The S&P/ASX 200 Index (ASX: XJO) fell by around 0.5% today to 6,885 points.

It was one of the busiest days of reporting season so far, with some major movements in both the gains and declines sections of the market.

Here are some of the highlights from today:

EML Payments Ltd (ASX: EML)

The EML share price was the best performer in the ASX 200 today after it reported its FY21 half-year result.

It reported that gross debt volume (GDV) increased by 54% to $10.2 billion, which drove revenue higher by 61% to $95.3 million.

The earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 42% to $28.1 million and underlying net profit rose 30% to $13.2 million. The ASX 200 share also reported underlying operating cash inflows grew by 68% to $35.1 million.

EML re-instated its EBITDA guidance range, it’s expecting EBITDA to be between $50 million to $54 million (up 48% to 56%) for FY21 whilst underlying net profit is expected to be between $30 million to 33.5 million (up 25% to 40%).

The company ended the period with $136.5 million of cash.

Webjet Limited (ASX: WEB)

The Webjet share price rose by 5% today after the travel business reported its FY21 half-year result.

The ASX 200 travel business reported that its total transaction value (TTV) was down 89% to $267 million because of COVID-19 impacts. Revenue declined by 90% to $22.6 million.

A focus on expenses and reducing the cash burn saw underlying costs fall 52% to $62.7 million. The monthly cash burn is down to $4.8 million, the company had a cash balance of $283 million.

Reducing costs by around half wasn’t enough to stop underlying EBITDA plunging to a loss of $40.1 million. The underlying net loss was $60.5 million, with the statutory net loss being $132.2 million which included a number of non-cash items.

Webjet revealed that its online travel agency (OTA) business has returned to profitability due to its focus on the domestic leisure market and the ability to utilise its variable cost base.

Rio Tinto Limited (ASX: RIO)

The big ASX 200 miner reported its FY20 result this afternoon.

It reported that it generated US$15.9 billion of net operating cashflow, an increase of 6%. Rio Tinto also made US$9.4 billion of free cashflow, up 3%. Net earnings rose 22% to US$9.8 billion.

The high level of profit and cashflow allowed Rio Tinto to declare a 26% increase to the annual dividend to US$5.57 per share. It also declared a special dividend worth US$0.93 per share for investors. Including the special dividend, the FY20 dividends represented a 72% dividend payout ratio.

Rio Tinto was also able to reduce its net debt by US$3 billion to US$0.7 billion during the year.

Heavy declines in the ASX 200

There were some big declines today in the ASX 200.

The worst performer was the Zip Co Ltd (ASX: Z1P) share price which fell 14% after yesterday’s price query from the ASX.

Gold miner Evolution Mining Limited (ASX: EVN) suffered a 10% share price decline after reporting its result.

The Appen Ltd (ASX: APX) share price fell more than 9% after it was on the receiving end of a negative broker report.

More reading

• Share prices of travel shares soar, Corporate Travel (ASX:CTD) and Webjet (ASX:WEB) report
• Webjet (ASX:WEB) share price soars to 5% increase in late trade
• Rio Tinto (ASX:RIO) share price on watch after announcing special dividend
• Here’s why the Appen (ASX:APX) share price is sinking
• 2 high-yielding ASX 200 shares

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Eagers Automotive Ltd (ASX: APE) share price could be on watch tomorrow, following the circulation of plans to start selling cars at shopping centres and airports. The car sales conglomerate, formerly known as AP Eagers, closed down 2.2% today at a price of $13.87.

Cars in a mall, get ready for it

Reportedly, the Eagers conglomerate that delivered 10% of new cars sold in Australia last year plans to open showrooms in shopping centres by the end of this year. Multiple stores are being removed and made way for the supermarket-sized display area expected at the Indooroopilly shopping centre.

On top of this, Eagers will also begin construction of a 90,000 square metre complex near the Brisbane airport that will be accompanied by a 2.5-kilometre test track. The mega facility will also have over two dozen showrooms and service centres. This development would be one of the biggest in the world.

The airport facility is anticipated to be operational in 2023, with preparations already underway to begin construction.

The rationale behind this new approach explained by COO, Keith Thornton, is to engage potential customers in new ways in a stress-free environment. Adding, “The great thing about a shopping centre showroom is our customers are already going there.”

A shift in shopping centre utilisation

Following the aftermath of COVID-19 on traditional bricks-and-mortar stores, as well as the continued digitisation of shopping in general, businesses are finding new ways to adapt. It is becoming a common theme that shopping centres are shifting towards a more experiential destination.

Many shoppers probably weren’t thinking of trying their next car as part of the new mall experience, but who’s complaining?

AP Eagers share price snippet

It has been a solid 12 months for Eagers shareholders, witnessing the share price rise 51.4% over the period. It hasn’t been without its nail-biting times though. Shares in the auto group fell to a 52-week low of $2.50 in March, before steadily climbing to today’s $13.87 price point.

The company’s market capitalisation is now $3.64 billion.

More reading

• ASX 200 down 0.3%: Crown CEO hasn’t resigned, Mirvac update, Nearmap remains halted
• 3 forgotten ASX stocks left behind in the car sales recovery
• Why these brokers think today’s Eagers Automotive (ASX:APE) share price is a bargain
• Brokers list the latest ASX shares to buy in this market meltdown
• Why the Eagers Automotive (ASX:APE) share price is on watch today

Motley Fool contributor Mitchell Lawler 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 Bruce Jackson.

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In what may be a catalyst for ASX cannabis shares, a private company today gained approval to grow medicinal cannabis in Western Australia.

As reported by the ABC, the private medicinal cannabis company Elite Cannabinoids has received approval for growing a range of different cannabis strains at a secluded location 800km north of Perth.

High-level details for Elite Cannabinoids

Elite Cannabinoids recently gained its license for growing medicinal cannabis. The company will now be able to utilise 46 hectares of land in the production of cannabis. Additionally, the company expects to have an onsite pharmaceutical manufacturing facility. The combined enterprise should generate more than 60 jobs for the Gascoyne region.

In the words of Elite Cannabinoids CEO Sebastian Cox, “It will be one of the biggest medicinal cannabis facilities in the southern hemisphere.”

Mr Cox further explained that the Gascoyne region was exceptional for the operation due to the high solar exposure, low biosecurity risks, and good water security.

The facility will be positioned to accommodate the demand of patients throughout Australia, with the added potential of expanding to international markets. As such, the company will begin with 253,000 cannabis plants in the first stage of operations. Production is anticipated to be in the works by 2023.

What does this mean for ASX cannabis shares?

Any correlation between Elite Cannabinoids approval and other companies is speculation. However, it does indicate there is still an existing demand for medical uses of cannabis. As mentioned in the ABC report, the Australian Institute of Health and Welfare estimates 600,000 Australians currently use it for medical purposes.

Australia legalised production and cultivation in 2016, which invoked pot stock mania in 2017. Since then, the sector has been rather quiet, with many shares falling back to reality. The big potential yet to be unlocked is legalisation for recreational use in Australia.

A few ASX-list players in the game include Ecofibre Ltd (ASX: EOF), Cann Group Ltd (ASX: CAN), Zelira Therapeutics Ltd (ASX: ZLD), and Althea Group Holdings Ltd (ASX: AGH).

Notably, the best performers in the last year have been Zelira and Althea. Shareholders would be happy with appreciations of 38% and 47% respectively. In contrast, the others have experienced falls of 40% or more. Internationally it is a very competitive landscape for these companies, but the market is still budding.

More reading

• Here’s why the Cann Group (ASX:CAN) share price is in a trading halt
• How did ASX cannabis shares perform in 1H FY21?
• Why the Cann (ASX:CAN) share price is pushing higher
• Why the Ecofibre (ASX:EOF) share price is crashing 16% lower today
• Why AMP, Ecofibre, Magellan, & Vita shares are sinking today

Motley Fool contributor Mitchell Lawler 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 Bruce Jackson.

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The Wesfarmers Ltd (ASX: WES) share price will be on watch for a couple of reasons on Thursday.

As well as releasing its half year results, the conglomerate has just provided an update on its lithium operations.

What did Wesfarmers announce?

After deferring its final investment decision (FID) for the Mt Holland lithium project in January 2020, Wesfarmers and its joint venture partner, Sociedad Quimica y Minera de Chile S.A. (SQM), have now come to a final decision on the project.

According to the release, full funding will be committed upon receiving environmental approvals for the Kwinana refinery, which are anticipated in early FY 2022.

The company also advised that it has completed an updated definitive feasibility study (UDFS) for the Mt Holland lithium project.

The UDFS has provided greater certainty regarding the project’s engineering design and capital and operating costs. Furthermore, it has led to an increase in concentrator and refinery production capacity from 45,000 tonnes per annum to approximately 50,000 tonnes per annum of battery grade lithium hydroxide.

In addition, the UDFS includes increased flexibility to provide for a second phase of the project to expand production capacity at Mt Holland and the Kwinana refinery. Management advised that preliminary work to evaluate expansion options will commence in parallel with the construction of the first phase of the project.

Wesfarmers’ share of capital expenditure for the development of the project is estimated at approximately $950 million and will be funded using existing cash and debt facilities.

When will Wesfarmers be producing lithium?

Following receipt of all relevant approvals, construction of the mine, concentrator, and refinery are expected to commence in the first half of FY 2022.

After which, the first production of lithium hydroxide is expected in the second half of the 2024 calendar year.

Wesfarmers’ Managing Director, Rob Scott, is very positive on the project and expects it to create value for shareholders.

He said: “The development of the Mt Holland lithium project presents an attractive investment for Wesfarmers shareholders. The project capitalises on our Chemicals, Energy and Fertilisers divisions’ chemical processing expertise and Western Australia’s unique position to support growing global demand for electric vehicle battery materials which will make a crucial contribution to global efforts to reduce greenhouse gas emissions.”

“We have been pleased with progress of discussions with key battery manufacturers, which reflect a positive outlook for battery quality sustainably sourced lithium hydroxide,” he concluded.

More reading

• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• Wilson Asset Management thinks these 2 ASX shares are a buy
• 2 blue chip ASX dividend shares to buy today
• ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
• 2 super ASX 200 shares to buy for your retirement portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The BPH Energy Ltd (ASX: BPH) share price saga continues today after the company’s shares were placed in a trading suspension, soon followed by a trading halt.

BPH shares started the trading day at 13 cents apiece and dipped to 12 cents soon after. But someone lit a rocket under the company around 1pm which saw the BPH share price explode up 73.6% all the way to 22 cents each by 2pm. But that’s where it ended for BPH for the day.

At 2.56pm, the company released a market announcement that told investors trading would be suspended pending a further announcement. Then at 3.38pm, another update was released. This told investors that the ASX would suspend BPH shares from trading until at least Friday 19 February, or whenever this announcement is finally… announced.

Today’s move is just the latest chapter in what has been a very dramatic saga to watch. Back on 21 January, BPH shares were only 5 cents each. But by 28 January, the company was asking as much as 33 cents a share, a 560% surge in around a week. The catalyst?

Well, it’s a little unclear. But soon after this move (on 1 February), BPH Energy announced it proposed to use the drilling program in the Sydney Basin to investigate the potential for a carbon, capture and storage (CCS) project with partner, Bounty Oil & Gas NL (ASX: BUY). It also announced a capital raise program to help fund this endeavour. The shares were placed in a trading halt. After it completed the capital raise, BPH shares rose 31% on its return to market trading.

BPH on a rollercoaster

However, soon after this, the company fell sharply (around 21%) following comments from the New South Wales Deputy Premier John Barilaro. Mr Barilaro stated that he was not in favour of the PEP11 oil project that BPH is aiming to deploy its CCS project within, and the application should be rejected. Mr Barilaro also reportedly stated that he would “refuse further applications to extend the life of PEP11”.

It’s these comments that have likely sparked the surge in BPH shares we have seen today. This morning, before market open, BPH issued an announcement which clarified that its PEP11 project was subject to approval from both the NSW government and the Federal government.

The release points out that, under the relevant legislation, if the state and the Commonwealth disagree on a permit, it’s the Commonwealth opinion that prevails. That essentially renders Mr Barilaro’s comments impotent regarding PEP11.

Thus, investors who might have assumed that PEP11 would be cancelled (meaning BPH had raised capital for nothing) are possibly breathing easier today. Or at least they were before the trading halt. We shall have to wait until (probably) Friday to see what BPH has up its sleeves for investors next.

More reading

• Why the BPH Energy (ASX:BPH) share price is crashing 21% lower today
• Why the BPH Energy (ASX:BPH) share price rocketed 32% higher today
• BHP Energy and Zip were among the most traded ASX shares last week
• Why BPH Energy (ASX:BPH) shares are in a trading halt

Motley Fool contributor Sebastian Bowen 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 Bruce Jackson.

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The share prices of ASX travel shares have flown higher today, including Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB).

The Corporate Travel share price went up almost 5%, the Webjet share price rose 5%, the Flight Centre Travel Group Ltd (ASX: FLT) share price rose almost 3%, the Helloworld Travel Ltd (ASX: HLO) share price rose 3.6% and the Qantas Airways Limited (ASX: QAN) share price went up 0.6%.

It has been a busy period of announcements for the travel industry. Not only were there a couple of reports today, but Victoria’s has lockdown ended and the COVID-19 vaccine rollout is about to start.

Profit results

Webjet released its FY21 half-year result today. It said that total transaction value (TTV) was down 89% to $267 million, revenue fell 90% to $22.6 million and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was down by 146% to a loss of $40.1 million. Underlying net profit dropped to a loss of $60.5 million.

However, Webjet said that its OTA (online travel agency) business returned to profitability as domestic borders started to reopen, driven by its strength in servicing the domestic leisure market, as well as leveraging its highly variable cost base.

Corporate Travel said that the FY21 first half revenue was ahead of expectations, despite the worsening COVID-19 situation in the second quarter. December 2020 had the highest revenue of the half despite being seasonally the quietest month for corporate travel in the first half.

Despite that, it still generated an underlying EBITDA loss of $15.7 million for the half, including a two-month loss contribution from the Travel and Transport acquisition. The underlying net loss for Corporate Travel shareholders was $26 million and the statutory net loss was $36.4 million.

The company said it was positioned for the recovery in corporate travel activity in the northern hemisphere where the COVID-19 vaccination efforts continue.

Victoria ends lockdown

Victoria’s 5-day snap lockdown is going to end today, rather than be extended as some had feared. The state recorded 0 new COVID-19 cases today.

The four reasons to leave the home will no longer apply and the 5km travel limit will be lifted. There will still be a 5-visitor limit to homes and public outdoor gatherings are limited to 20 people. Crowds will be able to return to the Australian Open from Thursday.

The borders have already started opening up again. South Australia has announced that it’s open again to regional Victoria, though there’s going to be a 14 day wait for no community cases before Melbournians can visit SA.

Vaccinations start

Over 140,000 BioNTech – Pfizer vaccine doses arrived in Australia this week and they will start to be administered on 22 February according to reporting by media such as The Guardian.

Various groups will receive the COVID-19 vaccine including quarantine and healthcare workers, people in aged care settings and disability care.

Travel businesses are hoping that as more vaccines are distributed, it could lead to stronger conditions for the travel sector.

More reading

• Webjet (ASX:WEB) share price soars to 5% increase in late trade
• One year on and 50% up, the All Technology Index is booming
• Webjet (ASX:WEB) share price edges lower on H1 FY21 results
• Why the Corporate Travel Management (ASX:CTD) share price is trading lower
• 5 things to watch on the ASX 200 on Wednesday

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and Helloworld Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Webjet Limited (ASX: WEB) share price finished strongly today after the company presented its half-year results. It was a tale of two halves for the company as shares in the travel agent rebounded strongly after a disappointing start.

The Webjet share price finished the day strongly rising 5.02% to $5.02.

Why the Webjet share price is flying

Despite the poor first half result, investors bid up the Webjet share price late on signs of growth. According to the AFR, the arrival of COVID-19 vaccines will provide more clarity about the triggers for opening domestic and international borders.

Speaking to the AFR, Webjet Managing Director, John Guscic, argued that it was realistic to seek clear policies. Especially given the ever-changing nature of the coronavirus. 

Gusic stated:

I appreciate that the environment changes quickly, but you don’t make policy up on the fly.

Mr. Guscic was speaking after the travel booking company announced its results for the first half of FY21. For the period, revenue plummeted to $22.6 million. This was a 90% drop from the same time last year. Overall, the company posted a hefty loss of $132.2 million down from the profit recorded last year.

Nonetheless, there were some positives in the result. Webjet retained a strong cash position of $283 million after its large capital raising last year. The current loss rate of $4.8 million gives the company just under 5 years before it will run out of cash.

What Now

Regarding the company’s future, Webjet noted that it is focused on capitalising on the impending market recovery. Moreover, it is hoping that the structural shift from offline to online will provide the company with tailwinds moving forwards.

Commenting on the future and dividends, Chairman Roger Sharp said:

Given the uncertainties inherent in the current travel environment, Webjet is not providing earnings guidance for FY21, and has not declared an interim FY21 dividend. Further, the Company has deferred payment of its FY20 interim dividend payment, which was due to be paid on 16 April 2021. It will be reviewed again following 1H22 results later this year.

Webjet shareholders will now be looking forward to the company’s FY21 results, which will be announced on May 19.

More reading

• One year on and 50% up, the All Technology Index is booming
• Webjet (ASX:WEB) share price edges lower on H1 FY21 results
• 5 things to watch on the ASX 200 on Wednesday
• These are the 10 most shorted shares on the ASX
• Why ASX travel shares were smashed on Friday

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Lynas Rare Earths Ltd (ASX: LYC) share price finished off at $6.11 today having powered up over 13% to reach its highest price since May 2013.

Lynas has a portfolio of aligned assets to explore, develop, mine and process rare earth minerals. Its main asset is the Mt Weld rare earth deposit in Western Australia.

So what sent the Lynas share price to the sky today?

Lynas share price soars as China fights with the US

According to the Australian Financial Review (AFR), China wants to curb the exports of rare earth minerals that are crucial to US defence contractors such as Lockheed Martin Corp. 

These rare minerals are used to manufacture sophisticated weaponry and F-35 fighter jets. Fighter jets, for example, rely heavily on rare earths for critical components such as electrical power systems and magnets. 

According to the AFR, a Congressional Research Service report said each F-35 required 417 kilograms of rare earth materials.

China has been setting rare earth production limits since 2007 and currently controls about 80% of the world’s supply.

Lynas steps in to accommodate US Defense Department

Last month, Lynas was awarded $30 million in funding from the US Department of Defense to build a light rare earths facility in Texas.

Outside of China, Lynas is the only other major rare earths producer. 

Considering the Lynas share price movement today, perhaps the market believes that China will restrict future supplies? 

In the instance that China decides to do exactly that, Lynas will be one of the only contenders capable of picking up the slack.

Foolish takeaway

Rare earth minerals don’t just build military gear, they are also used to manufacture many other products such as smartphones, electric vehicles and wind turbines.

Regardless of today’s China news, the Lynas share price had already been rising for the past year off the back of increasing demand. Lynas shares have gained 182% over the past 12 months.

Over the past month, the Lynas share price is up 38%.

More reading

• 2 ASX shares that humbled successful fundies
• Worley (ASX:WOR) share price crashed on profit warning
• These were the best performing ASX 200 shares in January
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• These were the worst performing ASX 200 shares last week

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The Nearmap Ltd (ASX: NEA) share price was a strong performer on Wednesday and stormed higher again.

The aerial imagery technology and location data company’s shares finished the day 7% higher at $2.77.

This means the Nearmap share price is now up 34% since this time last month. And that’s despite the company being the target of a short seller attack last week.

That short seller attack may go down as one of the least successful we’ve seen in recent times.

Why is the Nearmap share price racing higher?

Investors have been buying Nearmap shares since it released a comprehensive response to the short seller report and its half year results.

In respect to the latter, Nearmap reported annual contract value (ACV) of $112.2 million on a reported basis and $116.7 million on a constant currency basis. This represents a 16.1% and 21% increase, respectively, over the prior corresponding period.

A key driver of this growth was its North American business, which delivered record ACV for the half.

Anything else?

Also supporting the Nearmap share price has been the reaction to its results by brokers.

As I mentioned here yesterday, analysts at Goldman Sachs were pleased with its results and retained their buy rating and lifted their price target to $2.95.

Goldman Sachs isn’t alone in rating its shares as a buy. Analysts at both Citi and Morgan Stanley responded to its results by reiterating their buy and overweight ratings.

Coincidentally, both brokers have price targets of $3.10 on Nearmap’s shares. This price target implies potential upside of approximately 12% over the next 12 months.

So, although the Nearmap share price has been on fire over the last 30 days, based on the views of these brokers, there appears to be room for its shares to run even higher from here.

More reading

• Where next for the Nearmap (ASX:NEA) share price?
• ASX 200 rises, JB Hi-Fi profit soars, Altium drops
• ASX 200 up 0.8%: Nearmap jumps, Bendigo and Adelaide Bank impresses
• Nearmap (ASX:NEA) share price soars 14% after response to short sellers
• Why Atomos, Bendigo and Adelaide Bank, Coca-Cola Amatil, & Nearmap are racing higher

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Pact Group Holdings Ltd (ASX: PGH) share price is on the move up today after the company provided its half-year results.

With shares up 5.7% to $2.80 at the close of trade, it appears the packaging manufacturer’s results for the period ending 31 December 2020 have been well-received.

Profits well packaged by Pact

The standout result is Pact’s half-year net profit after tax (NPAT) of $49.9 million, up 43.5% from the previous corresponding period. This strong rise in profits was achieved despite revenue only growing by 1% to $894.4 million. Growth in the business’s reuse and crate pooling services contributed to higher margins.

Pact Group continues to work towards its Lead the Circular Economy strategy. During the half, such efforts include progressing on phase two of the company’s Australian packaging turnaround; enhancing recycling capability; and growing reuse volumes in the US.

Furthermore, the company nearly doubled its earnings before interest, tax, depreciation and amortisation (EBITDA) from contract manufacturing services. The segment added $20.7 million in EBITDA during the half, up 90.5% from the $10.9 million in the previous year.

Profits were further assisted by a reduction in financing costs during the period. Net finance expenses fell to $25.6 million from $33.1 million due to lower interest rates on borrowings.

What other surprises are in the box?

Shareholders are welcoming the announced dividend of 5 cents per share. After a cataclysmic year for dividends last year – dividend investors would be breathing a sigh of relief. While 5 cents may not seem like much, keep in mind Pact Group only provided 3 cents per share in dividends for all of 2020.

Pact also reduced the company’s gearing, which is essentially the debt to assets ratio of the company, to 2.4 times – down from 2.9 times. By taking this action, shareholders can rest a little easier knowing that if interest rates rise, Pact’s exposure isn’t precarious now.

The company’s ability to rely less on operating debt is due to the increased free cash flow. Free cash flow increased by 119% for the period to $46 million, giving the company more operational liquidity.

Pact Group share price snippet

Today’s rally places the Pact Group share price at $2.80, just over 14% higher than a year ago. It also puts it 7.7% higher than Morgan Stanley’s recent price target of $2.60.

The packaging manufacturer now holds a market capitalisation of $912 million, at a price-to-earnings (P/E) ratio of 10.38.

More reading

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Motley Fool contributor Mitchell Lawler 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 Bruce Jackson.

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