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Highlights
- S32's H1 FY24 revenue dropped 15.2% due to lower metal prices and production volumes
- Despite challenges, S32 achieved a 1.7% net margin, a significant improvement from H2 FY23
- Free cash flow from operations was negative at USD 477mn, impacted by higher capex and working capital.
- S32 anticipates a 7% increase in copper equivalent production in H2 FY24, driven by operational improvements
South32 Limited (LSE: S32) is a metals and mining company with a market capitalization of GBP 8,190.04mn. In the first half of FY24, S32 experienced a 15.2% decline in revenue attributed to reduced production volumes and lower average sales prices of metals. On a positive note, the company achieved a net margin of 1.7% for the period, a significant improvement from -23% in H2 FY23.
In terms of cash flow, the company’s free cash flow from operations was negative at USD 477mn, compared to USD 67mn in pcp. The reasons included declining profitability, increased working capital, and a higher capital expenditure of USD 168 million aimed at enhancing productivity, making improvements, and supporting growth initiatives.
Recent business update
According to S32's June quarterly report, the company reached 98% of its FY24 copper equivalent production goal and anticipates that operating costs will align with guidance. Robust sales in June 2024 capitalised on increased commodity prices, enhancing cash flow by releasing working capital. Significant milestones in portfolio transformation include the sale of Illawarra Metallurgical Coal and steady progress in constructing Hermosa's Taylor deposit as planned.
Company outlook
S32 expects a 7% rise in payable copper equivalent production in H2FY24. This growth is expected to be driven by operational improvements such as longwall movements at Illawarra Metallurgical Coal and increased production from Brazil Aluminium, Sierra Gorda, and Cerro Matoso. Looking forward to FY25, the company is forecasting a 3% increase in payable copper equivalent production. This growth is underpinned by continued enhancements in the copper portfolio and advancements in low-carbon aluminum.
Top 10 shareholders
S32’s top ten shareholders together hold approximately 22.65% of the total shares. Among them, The Vanguard Group, Inc. holds the largest portion at around 6.10%, followed by State Street Global Advisors Australia Ltd. with approximately 3.36%, as illustrated in the chart below:
Stock performance
Over the past three months, the stock price of S32 has declined by approximately 9.81%. It has recorded a 52-week high of GBX 209.60 and a low of GBX 143.40. Currently, the stock is trading below the average of its 52-week high and low.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference data for all price data, currency, technical indicators, support, and resistance levels is 23 July 2024. The reference data in this report has been partly sourced from EODHD/Others.
