BHP Billiton’s unwanted love child, South32 is back in the black, joining the growing list of resources groups to report solid earnings for the year to June 30.
Its former parent has done so, so has Rio Tinto and OZ Minerals (see separate story) in their half years to June, Fortescue Metals Group is another to report a reveal a substantial rebound in, while gold and nickel miners such as Western Areas, Evolution, St Barbara, Northern Star and Newcrest have all done well.
Now we can add South32 to the list as it rode the rebound in commodity prices (which shows signs of strengthening into the early weeks of 2017-18) to report a $US1.2 billion net ($A1.5 billion) profit for the year the year-earlier net loss of $US1.6 billion (which was driven by massive write downs and restructuring costs).
Revenue jumped 20% to $US7 billion while underlying earnings before interest and taxes quadrupled to $US1.6 billion.
“The combination of our high operating leverage and stronger commodity prices delivered a substantial increase in financial performance,” chief executive Graham Kerr said on Thursday.
"Free cash flow more than tripled to $US1.9 billion and we finished the year with a net cash balance of $US1.6 billion.
South32 declared a final fully franked dividend of US6.4c US cents a share, up from the unfranked one cent a share for 2015-16 (which was its maiden return to shareholders).
It paid an interim earlier this year of 4 US cents a share, making a total for the year to June of 10.4 US cents. So like shareholders in those other miners of all sizes, shareholders who have hung on during the miserable months of 2015-16 and into 2016-17 will finally get a big reward for their patience.
South32 was spun out of BHP in May 2015 and produces nickel, coal, manganese, alumina, silver and other metals.
Its Cannington mine in Queensland is one of the world’s largest sources of silver and also yields zinc and lead (both of which have risen sharply in recent months).
The only question mark is the fate of the Appin hard coking coal export mine near Wollongong, where work has been suspended multiple times due to challenging ground conditions and elevated gas levels.
But the company says the mine is stepping up longwall operations for a September restart.
The company had spent $211 million by June 30 purchasing shares at an average price of A$2.66 per share after it kicked off the buyback in April. The shares reached $3 on Thursday.
