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Iofina in a strong position despite volatile 2020

Snapshot

  • North America’s second-largest iodine producer

  • Record production volumes produced

  • Has diversified into CBD

Iofina PLC -

Quick facts: Iofina PLC

Price: 14.5 GBX

LSE:IOF
Market: LSE
Market Cap: £27.82 m
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Iofina is currently in the strongest position it has ever been, both operationally and financially

CEO Tom Becker

What does the company do?

Put simply, Iofina PLC (LON:IOF) extracts iodine from brine water, a byproduct of onshore oil and gas production in the US.

The company 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 update in October, the company said it is on track to deliver within guidance for the second half of 2020 at the lower end of its production forecast, pitched at 340 to 360 tonnes.

Third-quarter crystalline iodine production volumes amounted to 170.8 tonnes, compared to 167.3 in the same period in 2019. It has tallied some 455 tonnes of production over the nine months ended September 30, 2020.

The update followed a record set of interims in September when the firm reported that record revenue and underlying earnings (EBITDA).

Revenue in the six months to the end of June rose 8% to US$15.74mln from US$14.53mln in the corresponding period of 2019 while EBITDA jumped 50% to US$2.95mln from US$1.97mln.

Profit before tax, meanwhile, was US$1.32mln, compared to a loss in the first half of last year of US$300,360.

The company also ended June with cash balances of US$5.51mln, compared to a cash balance of US$10.26mln a year earlier.

What the CEO says, Tom Becker

"Iofina is currently in the strongest position it has ever been, both operationally and financially.”

“We are on track for record iodine production in 2020, iodine prices are still strong, and our debt has been refinanced and significantly reduced. These factors in combination with consistent production diversified across plants and product lines, as part of a prudent growth strategy, have allowed Iofina to continue to excel in spite of the global economic issues caused by the COVID-19 pandemic."

What the broker says

In a note on October 16, 2020, analysts at house broker finnCap, which have a 29p price target on the group, said the company's balance sheet "has been dramatically improved" by a recent refinancing and that its outlook "remains strong".

"We still see Iofina generating substantial free cash flow in 2021 of US$4.6mln, over a 10% free cash flow yield, with net debt falling from US$10mln to less than US$6mln. This will allow management to consider further plant expansions as the economic outlook becomes clearer", the broker added.

Video

Inflexion points

  • Iodine prices stable
  • Developments in CBD division
  • Iodine prices tied to global economic recovery

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Iofina is 'on track and well funded' after reducing debt and staying...

Iofina PLC's (LON:IOF) Tom Becker talks to Proactive London about their production projections which remain 'on track'. Becker explains that the debt refinanced last month 'significantly reduced', meaning they are now a 'bankable business'. He explains that Iodine prices are still...

on 23/10/20

3 min read