Deterra Royalties Ltd (ASX: DRR) shares are having a positive session on Tuesday.
In afternoon trade, the ASX 200 stock is up 3% to $3.79.
This has been driven by the release of the mining royalties company's full year results for FY 2024.
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ASX 200 stock higher on solid FY 2024 results
- Revenue up 4.9% to $240.5 million
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) up 3.9% to $227.9 million
- Net profit after tax up 1.6% to $154.9 million
- Total dividends up 1.5% to 29.29 cents per share
What happened during the year?
For the 12 months ended 30 June, the ASX 200 stock reported a 4.9% increase in revenue to $240.5 million.
The key driver of this was an 11% increase in royalties to $239.3 million from the Mining Area C (MAC) operation operated by BHP Group Ltd (ASX: BHP). This reflects a 13% increase in iron ore pricing, which was partially offset by lower sales volumes. In addition, a modest $1.2 million was received from ongoing operations at the Yalyalup and Wonnerup mineral sands assets.
The ASX 200 stock's operating costs increased 26% to $13.1 million in FY 2024. This is largely because of due diligence costs associated with its proposed acquisition of Trident. In addition, business development costs and market-based employee cost increases contributed to the rise.
This ultimately led to Deterra Royalties reporting a 1.6% increase in net profit after tax up to $154.9 million. This allowed the company's board to lift its fully franked total dividends by 1.5% to 29.29 cents per share, which represents a 100% payout ratio.
Though, it is worth remembering that this payout ratio will be changing from next year. It will be targeting a minimum dividend payout ratio of 50% of net profit after tax. This is subject to balance sheet management and anticipated investment requirements, franked to the extent possible.
Management commentary
The ASX 200 stock's managing director, Julian Andrews, was pleased with the results. He said:
Deterra's full year results for FY24 once again reflect the quality of our cornerstone MAC asset and the high margin nature of our business model. South Flank completed its ramp up to full production capacity of 80 Mwmtpa (100% basis) on a run rate basis in FY24 as planned, bringing name-plate production capacity at MAC to 145 Mwmtpa.
Andrews also took this opportunity to speak about the proposed acquisition of mining royalties business, Trident. The market hasn't been overly enamoured with the plan given the impact it will have on dividends and its exposure to weak battery materials prices. However, Andrews remains positive on the deal. He said:
I am also very pleased to note that in FY24 we announced an offer to acquire Trident Royalties Plc. This investment is a first step in our strategy to grow and diversify our portfolio, providing immediate cash flow from currently producing operations, as well multiple sources of near- and medium-term growth from assets in construction and longer-term optionality from development stage assets.
Whilst the Trident offer is an important investment in its own right, we continue to evaluate opportunities to add to the Company's portfolio through value-accretive investment in bulk, base and battery commodities. With the increasing cost and reduced risk appetite we have seen in broader capital markets, as well as greater volatility in commodity markets, we believe that our long-term outlook and short-term liquidity, position us well to execute on these growth ambitions over time.
Deterra shares are down almost 30% since the start of the year.
