A not unexpected loss for the year to June for the BHP Billiton spin-off South 32, but that hasn’t stopped the company from giving shareholders their first ever dividend.
Asset impairments and low commodity prices handed South32 a net loss, an historical accounting entry given the rapidity with which the company has been cutting costs in its life as an independent entity.
The company yesterday reported a loss after tax of $US1.6 billion for the 12 months to June 30, down from a pro-forma profit of $US519 million (it was spun out of HP in may, 2015,so the 2014-15 profit figure is notional.
Revenue fell by a quarter to $US5.81 billion, not a surprise given the way global markets fell sharply towards the end of calendar 2015 and into early 2016.
Coal prices though have recovered sharply in recent months,as have nickel and aluminium (but not copper) prices..
The loss came courtesy of non-cash impairment related charges which were taken in the December 31 half, of $US1.7 billion on an after tax basis.
Underlying earnings fell to $US138 million from a pro-forma result of $US575 million a year earlier.
The Board has decided to pay an maidenl final unfranked dividend of 1 US cent per share – so not battening down the hatches. The payout is in line with the company’s plan to give shareholders around 40% of net earnings every six months.
CEO Graham Kerr said a “series of restructuring activities and robust operating performance delivered strong results.” South32 set five production record, he added, and met guidance for the majority of the company’s upstream operations.
Mr Kerr said the company would pursue investments and opportunities where it saw value, but “will not compromise our strong balance sheet and investment grade credit rating.”
On the outlook, he said that Looking to FY17, we have maintained guidance for the majority of our upstream operations and will stretch performance to meet cost targets. Our functions are lean, with corporate costs now half the level envisaged at the time of listing.”
Mr Kerr said yesterday the company has generated controllable cost savings of $US386 million and reduced capital expenditure by $US306 million.
"By optimising our operations and maintaining a core focus on value, we generated free cash flow of $US597 million and finished the year with net cash of $US312 million," Mr Kerr said in the company’s results.
"We will continue to unlock the potential of our portfolio, identify opportunities and pursue investments where we see value, but will not compromise our strong balance sheet and investment grade credit rating.
"Twelve months on, South32 is a much stronger company with significantly lower costs and a balance sheet that provides flexibility. Against this backdrop, our board resolved to pay an inaugural dividend of US1¢ per share."
The company its restructuring efforts would help it achieve the majority of its cost targets for the 2017 financial year.
Shares in South32 are up 130% the January low of 89 cents, closing at $2.05 per share on Wednesday. They peaked around $3.37 just after listing in May 2015. They fell more than 4%this morning to $1.95.
South32 owns most of the former parent company’s unwanted non-core industrial metals and coal businesses.
