Australia’s Lynas Rare Earths (LYC.AX) reported a significant drop in revenue for the second quarter, failing to meet analysts’ expectations.
This decline was primarily attributed to a sharp fall in rare earth prices, which occurred amidst a slowdown in construction activity in China.
As the world’s largest producer of rare earths outside of China, Lynas faced challenges due to decreased demand in China’s appliance sector, directly impacted by the construction downturn.
During the three months ending on December 31, Lynas saw its sales plummet by 51.7% to A$112.5 million ($74.06 million), down from A$232.7 million during the same period the previous year.
These results fell short of Macquarie’s estimated revenue of A$117.8 million, reflecting the severe challenges faced by the company.
Analyst Dan Morgan of Barrenjoey highlighted the company’s current struggles, stating, “The major issue for the company at present is the commodity price trajectory and demand in China.
There wasn’t anything positive the company said on demand to change the prevailing market mood.”
Despite these challenges, Lynas made significant progress on its strategic initiatives.
The company reported the near-completion of construction at its Kalgoorlie rare earths processing plant, which will supply mixed rare earth carbonate to the new Lynas Seadrift facility in Texas, catering to the U.S. Department of Defense (DoD).
Lynas has also been upgrading its Malaysian processing facilities to increase its neodymium and praseodymium separation capacity to 10,500 tons per year, essential components in various sectors, including electrified transport and defense.
While Lynas temporarily halted most of its Malaysian operations in mid-November, its expansion project at the Mt Weld mine in Western Australia continued as planned.
A completed drilling program indicated extensive rare-earth mineralization around the mine, ensuring the project’s ongoing success.
Looking ahead, Lynas estimated its production for the March quarter to be around 1,500 tons, surpassing its previous projection of 900 tons.
Nevertheless, the company’s shares faced a 3.4% decrease, falling to A$5.75, marking their lowest level since July 20, 2021.
Lynas faced a challenging market environment during the second quarter, primarily due to falling rare earth prices and reduced demand in China.
Despite these setbacks, the company remained committed to its strategic expansion plans and expected improved production in the upcoming months.