Mining & Resources
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Easing global supply chain pressures have helped reduce inventory (lower DIO), with the benefit of this and shorter customer payment cycles (lower DSO) passed onto suppliers (lower DPO).
Our sample of Mining & Resources companies reported average revenue growth of 9% in FY23, a positive result but well below the double-digit growth achieved in FY21 and FY22. The main driver was the “normalisation” in commodities prices for a number of key exports, such as coal (67% reduction), LNG (51% reduction) and lithium (35% reduction). Interestingly, only 39% of operators that increased revenue were able to convert this into higher gross margins as labour, fuel and energy costs also materially increased. On average, gross and EBITDA margins fell by 3% and 4% respectively in FY23, but remained at very healthy levels.
From a working capital perspective, DWC decreased by 5.9 days to 42 days in FY23. Our sampled companies were able to reduce their inventory holdings, with average DIO falling by 4.5 days (to 76.7 days). Our sampled companies also shortened their customer collection cycles, evidenced by close to two thirds of our sample recording lower DSO (overall down by an average of 10.5 days to 31.5 days). Notably, 34% of sampled companies that reduced DSO did so by two weeks or more, signifying a material improvement in this metric (which had drifted higher over the last two years).
The improvements in DSO and DIO were driven by the reopening of supply chains, particularly international shipping. This allowed Australia’s key exporters to move commodities to end-customers more quickly, with a third of our sampled companies having a lower year-end inventory balance than in FY22. The benefit was also shared with suppliers, with DPO reduced by 19.5 days (to 58.6 days).
Our Australian sample companies sat within the range of DWC achieved in Asia, Europe and the US. Going forward, we expect to see ongoing volatility in commodity prices as the transition to renewable energy continues and demand uncertainty in some international markets remains (including China, where lower construction activity may materially impact iron ore prices).
Net working capital performance
Sector outlook
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Financial Year
Days | 2022 | 2023 | Change |
|---|---|---|---|
DSO | 42.0 | 31.5 | (10.5) |
DIO | 81.2 | 76.7 | (4.5) |
DPO | 78.1 | 58.6 | (19.5) |
DWC | 47.9 | 42.0 | (5.9) |
Best & Worst
Days | Best | Worst | Spread |
|---|---|---|---|
DSO | - | 105.7 | 105.7 |
DIO | 1.6 | 240.6 | 239.0 |
DPO | 212.1 | 4.7 | (207.4) |
DWC | 1.5 | 119.5 | 118.0 |
International Benchmarking
Days | Asia | EU | US |
|---|---|---|---|
DSO | 49.7 | 47.6 | 31.2 |
DIO | 82.1 | 72.0 | 43.5 |
DPO | 52.4 | 78.7 | 83.0 |
DWC | 73.5 | 43.0 | 22.6 |
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