South32, a globally diversified mining and metals company with operations in Australia, Southern Africa and South America, has delivered a strong set of results for the half year ended December 31, which included a record interim dividend of $405m (8.7 US cents per share).
The company, which has a primary listing on the Australian Securities Exchange with secondary listings on the JSE and the London Stock Exchange, attributed its performance for the period to the broad recovery in global commodity prices, as well as its divestment of lower-margin businesses in energy coal and manganese alloys. It included the disposal of its loss-making SA mines, SA Energy Coal, in June 2021.
The mining group on Thursday reported a net profit of just more than $1bn for the period, up 1,847% from $53m in the previous six months.
South32 CEO Graham Kerr said the company, which was spun out of BHP Billiton in 2015, is focusing on diversifying its operations and reshaping its portfolio for a low-carbon future.
“Our strong financial position has enabled us to invest in the business by making acquisitions in copper and green aluminium to increase our exposure to the metals critical for a low-carbon future,” he said.
The group had added copper to its portfolio through the acquisition of a joint venture in Chile, in which it acquired a 45% stake in the Sierra Gorda copper mine.
The company achieved a record operating margin of 44% and a 638% increase in underlying earnings to about $1bn for the period.
South32, the world’s No 1 manganese producer, said it will expand its capital management programme by $110m to $2.1bn, leaving $302m to be returned to shareholders.
The company experienced several challenges at its SA operations. Eskom last year had its worst year for load-shedding. South32 COO Noel Pillay said the company’s Hillside Aluminium smelter in Richards Bay and the Mozal Aluminium smelter in Mozambique are both large consumers of power supplied by Eskom.
“Under each smelter’s energy supply agreement, Eskom has the flexibility to load-shed the smelters to help manage SA’s grid and minimise national load-shedding. Both smelters experienced higher load-shedding during the first half of the 2022 financial year [than before], but the teams plan for these occurrences and they have not affected our production guidance for the year,” he said.
The supply chain crisis that emerged during the pandemic created logistics challenges for the company. According to Pillay, the company saw a $333m increase in working capital during the half year and almost half of that was related to inventory and to logistics challenges in its aluminium value chain, predominantly out of SA.
“There has been port congestion in Richards Bay for the last couple of months and our marketing team has been looking at alternative logistics options, and they are putting those in place,” Pillay said.
“Looking ahead, we are well positioned to capitalise on current market conditions as countries continue their economic recovery from Covid-19, and into the future as they invest in new infrastructure that is expected to see continued growth in demand for the metals critical for a low-carbon future,” Kerr said.
By the JSE’s close South32’s share price had gained 0.97% to R48.97.
Update: February 17 2022
This story has been updated with new information.
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