kogan managed to record a small EBITDA profit for the month. This was thanks to gross margin improvement and operating cost reductions.

Ruslan Kogan concluded:

We look forward to the second half of this financial year with confidence. We have reset Kogan.com for success, and in doing so, have ensured we continue to delight our millions of Customers during these challenging times.

The post ‘The ship has steadied’: Kogan share price climbs on first-half results appeared first on The Motley Fool Australia.

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The Lynas Rare Earths Ltd (ASX: LYC) share price is struggling at the start of the week.

As we approach midday, shares in the rare earths miner are down 4.35% to $8.13 apiece. The negative move follows the release of the company’s first-half results for FY23.

Let’s check the highlights below:

Lynas share price retreats on falling earnings

• Net revenue up 18% from prior corresponding period to $370 million
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) flat at $189 million
• Cost of sales growth outpacing revenue growth — increasing 31.9% to $185 million
• Net profit after tax (NPAT) fell from $156.9 million to $150.1 million, down 4.3%
• Total rare-earth-oxide (REO) production increased 7.9% to 7,957 tonnes
• Average selling price per kilogram of REO lifted 8% to $52.50

It’s a mixed bag from Lynas for the six months ended 31 December 2022. On the one hand, the rare earths miner was able to increase production, realise a higher average price, and deliver improved revenue compared to the prior corresponding period.

On the other hand, Lynas saw costs grow at a faster pace than the top line in the first half, crimping the company’s margins. Unlike the past 18 to 24 months, profits failed to continue a rocket-like trajectory — slipping 4% year-on-year.

According to the report, the main cost drivers in the half were increases in chemical prices, utility tariff rates, employee costs, and royalty costs.

What did management say?

The reduced profitability from Lynas might be disappointing, but the result could have been worse given the challenges faced. A similar perspective was shared by CEO and managing director Amanda Lacaze:

This has been an eventful half year for Lynas with the announcement of our Mt Weld capacity expansion project and accelerated construction activity on the Kalgoorlie Facility. At the same time, in Malaysia we overcame significant water supply issues to deliver a strong production result.

In addressing the cost pressures which Lynas contended with during the half, Lacaze said:

Our team remains focused on increasing operational efficiencies to mitigate the continuing high-cost environment. At the same time, increasing production to meet strong demand from our key customers and delivering on our exciting growth projects remain key priorities.

What’s next?

There are several key developments taking shape for Lynas. Arguably the most important is the appeal of conditions set under the recently renewed Lynas Malaysia operating license.

The current prohibition of importing and processing lanthanide concentrate would result in the closure of the company’s cracking and leaching plant from 1 July 2023. Hence, Lynas has appealed to the Minister of The Ministry of Science, Technology, and Innovation.

At this stage, a number of possible ramp-up scenarios are being considered if the conditions are not removed.

Furthermore, progressing construction at the Kalgoorlie Rare Earths Processing Facility will be an important priority for the company. Key operational leadership personnel has now been recruited for the facility as processing is targeted for the fourth quarter of FY23.

Lynas share price under the microscope

The Lynas share price peaked in January 2022 at around $11.10 and has been on a steady decline since.

Over the past 12 months, shares in this mining company have fallen 19% in value. Whereas, other mining giants with greater exposure to iron ore and copper have been much more resilient. For instance, the BHP Group Ltd (ASX: BHP) share price is down 3.9% during the same stretch of time.

The post Lynas share price slips as costs jump 32% appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has positions in Lynas Rare Earths. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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