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Iofina headed for another record year

Snapshot

  • North America’s second-largest iodine producer

  • Set for record production, revenue and earnings

  • Has diversified into CBD

Iofina PLC -

Quick facts: Iofina PLC

Price: 29 GBX

LSE:IOF
Market: LSE
Market Cap: £55.64 m
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The company remains on track to achieve a record year of crystalline iodine production

CEO Tom Becker 

So, what does the company do?

Put simply, Iofina PLC (LON:IOF) extracts iodine from brine water, which itself is a by-product of onshore oil and gas production in the US.

It is the second largest producer of iodine in North America and comprises three entities: Iofina Resources, Iofina Chemical and IofinaEX.

The AIM-listed group‘s strategy is to identify, develop, build, own and operate iodine extraction plants based on its well-head extraction technology.

IofinaEX has been set up to produce cannabidiol (CBD), the non-psychoactive ingredient of cannabis.

How’s Iofina performing?

In an October 14 update, the group said it remained on track to deliver record iodine output for the year after its plants processed 167.2 metric tonnes of the crystalline product in the third quarter. It also said it expects to exceed guidance for the second half, which was set at 305-325 tonnes.

In the nine-months to date output was 454 metric tonnes. Iofina said the spot price averaged US$32 per kilogram in the three months ended September 30. Chemical sales were “robust” and in line with expectations, it added.

"The company remains on track to achieve a record year of crystalline iodine production,” said chief executive Tom Becker.

“Product sales are in line with our targets and we are further benefiting from the rising iodine spot price. Importantly, we are continuing to execute on our stated strategy of increasing production capacity.”

In the same announcement, Iofina said its new specialty chemical division, IofinaEX, “continued to progress”.

Inflection points

  • Iodine prices continue to move higher
  • The construction of a new iodine plant began in September, which should take six to seven months
  • The CBD business - although broker finnCap cautions it is “still early days” for the new division. “Iofina continues to refine its process development work and mature its CBD strategy for both the US and international markets,” said analyst Jonathan Wright.

The share price

While it has more than doubled in the year to date, the recent weakness (it has fallen around 20% in the past month on profit-taking) provides an “excellent buying opportunity”, according to finnCap’s Wright.

He reckons the stock is worth 35p, around 10p more than the price on October 14.

More from the analyst

The company is on for a record revenues and earnings, according to Wright. He is predicting turnover of just over £30mln this year (up from £24mln in 2018), rising to £37.5mln and then £43mln. Adjusted EBIT is expected to be £5.9mln, £9.6mln and £11.4mln respectively for 2019, 2020 and 2021.

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