Leaving aside the effects of share buybacks, underlying earnings for South32 (S32) decreased by a quarter in the year to June, as rising production volumes were offset by lower aluminium and thermal coal prices.
Profitability was also constrained by $504m (£417m) in impairments, including the de-recognition of deferred taxes attributable to the diversified miner’s South African coal business, which has been run as a separate unit since April 2018 in preparation for a sale. To this end, South32 is now in exclusive negotiations with Seriti Resources to finalise terms.
Looking ahead, mining prices could remain under pressure if China’s economy stutters due to the ongoing US trade dispute, but that is beyond the influence of management. The group anticipates a 3 per cent rise in overall volumes through FY2020, while weaker producer currencies and lower input costs are expected to dampen operating costs through the year.
Consensus estimates are for cash profits of $1.93bn for June 2020, giving adjusted EPS of 17.2¢, rising to $1.99bn and 17.7¢ in FY2021.
SOUTH32 (S32) | ||||
ORD PRICE: | 147.88p | MARKET VALUE: | £ 7.40bn | |
TOUCH: | 147.54-147.88p | 12-MONTH HIGH: | 235p | LOW: 147p |
DIVIDEND YIELD: | 4.4% | PE RATIO: | 23 | |
NET ASSET VALUE: | 203¢ | NET CASH: | $612m |
Year to 30 June | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend ** per share (¢) |
2015 * | 7.74 | 0.52 | 0.50 | nil |
2016 | 5.23 | -1.55 | -30.3 | 1.0 |
2017 | 6.16 | 1.62 | 23.2 | 10.0 |
2018 | 7.55 | 1.62 | 25.8 | 10.5 |
2019 | 7.27 | 0.80 | 7.7 | 7.9 |
% change | -4 | -50 | -70 | -25 |
Ex-div: | 12 Sep | |||
Payment: | 10 Oct | |||
£1 = $1.21. * Pro-forma figures, pre-demerger. ** Excludes special dividends of 3¢ for FY2018, and 1.7¢ for FY2019. |