South32 will reward shareholders with a special dividend on top of the normal interim payment after reporting a $US635 million ($895.6 million) first-half profit.
In total shareholders will receive a payout of 6.7 US cents for the half year (9.6 cents Australian), made up of an interim dividend of 5.1 US¢ (7.2 A¢) and a special dividend of 1.7 US¢ (2.4 A¢) a share – both fully franked.
That was after the company revealed an 18% rise in half-year underlying profit as a surge in metallurgical coal output and stronger commodity prices helped boost its bottom-line.
South32 reported $642 million in underlying profit for the six months ended December 31, compared with $544 million a year earlier.
Revenue for the six months rose 9% to $3.81 billion, from $3.49 billion a year ago.
Fortunes for the miner improved after production at its Illawarra Metallurgical Coal project which accounts for most, if not all, of South32’s coking coal output, rose in the second quarter as it recovered from cuts to its operations because of gas and other operating problems at the Appin mine.
South32 further raised its production forecast for full-year 2019 for Illawarra by 7% which should provide a further boost with premium coking coal prices remaining higher than many analysts had forecast (around $US200 a tonne).
The company said the higher profit was also boosted by record ore production at its Australia Manganese operations, while higher average realised prices for its commodities during the half-year helped its sales revenue rise by about $300 million.
The recent floods in North Queensland where the company’s Cannington mine is located have impacted rail lines in the region, with a large stretch of track closed due to the floodwaters which submerged huge areas of the outback.
The 1,000km rail line, which is used by South32 and other miners including Glencore (Mount Isa) and MMG Ltd for transport of the commodities, is expected to be out of action for at least a month.
The miner maintained its outlook for its Cannington operations but said it would be subject to a review after the company’s assessments on the impact of the flood on its logistics infrastructure.
CEO Graham Kerr said in a statement said the company was well placed for the rest of the year with a net cash balance of $US678 million and an improving outlook for production and costs across its diversified mining operations in Australia, South American, and Africa.
“We continued to reshape our portfolio by acquiring the high-grade Hermosa resource and a 50% interest in and operatorship of the Eagle Downs Metallurgical Coal project during the period. We are also progressing our early stage exploration projects and remain on track to divest South Africa Energy Coal with binding bids expected by 30 June 2019.
“We are well positioned for the second half of the year, with a net cash balance of US$678M and an improving outlook for production and costs. This strong position has allowed us to return US$511M to shareholders in respect of the period with today’s declaration of a US$258M fully franked interim dividend and a US$86M fully franked special dividend.
“Having established a strong track record, we will continue to return any excess capital to shareholders in a timely and efficient manner by monitoring our financial position within the context of the prevailing macro-economic environment and our capital management framework.
“This will involve the continuation of our existing US$1B capital management program with the recommencement of our on-market share buy-back following the release of our financial results,” Mr. Kerr said.
South32 shares rose 3.5% yesterday to end at $3.80
