Codan shares surge 19% to record high after raising H1 profit outlook

Australian communications technology firm Codan (ASX:CDA) shares hit a record high on Tuesday after the company significantly boosted its first-half profit outlook. This surge was fueled by robust demand from drone manufacturers. Shares of Codan climbed 18.85% to A$61.79, surpassing the broader S&P/ASX 200, which remained essentially unchanged.

The positive reaction to the anticipated increase in earnings for the six months leading up to December was driven by the expectation of a profit after tax of at least A$160 million for this period. This figure is more than double the A$71.2 million reported for the same period a year earlier and aligns closely with the A$175.2 million generated by Codan for the full year ending June.

The stronger profit outlook was primarily attributed to increasing demand for electronic components used in unmanned drones. Codan supplies a crucial radio-frequency component that facilitates high-speed video and data transmission to around 50 drone manufacturers in the U.S. and Europe. The company noted that demand from conflict regions was exceptionally strong, highlighting the effectiveness and reliability of its technology in challenging environments.

This was specifically bolstered by sales of its Minelab metal-detection business, notably the Gold Monster 2000 and GPZ8000 detectors. The surge in gold prices has heightened demand from prospectors, particularly in Africa, which is Codan's largest market for metal detectors. However, Codan cautioned that it could not provide a full-year profit forecast due to the unpredictable nature of demand from conflict regions beyond roughly three months.

The company is also focusing on addressing potential supply-chain constraints to meet the heightened demand. Codan, under the leadership of CEO Alf Ianniello since early 2022, entered the S&P/ASX 100 index on September 1. The company acquired drone-radio business DTC for A$114 million in 2021.