XRF Scientific Limited (ASX: XRF) manufactures equipment and chemicals which are used by mineral producers, construction material companies and commercial analytical laboratories in the preparation of samples for analysis. Its technology is used to measure the composition and purity of materials and is mainly applied in industrial quality control and in process control for manufacturing processes in industries such as metals and mining, construction materials, chemicals and petrochemicals. XRF’s products help customers to improve product quality and performance, increase productivity and yield and reduce downtime and waste.
XRF has manufacturing, sales and support facilities located in Perth, Melbourne, Europe and Canada, plus a global network of distributors. Customers include BHP Billiton, Rio Tinto, Vale, South 32, Glencore, Alcoa, Lafarge, Holcim, ArcelorMittal, CSIRO, and Intertek.
Strong mining industry activity boosts September quarter earnings
Elevated levels of mining exploration and production were the main drivers of activity in the September 2024 quarter which boosted XRF’s Pre-tax Profit by 15 percent to $3.2 million, compared to the September 2023 quarter. Revenue for the quarter was $13.1 million, down 3 percent.
The Consumables and Precious Metals divisions performed strongly. Higher sample analysis activity lifted Consumables sales for the quarter to $4.6 million, up from $4.4 million in the previous corresponding quarter. Sales revenue would have been higher but for falling lithium prices which reduced the selling prices of Consumables, although the profit per unit sold remained steady during the quarter. New customer relationships in Australia and internationally were established in the September quarter, implying continuing strong Consumables sales in the period ahead.
The main Consumable sales driver was sample analysis activity from mining companies. However, selling prices for Consumables were reduced during the quarter from falling lithium prices, with profit per unit sold remaining steady. This occurred because lithium chemicals are a key production input and began materially reducing in price during the year. As a result, selling prices and production costs are affected, with profit per unit sold remaining steady. This trend is expected to continue into FY25, which should have a positive impact of reducing working capital requirements.
New customer relationships were established during the quarter with production mines both in Australia and internationally, implying ongoing sales growth in the Consumables division.
Precious Metals sales were $4.3m for the quarter compared to $4.0m in the previous corresponding quarter, with consistent demand for both new product and recycling sales from the mining and industrial markets. International sales growth continued in key markets across Europe, Asia and the Americas.
Capital Equipment sales were $4.3 million for the September 2024 quarter compared to $5.1 million in the September 2023 quarter. Sales numbers were distorted by the delay for invoicing of $0.8 million of sales of fully manufactured machines until the December quarter. This delay impacted reported September quarter Group Profit Before Tax by $0.4 million.
Looking Ahead
XRF expects the December 2024 quarter to be positive for all divisions. Key focus areas during this period include increasing Orbis crusher sales, new product developments, xrTGA sales and M&A opportunities. Most of the Capital Equipment sales growth is occurring internationally.
Looking to FY25, the Capital Equipment division is currently developing several new machines, of which three are expected to be released during FY25.
The Group’s balance sheet remains robust with $12 million in cash and $1.6 million of debt at 30 June 2024.
Continued R&D investment in new products across all divisions should support long-term sales growth. In the interim period, strong demand from mining and industrial customers and for Capital Equipment products ensures a positive FY25 outcome for shareholders.
