Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Midway Ltd (ASX:MWY, Financial) reported its first NPAT profit since FY 2019, indicating a significant turnaround.
- The underlying EBITDA improved by $11.3 million to $14.2 million, showcasing enhanced operational performance.
- The company achieved a positive operating cash flow of $22.8 million, reflecting strong financial health.
- The sale of plantation estates generated over $173 million, allowing the company to repay all short and long-term debt.
- A special dividend of $0.145 per share and an ordinary dividend of $0.016 per share were declared, rewarding shareholders.
Negative Points
- South West Fibre experienced a difficult year with disappointing sales volumes, impacting overall performance.
- Higher supply costs offset some of the benefits from increased sales volumes and better foreign exchange rates.
- The nascent plantation carbon management business remains earnings negative as the carbon project pipeline builds.
- The Japanese market for wood fibre continues its gradual decline, posing a challenge for future growth.
- Volatility in the wood chip market remains a concern, requiring constant improvements to manage fluctuations.
Q & A Highlights
Q: Can you please clarify the net cash position post the receipt of the grain terminal proceeds? Is this in the receivables line currently?
A: (Michael McKenzie, CFO) On a proforma basis, the only thing in receivables is the last tranche of the MEAG sale plus one vessel. The grain sale is an asset held for sale on the balance sheet for $12 million. After accounting for various factors, the net cash position is estimated to be around $40 million to $45 million before the declared dividends.
Q: What is the likelihood of increasing NPAT in future years?
A: (Anthony Mckenna, CEO) We aim to grow the carbon business, which will start contributing earnings from the coming financial year. The wood fibre business will also see improvements. While not making specific forward-looking statements, we expect underlying EBITDA to be $10 million to $15 million through the cycle, with growth anticipated in the carbon business over the next five years.
Q: Can you provide an update on likely earnings from the carbon business?
A: (Anthony Mckenna, CEO) The carbon business had slightly negative earnings this year as we build the team ahead of projects and revenue. Revenue will start becoming more meaningful this financial year, but significant earnings will take a few years to build up due to the long tail nature of contracts and ACCU generation.
Q: What types of partnerships are you forming for the carbon business?
A: (Anthony Mckenna, CEO) We are partnering with small landowners, major emitters, financiers, and traditional owners. For example, we are working on a pilot project with a global resources company and raising equity for the Tiwi second rotation project, which will be Australia's largest plantation carbon project.
Q: Are there any concerns over the increase in shipping costs?
A: (Anthony Mckenna, CEO) We monitor shipping costs closely. While costs are increasing, there is a natural hedge in the wood chip market. Higher shipping costs often indicate a stronger market, which benefits our business. Most of our sales are FOB, mitigating some of the impact.
Q: What are the key takeaways from the financial results?
A: (Anthony Mckenna, CEO) We reported improved underlying EBITDA of $14.2 million, strong second-half volumes, and progress in the carbon strategy. The sale of plantation estates has strengthened our balance sheet, enabling the declaration of a $0.145 special dividend and a $0.016 ordinary dividend.
Q: How is the grain project progressing?
A: (Anthony Mckenna, CEO) The grain project is progressing well. We have signed contracts with CHS Broadbent, and the development lease has commenced. The sale of the Geelong site portion is due for settlement in the first half of FY25.
Q: What is the status of the Tiwi second rotation project?
A: (Anthony Mckenna, CEO) The equity raising for the Tiwi second rotation project is progressing well. We are confident of achieving a good result, enabling us to establish Australia's largest plantation carbon project.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
