Atlas Pearls reports a challenging first half of FY26 with a 27% drop in revenue and a net loss of $5.2 million, driven by weaker market demand and a shift towards lower-grade pearl sales.
- Revenue declines 27% to $13.6 million
- Net loss after tax of $5.2 million versus prior profit
- Normalised EBITDA falls 49% to $3.2 million
- Inventory levels halved with higher-value pearls proportionally increased
- Interim dividend suspended to support strategic investments
Market Headwinds and Revenue Impact
Atlas Pearls Ltd (ASX: ATP) has revealed a tough start to FY26, with revenue dropping 27% to $13.6 million for the half-year ended 31 December 2025. This decline reflects a softer global market for South Sea pearls, compounded by a lower average selling price per pearl, which fell from $63 to $33. The company sold 33% more pearls than the previous corresponding period, but this was largely due to a higher proportion of low-grade pearls, which now make up 53% of sales compared to 24% in H1 FY25.
Profitability and Non-Cash Adjustments
The financial results show a net loss after tax of $5.2 million, a stark reversal from the $12.1 million profit recorded in H1 FY25. Normalised EBITDA also halved to $3.2 million. A significant factor was a non-cash $5.4 million reduction in the fair value of biological assets, reflecting updated market pricing assumptions and biological growth estimates. While this accounting adjustment does not affect cash flow, it underscores the challenges facing the valuation of the company’s core assets.
Inventory and Sales Channel Strategy
Inventory levels have been aggressively managed, with pearls on hand dropping from 219,436 to 92,886 pieces, valued at $3.5 million. Interestingly, the value per pearl in inventory rose from $27 to $38, indicating a higher proportion of premium pearls held at period end. The company has also shifted its sales strategy, reducing reliance on auctions and focusing on private sales channels to capture better margins, though overall demand remains subdued.
Dividend Suspension and Strategic Focus
In light of the financial performance and ongoing investments, Atlas Pearls has suspended its interim dividend. The board cited the need to fund operational efficiencies, including a new larger vessel and expansion at the Alyui production site, as key reasons. The company remains committed to its FY30 strategy aimed at sustainable growth, operational excellence, and innovation to deliver high-quality South Sea pearls at competitive production costs.
Looking Ahead
Despite the current headwinds, management is focused on navigating the softer market environment through disciplined inventory control, channel optimisation, and continued investment in health, safety, and sustainability initiatives. The company’s ability to adapt its product mix and sales approach will be critical as it seeks to regain momentum and deliver long-term shareholder value.
Bottom Line?
Atlas Pearls faces a pivotal period as it balances market challenges with strategic investments aimed at future growth.
Questions in the middle?
- Will the shift towards low-grade pearl sales persist or reverse in coming quarters?
- How will the company’s investment in production capacity impact profitability long term?
- What market conditions or innovations could drive a recovery in pearl prices?