ALS Limited - Trading Update for H1 FY25
ALQ (ALQ) Share Update September 2024 Wednesday 18th
ALS Limited Reports Mixed Trading Update for H1 FY25
ALS Limited (ASX: ALQ) has released a trading update ahead of the half year ending 30 September 2024, highlighting mixed performance across its business divisions.
Instant Summary:
- Volume headwinds in the Minerals division, particularly in Australia and Latin America.
- Stable volumes in North America for the Minerals division.
- 30% margin resilience in the Minerals division despite declines.
- Positive organic growth in Life Sciences, especially Environmental.
- Integration of Nuvisan, Wessling, and York acquisitions on track.
- Corporate costs in line with guidance; interest expenses slightly above due to higher debt levels.
- Underlying EBIT expected to be slightly ahead of the previous corresponding period (pcp).
- Underlying NPAT expected to be down by approximately 5%.
Commodities Division
ALS Limited has encountered volume headwinds within its Minerals division, with geochemistry and metallurgy volumes remaining patchy. These fluctuations have become more pronounced in July and August, particularly in the Australian and Latin American markets. This has resulted in volume declines and margin pressure in these regions. However, North American volumes have remained stable, holding in line with the previous corresponding period (H1 FY24). Despite the challenges, Minerals margins have shown resilience, maintaining around 30%.
Life Sciences Division
On a more positive note, the Life Sciences division, especially Environmental, has experienced organic growth in line with expectations. The integration of recent acquisitions, including Nuvisan, Wessling, and York, is progressing well. Nuvisan, in particular, is starting to see positive medium and long-term improvements in its business development pipeline. However, it is important to note that these acquisitions will be EPS dilutive in FY25 due to initial trading and associated interest costs.
Corporate and Interest Costs
Corporate costs are broadly in line with guidance, while interest expenses are tracking slightly above expectations due to higher average debt levels and lease interest costs from recent acquisitions. This has contributed to the overall financial outlook for the company.
Outlook
Considering the combined impact of these factors, ALS Limited expects underlying EBIT for the September half to be slightly ahead of the previous corresponding period. However, underlying NPAT is projected to be down by approximately 5%. The company plans to provide a further update on its outlook with the H1 FY25 results, which will be announced on 19 November 2024.
For more details, a conference call will be held by CEO Malcolm Deane and CFO Stuart Hutton on 19 September 2024 at 10am (AEST). Participants need to pre-register for the call.
The mixed performance in ALS Limited's divisions is likely to have a varied impact on its stock. The volume declines and margin pressure in the Minerals division could negatively affect investor sentiment. However, the resilience in margins and positive growth in the Life Sciences division may offset some concerns. Overall, the expected decline in underlying NPAT might lead to cautious investor behavior.
Investor Reaction:
Analysts might react cautiously to the mixed results, highlighting the challenges in the Minerals division while acknowledging the positive developments in Life Sciences. The expected EPS dilution from recent acquisitions could also be a point of concern for some investors.
Conclusion:
Investors should keep an eye on the upcoming H1 FY25 results announcement on 19 November 2024 for a more comprehensive understanding of ALS Limited's performance. Monitoring the company's strategic responses to the challenges in the Minerals division and the integration of recent acquisitions will be crucial for making informed investment decisions.