Release Date: November 18, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ALS Ltd (CPBLF) reported a 14% increase in overall revenue to $1.4 billion for the first half of fiscal year 2025.
• The company achieved strong cash conversion, representing 91% of underlying EBITDA, marking the strongest H1 seasonal performance in years.
• ALS Ltd (CPBLF) maintained a robust EBIT margin above 30% in its minerals division, demonstrating resilience despite market challenges.
• The environmental business saw strong organic revenue growth of 11.8%, driven by supportive industry megatrends.
• ALS Ltd (CPBLF) declared an interim dividend of 18.9 cents per share, with an increased franking to 30%.

Negative Points

• The overall EBIT margin declined to 17.1%, impacted by recent acquisitions and adverse foreign exchange effects.
• Underlying net profit after taxes decreased by 3.9% to $152.3 million.
• The pharmaceutical business experienced a negative organic growth of 3.4%, with mixed performance across operations.
• ALS Ltd (CPBLF) faced challenges with volatile sample flows in the minerals division, impacting visibility and forecasting.
• The company reported a decline in revenue for its commodities division by 1.7% due to subdued exploration activities and adverse FX impacts.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Sign with CPBLF.

Q: Can you provide an update on the cost-out program and its impact on revenue growth? A: Stuart Stutton, CFO: The cost-out program is progressing as planned, and we are seeing encouraging signs in the revenue line. We are about halfway through implementing the cost-out program, which is expected to progressively impact the second half. The program involves people-related costs, with some notice periods in Germany being longer than usual.

Q: How are FX impacts affecting margins, particularly in Latin America? A: Stuart Stutton, CFO: The FX impacts are primarily due to adverse translation effects in emerging economies where currencies are disconnected from the US dollar. This affects our margins as earnings translate to lower numbers, but there is no disconnect in passing through costs in these markets.

Q: What is the current outlook for sample flow volumes and market conditions? A: Malcolm Deane, CEO: The environment remains volatile, with fluctuations in sample flows. While there are positive signs, such as increased junior financing, it's too early to call a positive change in the cycle. We are focusing on maintaining resilience in margins and expanding market share.

Q: How is the hub and spoke model being managed amid volatility in sampling flow volumes? A: Malcolm Deane, CEO: The hub and spoke model is mature and continuously improved. The challenge is the specific volatility in sample flows, with strong weeks followed by soft weeks. We are reshaping our cost base to align with current volumes rather than expecting a market turn.

Q: Can you discuss the capacity in the mineral labs and any plans for future investment? A: Malcolm Deane, CEO: We are investing in future growth during this slower period to avoid running behind demand when the cycle is up. We are expanding hub facilities in Lima and increasing sample prep capacity in Western Australia to ensure we can service clients as needed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.