South32 reports lower earnings as prices decline


South32 reports lower earnings as prices decline

Published Date: 2020-02-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

South32 reports lower earnings as prices decline

The diversified mining group says its operating profit remained strong and it has paid a special dividend due to its financial position.

South32 has reported a sharp decline in first-half earnings as volatile global macro-economic conditions affected the prices of some of the commodities it produces, including metallurgical coal, manganese and aluminium. The diversified mining group said a temporary increase in its tax rate also offset weaker currencies in the countries it mines in and the initiatives it's taken to lower operating costs. Despite the earnings decline, it said its operating performance remained strong.

Revenue fell 16% to $3.22 billion in the six months to end-December and underlying earnings before interest, tax, depreciation and amortisation dropped 48% to $678 million. Profit after tax of $99 million and basic earnings per share of 2.2 US cents were both down 84%, while underlying earnings fell 80% to $131 million. It's declared an interim dividend of 1.1c, down from 5.1c, and a special dividend, also of 1.1c per share.

The group said the payout demonstrated its strong financial position, track record of returning excess capital to shareholders and positive outlook for its business. It ended the period with a net cash balance of $277 million.

Over the period, it said its Brazil Alumina business delivered record production, while it maintained higher output rates at Worsley Alumina in Australia, In SA, it responded to lower manganese prices by cutting higher cost trucking and extending a maintenance shut at its Wessels mine.

The group said it expected the sale of its South Africa Energy Coal (SAEC) operation to Mike Teke's Seriti Resources to close before the end of the calendar year. The proposed transaction was behind a temporary increase in its effective tax rate to 75% from 37.3%.

Its shares rose 0.9% to R26.25 yesterday.

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