All You Need To Know About SOUTH32 Ltd (S32)

Business Overview

South32 Ltd is a globally variegate metal and mining company. It is engaged in the exploration, refining, transport and marketing of a series of products including Alumina, Aluminium, Bauxite, Energy Coal, Metallurgical Coal, Lead, Nickel, Manganese, Silver and Zinc. The company is one of the largest producers of manganese ore across the world, one of the biggest ferronickel producers and a significant producer of silver as well.

The company’s business operations spread across in Australia, Mozambique, Colombia, South Africa and Brazil. It manages its marketing operations from Singapore and the United Kingdom. [optin-monster-shortcode id="wxhmli4jjedneglg1trq"]

The company is headquartered in Perth, Western Australia.

Recent News

• On February 14, 2019, Company reported its H1FY19 results ended as on 31^st December 2018.
• On February 8, 2019, South32 appointed Karen Wood as Chair-Elect of the Board of Directors, Wood will succeed David Crawford with effect from April 12, 2019.
• On January 17, 2019, Company announced Katie Tovich would succeed Brendan Harris as Chief Financial Officer (CFO) from May 1, 2019.

Key Financials (H1FY19 ended as on 31^st December 2018)

(Source: Company filing, LSE)

Highlights

• South32 reported revenue of $3,811mn for H1 FY19, up 9 per cent against its H1 FY18 reported revenue.
• Group’s gross profit grew 34.9 per cent in H1 FY19. Reported gross profit for H1FY19 stood at $908mn.
• Pre-tax profit stood at $870 mn for H1FY19 compared to $603 mn in H1FY18, up 44.2 per cent against the corresponding period of the previous year.
• The company reported profit attributable to shareholders was $635 mn in H1FY19, compared to $543 mn in H1FY18.
• Basic EPS grew 19 per cent to 12.5 cents in H1FY19 compared to 10.5 cents in H1FY18.
• The company witnessed a growth of 106 per cent in production at Illawarra Metallurgical Coal as the Appin colliery continued to ramp-up towards historical prices.
• South32 completed the acquisition of the remaining 83 per cent interest in Arizona Mining for US$1.4bn.
• The company’s ongoing share buyback program is in the process whereby the company has purchased 68m shares at an average price of A$3.39 per share for a cash consideration of US$167 mn.

Ratios

(Source: TR)

Commentary

• South32’s gross profit margin for FY18 stood considerably higher against the industrial median. Gross margin of South32 stood at 55.5 per cent against 43.7 per cent of the industry average during FY18.
• At EBITDA margin front, the company's margin of 26.7 per cent stood below the industry median of 30.2 per cent.
• Return on equity (ROE) reported 12.7 per cent for FY18 was in line with the industry median of 11.5 per cent.
• At liquidity front, South32’s liquidity position is much better than the industry median of 1.72, in terms of current ratios. South32’s current ratio was 2.9 during FY18.

Share Price Performance

On 25^th February 2019, South32 share closed at GBp 213.2, up by 1.52% against its previous close. During the last one-year stock have reached a 52w high of GBp 236 and a 52w low of GBp 171.30 At the closing price, the share was trading 9.66 per cent lower than its 52w High and 24.46 per cent higher than its 52w low, that’s a positive signal. Stock’s average 5days daily volume was 44.98% higher against the 30days daily average volume. The company’s outstanding market capitalisation was around £10.75 billion and a dividend yield of 5.95%. The company’s stock beta was 2.04 which indicates that stock is highly volatile against the benchmark. On year-to-date basis stock was up by 15.87% and on 3 months basis, the stock was up by 21.34%.

Conclusion

South32 Ltd has a strong business model, with strong liquidity position makes it attractive among the minerals and mining sector. Improvement in the commodities prices in the global market will have a positive impact on the top-line and bottom line of the company. One should keep an eye on this company, as shares are trading near its 52w high price.