Magontec Battles Supply Chain Woes While Eyeing Profitability in FY26
Magontec Limited reports a $5.25 million interim gross profit and a doubling of net assets per share to 84 cents, despite an underlying net loss. The company is banking on new Chinese supply partnerships and automation to restore profitability by FY 2026.
- Interim gross profit rises to $5.25 million with 17.8% margin
- Net assets per share double to 84 cents after share buyback and cancellation
- Underlying net loss narrows to $2.25 million but balance sheet strengthens
- European magnesium alloy recycling faces volume challenges
- New supply agreements with Chinese primary magnesium alloy producers underway
Interim Results Highlight Mixed Performance
Magontec Limited (ASX, MGL), a specialist magnesium products manufacturer, released its interim financial results for the six months ending 30 June 2025, revealing a complex picture of operational resilience amid ongoing challenges. The company posted a gross profit of $5.25 million, up slightly from the previous corresponding period, with a gross profit margin improving to 17.8% from 14.7%. However, underlying net profit after tax (NPAT) remained negative at a loss of $2.25 million, reflecting continued headwinds in parts of the business.
Despite the loss, Magontec’s balance sheet shows marked improvement. Net assets per share have doubled to 84 cents since 2020, bolstered by a strategic share buyback and cancellation earlier this year. The company also reported a net cash position of $0.6 million, a significant turnaround from net debt of $5.5 million at the end of 2024.
Segment Performance and Operational Challenges
The anode segment, which includes magnesium and electronic anodes, demonstrated solid growth with a 28% increase in gross profit over the prior year period. This segment benefits from rising demand in Europe and North America, particularly for electronic anodes used in heat pump hot water systems, a market expanding rapidly as consumers and businesses shift away from fossil fuels.
Conversely, Magontec’s metals segment, which encompasses magnesium alloy recycling plants in Germany and Romania, faced a difficult first half. Volumes were lower than expected, especially in the first quarter, due to disruptions in the supply of primary magnesium alloy feedstock. This shortfall is largely attributed to the company’s withdrawal from the Qinghai project in China and the cessation of alternative primary alloy production in recent years.
Strategic Response and Outlook
To address these supply chain challenges, Magontec has forged new partnerships with primary magnesium alloy manufacturers in China, which produces over 90% of the world’s traded magnesium alloys. These relationships are critical to restoring the flow of primary metal to Magontec’s European recycling plants, which in turn supply secondary alloys to customers across Europe and North America.
Executive Chairman Nicholas Andrews highlighted ongoing investments in automation across both recycling and anode manufacturing operations, aimed at improving efficiency and reducing costs. He expressed cautious optimism that the improving volume trends seen in the second quarter of 2025 will continue through the remainder of the year.
Looking ahead, Magontec expects the anode and specialist metals segments to sustain profitability and contribute to a return to group-wide profitability in fiscal year 2026, contingent on the successful revival of its magnesium alloy recycling supply chain.
Bottom Line?
Magontec’s path to profitability hinges on supply chain restoration and operational efficiencies, setting the stage for a pivotal 2026.
Questions in the middle?
- How quickly will new Chinese supply partnerships translate into stable recycling volumes?
- What impact will automation investments have on Magontec’s cost structure and margins?
- Can the growth in electronic anode demand offset ongoing metals segment challenges?
