South32 has increased its share buyback programme by about $50m, enabling it to return $158m to shareholders before September in anticipation of a stronger outlook for commodity prices in the second half of the financial year.
The Australian-based metals and mining company, which was spun off from BHP in 2015, on Thursday reported underlying earnings fell 44% to $560m in the first half of its financial year as a result of lower prices for its key commodities.
Output in the six months to end-December increased 12% year on year, boosted by investment in copper and low-carbon aluminium, though coal was the biggest earnings contributor.
The company valued at R258bn on the JSE, declared an interim dividend of 4.9 US cents (88c) down 43.7%, while profit after tax was down by just over a third to $685m.
Greater capital expenditure on productivity, improvements, growth projects and higher taxes pounded free cash flow from operations, which dropped 92% to $67m. Cash generated from operations sank 36.9% to $855m.
Despite these challenges, the company said it had paid $224m in dividends in the year to date.
“This is in addition to our record $784m fully franked ordinary and special dividends, returned in October 2022, and $143m returned via our on-market share buyback in the December 2022 half year,” CEO Graham Kerr said.
“Commodity markets have strengthened, leaving us well placed to capitalise on planned production growth and lower operating unit costs expected across the majority of our operations in the second half of the 2023 financial year,” he said.
The company, which is also listed in Australia and London, produces bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical coal and manganese from operations in Southern Africa, Australia, and North and South America. It completed the sale of its SA coal assets to Seriti in 2021.
Its production guidance for the full financial year remains unchanged, and it expects volumes to rise 6% in the second half.
Manganese ore production from its SA operations was down by almost a half at 1.093-million tonnes as a result of Transnet's poor infrastructure that prompted South32 to transport more of its products by truck.
“While sales increased by 8% in the quarter, inventory remained above target levels as two shipments were delayed to January 2023 due to shipping delays at Richards Bay,” the company said in a statement in January.
The company also announced several management changes. CFO Katie Tovich becomes chief human resources and commercial officer, while vice-president of finance Sandy Sibenaler will step up to the CFO position.
Rob Jackson, the present chief human resources and commercial officer, will become group’s vice-president of supply.
Update: February 16 2023
This article contains additional information on South32’s dividend
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