ASX News LIVE | XJO Stumbles; S&P500 Notches New High; Netflix’s Subscriber Beat; Pilbara, Core Lithium Report

The Freightos global container index has doubled in the past three weeks to 26-month highs in response to Red Sea disruptions. New challenge for policymakers.#commsec @CommSec #ausecon #auspol #inflation pic.twitter.com/LlDTL2KsmQ

— CommSec (@CommSec) January 24, 2024

A trading update after market close is hardly ever a good sign.

So it proved for Nanosonics, the firm specialising in infection prevention products.

Late on Tuesday, Nanosonics offered a 1H24 trading update along with revised guidance for FY24.

Uh-oh.

Nanosonics admitted sales were lower than expected and forecast profit before tax to fall from $11.4 million in 1H23 to $4.9 million in 1H24.

A 57% drop.

Total revenue was down 2% to $79.6 million (analyst consensus was for a 17% rise) and yet expenses rose 12% to $60.8 million.

1H24 EBIT fell 72% to a paltry $3 million.

Citi says that $NAN Nanosonics update is big miss, H124 sales declined 2pc versus consensus calls up 17pc, warns NAN remains a one trick pony, this could get smoked mañana 🚨🚨 https://t.co/NUtZ0DdjNZ

— Tom Richardson. (@tommyr345) January 23, 2024

In case you missed it, the latest episode of What’s Not Priced In is out!

Is the uranium rally sustainable and have lithium stocks bottomed?

New WNPI episode out on #uranium, #lithium, iron ore and more.

✅Why lithium is a 'one-hit wonder'
✅Have lithium stocks bottomed?
✅Will green energy transition stocks continue to struggle in 2024
✅Does the uranium rally have legs?https://t.co/cdD0HcMbQ4

— Fat Tail Daily (@FatTailDaily) January 19, 2024

By far the most interesting move in the small-cap sector lately came yesterday.

It was small business bank Judo Capital [ASX:JDO] ripping up 16% on the day.

For a moment, I thought to day trade it.

Let me explain what happened…and why you should care!

We can glean all sorts of insights about the economy and the stock market from this price action.

Small-Cap Spikes and Forecasts

Gone but not forgotten.

Global X is delisting 19 ETFs next month.

Some of the names are a great illustration of the hype cycle in markets. Pot stocks were once all the rage. And for a moment, many thought we’d be living out our days in the metaverse.

Yet next month Global X will shutter its cannabis and metaverse ETFs.

C’est la vie.

Global X to delist 19 ETFs on Feb. 16, 2024 due to lack of assets and forseeable flows

Global X Health & Wellness ETF | $BFIT
Global X Green Building ETF | $GRNR
Global X China Biotech Innovation ETF | $CHB
Global X Cannabis ETF | $POTX
Global X Metaverse ETF | $VR
Global X… pic.twitter.com/yLZy1Mns9g

— ETF Hearsay by Henry Jim (@ETFhearsay) January 23, 2024

Bloomberg’s Eric Balchunas has the latest goss on those newly issued spot Bitcoin ETFs.

LATEST: The Great GBTC Gouge hit record -$640m on Monday, the Nine did their best to offset but fell short w/ a $553m haul. ROLLING NET FLOWS still healthy at +$1b but ongoing battle. The Nine now have a 20% share vs GBTC. Volume also remains very high for new launches in 2nd wk pic.twitter.com/ng0BU8mi6L

— Eric Balchunas (@EricBalchunas) January 23, 2024

No wonder Core suspended mining operations.

It’s burning cash. And that cash pile is dwindling.

In the December quarter, Core recorded negative free cash flow of $75 million!

Having started the quarter with $202.1 million in the bank, CXO now has $124.8 million.

That’s about three quarters of funding available … if cash outflows remain at recent levels.

Actually, it’s less than that.

Free cash flow was a negative $75 million in the quarter. Meaning Core has about 1.6 quarters of funding available. CXO didn’t count all cash outflows from investing activities.

It excluded payments for plant & equipment along with payments for mine development from its investing activities when adding up relevant outgoings.

Falling lithium prices have forced Core to revise guidance.

In fact, Core has withdrawn FY25 guidance altogether.

Management also expects to cop an impairment of the carrying value of its Finniss operation at the upcoming half-year results.

On top of that, some roles will go.

In Core’s parlance, ‘a number of roles will be removed’ to ‘appropriately size the organisation’.

Another struggling lithium stock released its December quarterly today — Core Lithium.

And just like Pilbara Minerals, Core is one the most shorted stocks on the ASX. Unlike Pilbara, CXO is bleeding cash as its costs are higher.

Despite spodumene prices falling nearly 70% half-on-half, Pilbara was able to post a positive operating cash profit.

Not so for Core.

Falling prices led Core to suspend mining operations to preserve capital in December.

Despite the recent suspension, Core managed to raise production by 39% in 2Q24 to 28,837 tonnes. But now is the time to be frugal for Core.

Management cut capital spend guidance, also noting a reduction in ‘discretionary spending’.

In 2Q24, Core fetched 52% less for its spodumene concentrate than the prior quarter, ending December 2023 with $124.8 million in cash.

Pilbara thinks its balance sheet is a ‘significant competitive advantage’.

As some lithium miners struggle to preserve cash, it has over $2 billion in the coffers.

But Pilbara wants to sustain that advantage and has cut FY24 capital expenditure guidance from $875m-$975m to a new range of $820m-$875m.

Further, Pilbara said it likely won’t pay a dividend in 1H24.

Pilbara is the most shorted stock on the ASX, with over 20% of its shares held short.

Did today’s quarterly justify the short interest?

Going by the morning’s market reaction, the quarter was better than expected. PLS is up ~5% at the open despite admitting its spodumene fetched 67% less than it did six months ago.

But that price collapse was evident for weeks. The market priced that in.

The question is what’s next?

Pilbara said today that market conditions for spodumene will ‘remain volatile in the near-term’:

‘Market pricing for spodumene concentrate and lithium chemicals is expected to remain volatile in the near-term given uncertain macroeconomic conditions and closely managed inventories within the supply chain. The long-term outlook remains positive with an expected structural deficit of lithium materials supply relative to expected demand for lithium-based products such as electric vehicles and battery energy storage.’

Pilbara’s management remains upbeat about the long-term:

‘The long-term outlook for lithium remains strong based on compounding growth in EV production and other energy storage applications. However, as with many emerging sectors, the industry has seen pricing volatility including periods of lower pricing. With a low unit-cost structure and strong balance sheet position, Pilbara Minerals is uniquely placed relative to many of its competitors in the lithium sector to withstand and capitalise on a period of lower prices that could rationalise the market. With increasing production capacity, the Group is also uniquely positioned to take advantage of an improvement in market conditions when the pricing cycle turns.’

New lithium producer Pilbara Minerals reported a steep fall in revenue as realised prices for spodumene concentrate cratered.

The average realised price for its spodumene fell 50% quarter on quarter and 67% half on half.

As a result, despite Pilbara raising production by 22% in the December quarter, revenue fell 46% to $264 million.

Its cash balance suffered, too, shrinking 29% to $2.14 billion.

Good morning! Kiryll here.

We have a big day of quarterly reports out.

Pilbara Minerals. Core Lithium. Northern Star Resources. Woodside Energy!

Big names! Interesting quarterlies.

Let’s get to the lithium ones first, considering the huge sell-off over the last 12 months.