What stands out from South32 's (S32) figures for the six months through to the end of December is the relative strength of its balance sheet. The diversified miner, which was spun out of BHP Billiton (BLT) midway through last year, had negligible net debt and $756m (£543m) in cash and equivalents at its disposal at the period-end; a stark contrast to many other sector constituents battling with the effects of multi-year lows in commodity prices.
Admittedly, the spin-off was conducted under favourable terms, certainly in terms of the residual debt burden, which provided a stable platform for new boss Graham Kerr to re-position the business. But there's been no complacency in the face of a woeful trading environment; South32's debt burden was actually reduced by $286m during the period via the restructuring of a legacy financing arrangement.
South32 revealed underlying profits of $26m, but reported earnings were in negative territory on the back of $1.7bn in non cash impairments, including a $916m charge at the Australia Manganese business and a $518m impairment at South Africa Energy Coal. South32 is the leading global producer of manganese, with interests in alumina, silver, nickel and metallurgical coal, so the fall-away in mining prices wiped around $1bn off the top line based on prices when it was part of BHP.
JPMorgan Cazenove anticipates adjusted earnings losses of 1¢ a share this year and 2¢ in 2017, but has upgraded its free cash-flow estimates.
| SOUTH32 (S32) | ||||
|---|---|---|---|---|
| ORD PRICE: | 63p | MARKET VALUE: | £3.35bn | |
| TOUCH: | 62.75-63.25p | 12-MONTH HIGH: | 120p | LOW: 41p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 175¢ | NET DEBT: | 1% | |
| Half-year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | 0.64 | 0.06 | -2.8 | nil |
| 2015 | 2.69 | -1.63 | -32.9 | nil |
| % change | +320 | - | - | - |
| £1 = $1.38 | ||||
