Iluka firm on prices in tough environment

23 Aug 2012, 5:59 pm   -   Source: AAP

Mineral sands miner Iluka Resources will maintain its price strategy but isn't offering forecasts after posting an 88 per cent increase in first half profit.

Mineral sands miner Iluka Resources is holding firm on prices but the company has declined to offer forecasts due to uncertain trading conditions.

Iluka on Thursday lifted its first half profit by 88 per cent as higher prices more than offset lower sales volume.

The company posted a net profit of $274.4 million in the six months to June 30, up from $145.9 million in the previous corresponding period.

Managing director David Robb refused to give any commentary on the company's performance during the first two months of fiscal 2013 but he said Iluka was convinced of its pricing strategy.

"In relation to the pricing, nothing has changed," Mr Robb said.

"We always seek to have a dialogue with our customers. If there's a win-win outcome that makes sense for our shareholders we're happy to entertain it.

"We've never been pig-headedly inflexible."

Iluka said revenue in the first half was up 16 per cent from the previous first half, despite sales volumes falling by 35 per cent.

Sales volumes fell because of softer global demand, particularly for zircon.

Australian production of Zircon, which is used in ceramic tiles, fell almost 30 per cent in fiscal 2012.

Iluka reduced its production forecasts in July in response to lower demand, and did not alter those forecasts on Thursday.

No further guidance was provided.

Mr Robb said many businesses within the global economy were not even looking months ahead.

"It's just not possible to provide outlook, commentary or estimates of how the world is going to travel.

"We haven't changed our approach."

Global confidence in the zircon markets continued to slide in the second quarter while activity on the ground in China seemed to be worse than official government figures suggested, he said.

Iluka shares closed eight cents, or 2.3 per cent, higher at $9.92.

Morningstar analyst Mathew Hodge said it was hard to argue with the company's ongoing strategy of maintaining price while it continued to generate cash.

"Given how poor the external environment was in this half they still generated a $274 million net profit and their EBITA margins were nearly 70 per cent," he said.

"Just having those margins gives them a lot of flexibility."

He said the Jacinth-Ambrosia deposit, which makes up the bulk of Iluka's zircon business, gave the company strategic flexibility.

"We agree that trying to chase volumes doesn't make much sense," he said.

"They're better off maximising the margins they would make on that finite resource."

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