XRF Scientific FY25 Outlook: Record Demand & Growth Driven by Capital Equipment and Acquisitions

About XRF Scientific Limited

XRF Scientific Limited (ASX: XRF) manufactures equipment and chemicals which are used by mineral producers, construction material companies and commercial analytical laboratories in the preparation of samples for analysis. Its technology is used to measure the composition and purity of materials and is mainly applied in industrial quality control and in process control for manufacturing processes in industries such as metals and mining, construction materials, chemicals and petrochemicals. XRF’s products help customers to improve product quality and performance, increase productivity and yield and reduce downtime and waste.

XRF has manufacturing, sales and support facilities located in Perth, Melbourne, Europe and Canada, plus a global network of distributors. Customers include BHP Billiton, Rio Tinto, Vale, South 32, Glencore, Alcoa, Lafarge, Holcim, ArcelorMittal, CSIRO, and Intertek.

Record capital equipment demand driving revenue

Demand for XRF’s capital equipment products is at record order levels worldwide and is being driven by two key products in particular: the Thermogravimetric Analysis (TGA) machine and the laboratory jaw crushers.

The TGA machine measures changes in minerals, construction materials, plastics, ceramics and other materials in response to extremely high temperatures of up to 1000 degrees centigrade. Laboratory jaw crushers are used in the mining sector to reduce 110 mm samples of ore down to 2mm so that the samples can undergo detailed analysis within a laboratory.

Demand for the TGA machine is being sourced from a mix of globally significant mining and industrial customers. The machine performs a complex function by producing scientific data that is critical in setting proper temperature limits and for quality control purposes for materials like cement, glass and plastics. It has application to the mining, building and construction, and agricultural sectors. Now that the TGA machine is in the market, XRF is well positioned for future growth and higher revenue margins as this ground-breaking device is sold through XRF’s global distributor network.

Future capital equipment sales are also being driven by XRF’s recent acquisition of the remaining 50 percent of Orbis Mining in July 2024. Orbis Mining provides XRF with the proprietary manufacturing rights of laboratory jaw crushers that are in demand from some of the largest mining companies in the world.

XRF’s 50 percent stake in Orbis delivered $1.7 million before tax in FY24 (50 percent of Net Profit Before Tax allocated to non-controlling interest) so 100 percent ownership will be a measurable boost to full-year earnings going forward.

The capital equipment business segment generated $22 million of revenue in FY24 and a 35 percent lift in Net Profit Before Tax to $4.6 million and earned a margin of 21 percent. This business unit accounted for 36 percent of Group earnings in FY24.

New capital equipment products are under development for launch in FY25 and so contribution from this business segment is set to grow appreciably in the next 2 to 3 years.

What’s next?

The market for XRF’s analytical equipment is vast and growing and sales of these products is a key focus of the Group. Management have stated that the December half is seeing a strong take-up of analytical equipment by new customers.

Bolt-on acquisitions have been a positive contributor to growth over recent years and management have stated that their targets are complementary manufacturing companies in the laboratory supply or precious metals sectors.

Management have also stated their intention to work to lift the scale of operations to boost the market capitalisation. Given management’s proven track record of successful bolt-on acquisitions and consistent organic revenue growth, these ambitions appear well-placed.