Iofina PLC's (LON:IOF) president and CEO, Dr. Tom Becker told shareholders on Tuesday that “iodine markets have remained strong” after a solid 2019, with no impact seen to the market from the coronavirus outbreak, and the group is excited about a new plant which will come online in the months ahead.
In a market update, the boss of the AIM-listed specialists in the exploration and production of iodine and manufacturers of specialty chemical products, said the company’s directors “are confident that prices will continue to favour the Group as it progresses through 2020.”
The company noted that iodine prices rose over 20% in 2019 and continue to rise in early 2020, with the spot price now sitting in the mid $30's per kilogram and is rising towards the upper $30's as a result of the continuing demand for iodine and a tightness in supply.
It added: “To date we have not seen any impact from the COVID-19 virus outbreak to the overall iodine market and specifically to the Group's sales or supply chain.”
Iofina noted that the construction of the IO#8 plant continues to progress well, on budget and on track to be brought online likely in April 2020.
Once in production, IO#8 will contribute fully to the Group's second-half 2020 production output adding to Iofina's four operating iodine plants in Oklahoma, it added.
Becker commented: "As we approach the completion of IO#8 we are excited to see the plant come online in the months ahead and to begin contributing to the Group's 2020 iodine output.”
US CBD opportunities for IofinaEX
The company also said its IofinaEX business continues to make progress in developing its technology to isolate specialty chemicals from hemp.
It noted that active trials continue at the firm’s facility in Kentucky which recently had its Hemp Processor/Handler license renewed.
As part of the initial work to set up IofinaEX, the group said it has been evaluating business opportunities in Belize and elsewhere.
However, following this early evaluation process - which has been carried out at minimal expense – it added, the firm’s directors have concluded that the best strategy to grow IofinaEX would be to initially focus on the excellent CBD opportunities it has in the USA, a highly regulated market which Iofina currently operates in and understands well.
It said this will also allow Iofina to continue the strong progress being made within its core iodine and specialty chemical businesses in the USA.
Dynamic market evolving
The company noted that IofinaEX continues to develop its strategy in the CBD/Hemp space and will update the market as the business plan evolves in this dynamic market.
It said that fully developing and communicating the business plan has taken longer than anticipated as the CBD/hemp global market is changing rapidly.
Furthermore, the group added, despite now focusing on USA opportunities, IofinaEX will still continue to evaluate prospects outside of the USA as they present themselves.
Iofina CEO Becker concluded: "Having now refocused efforts for IofinaEX, along with the Group's core iodine business lines to concentrate on opportunities in the USA, the Directors are confident that Group resources will be properly utilised, that risk has been minimised and Iofina will maximise the value delivered for shareholders."
Valuation remains undemanding
In a note to clients, following the update, analysts at ‘house’ broker finnCap commented: “Iofina shares have been volatile in recent weeks as coronavirus concerns buffet markets. Today’s market update should provide some comfort to investors, with the company’s IO#8 expansion on track, iodine pricing continuing to improve and the coronavirus outbreak having no impact on performance."
They added: “Valuation remains undemanding at 6.0x 2020 EBITDA, while there is scope for earnings upgrades from higher iodine prices as 2020 progresses.”
finnCap repeated a 35p target price on Iofina shares, which in afternoon trading were changing hands at 20p each, down 3.6% on Monday’s close.
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