South32 has joined the growing parade of Australian resource companies producing record or near record results for the June 30 year or half year.
BHP, Rio Tinto, Yancoal Australia, Santos, Iluka, Pilbara Minerals – along with Whitehaven Coal (see separate story) and Allkem (see separate story) – are just some of the companies to have revealed very strong gains in revenue, earnings and returns to shareholders.
Copper, gold, coal oil and gas, lithium nickel, beach sands are some of the minerals that have produced solid returns.
Some of these gains will be one-offs, others will be more sustained, some will even seem another year of strong rises.
Yesterday, South32 revealed higher prices for aluminium and metallurgical coal, plus a new involvement in copper helped it move from a loss last year to a $US2.67 billion ($A3.87 billion) annual profit in the year to June.
Underlying revenue jumped 45% to $US10.630 billion ($A15.4 billion) as the company found “logistics solutions to mitigate challenging freight and third-party port performance to deliver volumes into favourable markets, capturing the benefit of higher prices.”
“This translated to a record operating margin of 47% (FY21: 26%), as we held increases in controllable costs to less than 2% of the Group’s total cost base for the year,” the company said on Thursday. Those are bank margins.
Investors lapped it up, along with the news of more returns, and sent the shares up 0.9% to $4.27.
Underlying EBITDA jumped by $US2.899 billion to a record $US4.755 billion and Underlying EBIT rose by $US2.928 billion to a record $US3.967 billion.
The profit is the biggest so far for the miner since it was created in 2015 from a collection of BHP’s unwanted assets here and offshore.
Underlying earnings surged $US3.67 billion ($A5.3 billion) thanks to higher realised prices, including $US1.54 billion from met coal used in steel making and $US1.03 billion from aluminium.
South32 said shareholders will receive $US1,053 million fully-franked ordinary dividends, including today’s announced $US648 million fully-franked ordinary dividend ($A936 million) in respect of the June half year; $US267 million as part of the ongoing capital management program, including Thursday’s announced $US$139 million fully-franked special dividend in respect of the June 2022 half and $US128 million allocated to the on-market share buy-back across the financial year (46 million shares purchased at an average price of $A3.89 each).
The record profit came just two days after South32 shelved a $US700 million expansion of its Dendrobium met (steelmaking) coal mine near Wollongong, south of Sydney.
“We have repositioned our portfolio toward metals critical for a low-carbon future,” South32 CEO Graham Kerr said in Thursday’s ASX announcement.
“We added copper to our portfolio through the acquisition of a 45 per cent interest in Sierra Gorda and doubled our low-carbon aluminium capacity with an additional shareholding in the hydropowered Mozal Aluminium smelter and the restart of our 100 per cent renewable powered Brazil Aluminium smelter,” he said.
“We delivered record earnings and cash flow in FY22 as our stable operating performance and recent portfolio improvements enabled us to capitalise on the significant tailwind of commodity prices.
Looking forward, Mr Kerr said “we are well positioned to navigate the current economic uncertainty. We have a strong balance sheet with net cash of US$538 million after funding our new investments during the year, while our ongoing focus on cost management and an expected 14% increase in production will mitigate industry-wide cost inflation.
“We have repositioned our portfolio toward metals critical for a low-carbon future, having already established a pipeline of high-quality development options,” he said.
