South 32’s Stock Soars After The Company Announced First Half-Year Results Of Fiscal 2019

  • Jan 17, 2019 AEDT
  • Team Kalkine
South 32’s Stock Soars After The Company Announced First Half-Year Results Of Fiscal 2019

South32 Limited (ASX: S32) has achieved record ore production at Australia Manganese in FY19’s first half year ended 31 December 2018 as the primary circuit reportedly continued to achieve high utilization rates while the Premium Concentrate Ore (PC02) circuit operated at approximately 120% of its design capacity.

The miner has reported a strong quarter of production while maintaining Fiscal 2019 guidance unchanged except for Illawarra Metallurgical Coal where the company now expects 7% increase in its previous production estimate. Further, the company’s plans to transform the ownership of South Africa Energy Coal was reportedly on track while binding bids scheduled in the second half of Fiscal 2019.

As at 31 December 2018, South32 has completed 79% of its US$1 billion capital management program, including a further buy-back of 68M shares for a cash consideration of US$167M during the December 2018 half year. In October 2018, the company has paid US$316 million final dividend in respect of Fiscal 2018.  Overall, the company has invested US$26.9M in exploration programs during the December 2018 half year, of which US$10.6 million was capitalized, and US$7.9 million was directed to its portfolio of high-quality early-stage greenfield exploration projects.

Illawarra saleable production increased by 106% to 3.8Mt in the December 2018 half year on the back of strong performance of Dendrobium and Appin longwalls. Its production guidance has now been increased by 7% to 6.5 Mt while two longwall moves are scheduled for the March 2019 quarter.

During 2018 quarter, the company has also completed the review of the development plan for Eagle Downs metallurgical coal project and has started the feasibility study ahead of a final investment decision slated for second half of the calendar year 2020.

For Worley Alumina, the company reported 2% increase in its production of 1,906kt in the December 2018 half year compared to the previous corresponding period. However, Brazil Alumina’s production declined by 6% to 636kt in 1H FY19, due to the impact of unplanned maintenance and power outages.

South32’s 100% owned South Africa Energy Coal project also delivered reduced production of 12.2 Mt, down by 9% or 1,252kt on 1H Fy18. But its Fiscal 2019 production guidance has been kept unchanged to 29Mt as the company expects Klipspruit to return to service by the end of January.

Despite an increase in the frequency of load-shedding events, the company managed to maintain its saleable aluminum production at Mozal Aluminium and Hillside Aluminium during the December 2018 half year. It includes 1% or 2kt increased in the production of 360kt at Hillside Aluminium saleable production.  But, notwithstanding the smelter’s strong operating performance, a reduction in aluminum prices and still rising alumina, the company expects pitch and coke input costs to result in a loss in the December 2018 half year.

Going forward, the company expects Group’s Effective Tax Rate (ETR) to trend lower in the second half of Fiscal 2019 if the alumina to aluminum price ratio continues to fall from its currently elevated level. It is in comparison to the expected increase in December half year’s ETR between 35% and 40%.

In today’s trading session, S32 stock price surged up by 4.655% to last trade at $3.485 on 17 January 2019. But over the past 12 months, the stock has witnessed a negative performance change of 15.36%.


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