The Lynas Rare Earths Ltd (ASX: LYC) share price is up after reporting its FY22 result.
Lynas produces important rare earths that are used in a number of different things including wind turbines, electric vehicles, smartphones and so on.
Lynas FY22 result
Here are some of the highlights from the result from the ASX mining share:
- Revenue rose by 88% to $920 million
- EBITDA (EBITDA explained) grew by 155% to $601.2 million
- EBIT increased by 219% to $540.6 million
- Net profit after tax (NPAT) went up 244% to $540.8 million
Commentary on the year
Lynas said that favourable market conditions and strong demand for Lynas’ rare earth materials enabled the strong growth. Rare earth prices were sustained at high levels during the second half of the year and the NdPr (Neodymium and Praseodymium) market price remained 70% to 80% higher than in the same period last year.
The Lynas Rare Earth CEO and managing director said:
Closing cash at $965.6 million allows us to confidently progress our various growth initiatives. This is important as Lynas as uniquely positioned with a resilient supply chain for rare earth materials from our facilities in Western Australia and Malaysia to our partners in Vietnam, Japan and Europe. This is valued by our key customer base.
Ongoing measures implemented across the business mitigated some of the challenges presented by the external environment, including shipping deals, input cost decreases, water supply issues and the ongoing effects of the COVID-19 pandemic.
Lynas 2025 growth plan
Its expansion initiatives will “support the further growth and development of outside China supply chains, including the re-establishment of a rare earths supply chain in the US.
The plan is to grow with the market, diversify its industrial footprint and increase the product range for customers.
It is working on accelerating the growth capacity at the Mt Weld site. It has announced a $500 million project to expand the mine and concentration plant. It’s aiming to reach 12,000 tonnes per annum of NdPr finished product.
Construction of the Kalgoorlie rare earth processing facility progressed during the year. Construction works at the end of FY22 were over 40% complete.
Lynas said it was “delighted” to be awarded a US$120 million contract by the US Department of Defense for the construction of a commercial heavy rare earths separation facility in the US. It will be co-located with the light rare earth separation facility which is sponsored and half funded by the US government. It’s expected to be located in an industrial area on the Gulf Coast of Texas. It’s targeted to be operational in FY25.
Final thoughts on the Lynas share price
This strong result wasn’t a surprise – investors were expecting strong numbers thanks to the strong commodity prices.
Considering the Lynas share price is down 9% since the August high and it’s down 18% in 2022. I think it makes sense to buy commodity shares when the resource price/commodity business drops.
It would have been better to buy shares in mid-July, but now appears to be a decent price considering the strong price for rare earths and the longer-term outlook.
