Engaged
RESULTS ANALYSIS
Need To Know
- Proposed merger with Livent overshadows everything.
- FY23 result buoyed by high commodity prices.
- Details needed on merger before decision.
Investment Implications
FY23 Results overview:
Revenue +62% to US$1.2bn
Net profit US$525m, no dividend.
Net cash balance US$648m
A much higher average FOB lithium carbonate price of US$43,981/t achieved in FY23 compared to US$23,398/t in FY22. Similarly, the spodumene concentrate price of US$4,879/dmt was substantially above FY22 at US$2,221/dmt. Costs did rise in FY23 on higher raw materials, energy and inflation.
Higher commodity prices contributed US$551m to AKE’s increased FY23 EBITDAIX of US$909m. Lower sales of spodumene concentrate compared to FY22 scrubbed US$196m from the outcome.
AKE increased its cash balance by US$230m to US$648m.
Olaroz reported US$580m of lithium carbonate sales revenue and expects to produce 22-26k tonnes in FY24 from the combined stages 1 and 2.
Mt Cattlin churned out US$616m revenue including US$514m sales from spodumene concentrate sales and US$99m from lower grade sales. FY24 guidance is for production of 210-230k tonnes of spodumene concentrate. Reserves have been updated to 7.1mt at 1.2% Li2O extending mine life by 4-5 years. The company is studying underground mining options.
Investment View
With the Livent merger yet to release the Scheme Booklet (containing the Independent Expert Report), AKE is planning for the merger to complete in late 2023.
The all-stock merger will create a US$10.6bn lithium company with assets in South America, Australia and Canada. AKE shareholders will own 56% of the group which will become the world’s third-largest lithium producer. It will be headquartered in North America with its primary listing on the NYSE and a secondary listing on the ASX via CDIs. Synergies are estimated at US$125m pa with US$140m of spending needed to extract it. Annual revenue will be around US$1.9bn and EBITDA about US$1.2bn. AKE’s chairman Peter Coleman has been appointed as the chairman of the merged group, and Livent’s CEO Paul Graves will become the new CEO.
AKE continues with its everyday business, but until we se the detail of the merged company, we will remain neutral on our view.
Stock Overview
Share Price
Company Overview
AKE is an Australia-based company specializing in lithium chemicals with operations in Argentina, Australia, Japan, and Canada, including lithium brine and hard-rock operations and a lithium hydroxide conversion facility.
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