Iofina LON:IOF the AIM-listed manufacturer of iodine from waste iodide brines from the upstream O&G sector, published an update earlier this week (16th April) for 1Q24.
The Colorado-based chemical company produced 123.7 metric tonnes (MT) of crystalline iodine from its six iodine plants in Oklahoma which was up 15.5% year-on-year and the company was pleased that the global iodine price remained relatively stable since the start of the calendar year in the mid-USD60s/kg and the company expects the iodine price to remain at this level in the second quarter of the year.
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The company is progressing well on the construction of its seventh iodine plant IO#10 which it hopes to complete and get into production in the summer, and is already in discussions for its next plant IO#11.
Iofina crystalline iodine production on-target
Management remains confident that it will hit a production target of around 275MT and 295MT of crystalline iodine in the first half of 2024 from its current six plants, up at least 14% on the 241.5MT produced in 1H23. That said, things are going to get a bit more expensive for Iofina, as supply fees for brine to two of its plants were below market rates, and new contracts have been negotiated upwards by the suppliers.
The company expects this will suppress earnings, and management now expects FY24 EBITDA to be in the range of USD8.5m to USD9m. However, with IO#10 the impact will be mitigated by the plant producing between 100MT and 150MT of crystalline iodine a year, which will contribute to second-half performance.
Iofina’s shares opened on 16th April at 21.125p. Over the year-to-date, the AIM-listed company’s shares fell 18.75% and over one-year, were down 27.2%. The company’s shares have ranged between 19p and 38p over a 52-week period and Iofina has a market capitalization of GBP46m.
Brine supply prices rising
Canaccord Genuity, which has Iofina under coverage, was concerned about the price hike in brine supply and pared back its target price from 40p to 35p, but retained its ‘Buy’ recommendation for the company with Alex Brooks, an analyst for Canaccord saying: “At our new 35p price target the stock would trade at 7.6x/9.7x 2023E/24E EV/EBITDA and 13x/19x 2023E/24E P/E, which we believe is cautious given its increasing track record of growth, potential for further expansion, and conservatively managed balance sheet.”
Brooks continued: “The impact of the additional brine supply fee on these two plants is material, and we are reducing our 2024E EBITDA to USD8.5m (from USD11.0m), a reduction of around 22%, with consequent impacts on other figures lower down the P&L. We now expect Iofina to close the year with around USD0m in net cash (was USD2m net cash), reflecting [Iofina’s] weaker cash generation, although we note there remains ample liquidity to fund the development of IO#10, IO#11, and subsequent facilities. We note our 2024 earnings forecast assumes an average iodine price of USD60/kg, as compared to spot prices around USD65/kg.”
As previously reported the largest single use for iodine currently is in X-rays and medical imaging, where iodine targets soft tissue areas in the body, allowing medics to analyse damage or injury in these areas through biomedical imaging. The chemical is also used in hospitals as a disinfectant; is a health supplement that helps to regulate the thyroid gland; is used in photography, inks and dyes; and some companies are experimenting with the chemical in electric vehicles, trying to develop a lithium-iodine battery.
