Lynas Rare Earths Limited (LYC.AX) 2021-01-29 Earnings Call Transcript

Thank you for standing by, and welcome to the Lynas Rare Earths Quarterly Investor Briefing. [Operator Instructions]. I would now like to hand the conference over to Lynas Rare Earths. Please go ahead.

Good Morning and welcome to the Lynas Rare Earths quarterly results briefing for the December quarter of 2020. Presenting the briefing today is Amanda Lacaze, CEO and Managing Director; and Amanda was joined by Gaudenz Sturzenegger, CFO; Andrew Arnold, General Counsel and Company Secretary, Daniel Havas, Vice President Strategy and Investor Relations, and Kam Leung, VP of Upstream. Please go ahead Amanda.

Thanks, Jen. Well, good morning everybody. And as always, thank you for your continued interest in the company. I was a bit concerned at a minute to - well 11, I'm in Queensland. So 10, we only had two people online, and I thought is everybody thinking, “Oh, it's also good that we don't have to ask any questions and that's okay as well.” But now we now have much more substandard quality. So I guess for me this is maybe one of the easiest quarterly read up that I've done. I mean, really wow, what a quarter. It was a very busy quarter. It was a very busy quarter and a very productive quarter. So it was productive in terms of our normal operations within the business. It was also a very productive quarter in terms of our progress on the significant growth projects that we have within our company. And it was a very busy quarter as we sought to continue to effectively manage some of the challenges that continue to be presented to our business by the COVID-19 pandemic. So with a great deal of pleasure that I highlight the fact that it was the highest revenue recorded in this quarter that we have ever recorded in the history of the company. Of course, benchmark pricing was fairly kind to us, but I think that more importantly, it reflects the strength of the key Nd segments into which we sell, particularly new automotive and by that, we're talking about the plug hybrid and electric vehicles. And I know that many investors are looking at Lynas as an excellent way to gain exposure to this electric vehicle and new energy Semantic of course continued growth in renewables, particularly in wind power and electronics. Last quarter, a number of analysts said, “Oh, you've done well to keep the cost where they are. Do you think you can manage to sustain that, and you will recall that I said that when we targeted to be operating at 75% of Lynas next capacity, we said we would expect to be able to capture cost efficiencies at that level. And we're pleased to be able to report this quarter. That was a continuing strong focus on our costs that we have indeed been able to sustain the cost efficient production. Of course, we'll note that we have also kept our production running at a 75% of line its next rate, as we previously indicated. And I know that some of you want to know, well, why don't we do more, and to that, I would say exactly the same as we did last quarter, but there are still a great deal of uncertainties in the market. We learn new and different things about the effects of the pandemic each day, and the challenges are much more than just health, but health matters. And our large processing facility is in Malaysia, which is grappling with a third wave of COVID infections at present. There is a rigorous movement control order in place. And as always, we ensure that we comply at a minimum with that regulation, but always as with everything in the business we adopted the highest standards. And so where quarantine rules may be more stringent in Australia, say compared to some other jurisdictions, we will always adopt the more stringent requirements. So in Malaysia, part of the movement control order is a request for all businesses to control and minimize the number of staff on site. We've gone back to many of our administrative staff working from home, but at the 75%, right, we certainly are able to very effectively manage the requirements to safeguard the health of our employees, and to make the government requirements. And the other thing I think that is particularly relevant in the quarter just past is the progress that we have made on Agros project. I said at the AGM that we are ambitious for our company and we are operating in growth segments, and we are ambitious that our company will continue to grow as the market grows. So we will retain our share in the high value segments and indeed growth that we will meet and exceed the expectations of our key strategic customers. Meeting the growth means that we need to be increasing capacity at each stage within each production stage within our operations. Part of that is satisfactory. One analyst that I read today wondered why we hadn't actually spent more money yet on Kalgoorlie. Of course, as always, we are carefully managing our procurement processes and profile to ensure best value, but we are moving forward with a number of the packages associated with construction that have now either been we've selected suppliers, or we are well advanced in the tender process. And I think that some of you would have seen the some of the pictures that we've got in the report fabrication, which is continuing not withstanding some of the COVID-19 challenges.

So we will be releasing our half yearly results next month. And one of the limitations always of the quarterly report is that it provides a view of cash, as opposed to P&L view of profitability. Once we've released that, you'll be able to see how these two things into play, but we've got a history of really excellent cash conversion within the quarter generally in excess of 80%, sometimes in excess of 90% simply the profile of sailings during the quarter meant that we had a lot of our deliveries later in the quarter. And I would reassure everyone, who is listening in that those sales which were invoiced later in the quarter have now been collected - the cash has been collected in the early part of January. So really very pleased with the quarter, and in fact very pleased with the first two quarters of this financial year. So with those as introductory comments, I am as always happy to take any question.

Thank you. [Operator Instructions]. There are no further questions at this time. I'll now hand back to Ms. Lacaze for closing remarks.

Okay, thank you everybody. It's very much appreciated and my fervent desire is that all quarterly reports will be as positive as today is. Okay, Tokyo getting soon. Bye.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you. [Operator Instructions] The first question today comes from Daniel Morgan of UBS. Please go ahead. - :

Thank you. Once again, your next question comes from Jack Gabb at Bank of America. Please go ahead.

Thank you. Your next question comes from Reg Spencer of Canaccord. Please go ahead.

In terms of other supply coming online, I tend to spend most of my time thinking about that than others do. And remain very firmly of the view that the textbooks are right. And that competitive markets are good for everyone, the more activity, the more innovation, the more demand is likely to increase. And for us as the market leader outside of China, our job is to make sure that we stay ahead of the game. That's good for us as well. It keeps us on our mettle. And we have no intentions of giving up those things that drive competitive advantage for our business.

Thank you. Your next question comes from Dylan Kelly of OrdMinnett. Please go ahead. - :

Thank you. [Operator Instructions] Your next question comes from Anthony Kavanagh of Chester Asset Management. Please go ahead. -:

Thank you. [Operator Instructions] Your next question comes from Matthew Chen of Foster Stockbroking. Please go ahead. -: