South 32 Witnesses A Share Price Uplift On Half Year FY19 Result Release


Globally diversified mining and metals company, South 32 Limited (ASX: S32) has released its half-year results of FY 2019. In H1 FY 2019, the group’s statutory profit after tax increased by 17% to US$635 Million, driven by record production at Australia Manganese, strong operating performance and higher commodity prices. Further, the Basic Underlying earnings per share increased by 20% as the company continued to benefit from its on-market share buy-back program. Following the release of the results, the share price of the company increased by 4.496% in the intraday trade as on 14 February 2019 (AEST 1:30 PM). 

For the half year ended 31 December 2018, the company reported Underlying EBITDA (Earnings before interest, tax, depreciation and amortization) of US$1.3 billion and Operating margin of 38 percent.  During the half year period, the company achieved 106% increase in production at Illawarra Metallurgical Coal and reported record ore production at Australia Manganese. The company also commenced various improvement initiatives at Worsley Alumina to support a sustainable increase in production to nameplate capacity of 4.6 Million tonnes.

During the period, the company also acquired the remaining 83% interest in Arizona Mining for total consideration of US$1.4 billion. The company also acquired a 50% interest in the Eagle Downs Metallurgical Coal project, and it has already commenced a feasibility study at the project.

At Worsley Alumina (86% share), in H1 FY 2019, the Operating unit costs increased by 4% to US$233/t as additional calciner maintenance was undertaken and the cost of caustic soda increased as higher priced inventory was consumed which more than offset the impact of a weaker Australian dollar.

While providing the outlook for FY 2019, the company has advised that its production guidance is unchanged for all of its operations except Illawarra Metallurgical Coal where the company has increased guidance by 7% to 6.5 million tonnes. Moreover, the company has decreased its FY 2019-unit cost guidance.

At Worsley Alumina, the company has lowered FY19 Operating unit cost guidance by US$3/t to US$227/t with revised exchange rate and raw material price assumptions partially offset by additional maintenance activity that is designed to improve calciner performance and sustainably achieve nameplate capacity.

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At Brazil Alumina the Operating unit costs increased by 24% in H1 FY19 to US$291/t as additional maintenance costs were incurred, higher priced caustic soda inventory was consumed, and the cost of bauxite supplied by MRN increased as the price reset to reflect the movement in alumina and aluminium prices on a trailing basis.

For the half year period, the board has declared an interim dividend of US 5.1 cents per share, 100% franked and a special dividend of US 1.7 cents per share, 100% franked. The record date for the interim dividend is 8 March 2019 and Payment date is 4 April 2019.

Meanwhile, in the past six months, the share price of the company has increased by 3.38 percent as on 13 February 2019. S32’s shares traded at $3.835 with a market capitalization of circa $18.54 billion as on 14 February 2019 (AEST 1:30 PM).


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