BHP Billiton has said it will dispose its underperforming and cash-sapping US onshore oil and gas business. That decision may have followed shareholder pressure, but the commodities giant is no stranger to large asset spin-offs: two years ago, BHP folded a chunk of its portfolio into South32 (S32), which this week posted its second set of preliminaries outside its former parent company.
It is doubtful BHP investors miss the lower-quality mines housed within South32, but the latter’s 11.4 per cent return on invested capital in the year to June suggests it is doing just fine on its own. In fact, the group more than equalled the high levels of cash generation we have come to expect from the diversified miners this results season. Underlying operating earnings increased 363 per cent on the back of stronger commodity prices and lower controllable costs, while free cash flow more than tripled to $1.9bn (£1.5bn), in turn swelling the cash balance and dividend and capital management pledges.
Analysts at Macquarie expect adjusted pre-tax profit of $1.3bn and EPS of 18.5¢ this financial year, down from $1.74bn and 22¢ in the 12 months to June 2017.
| SOUTH32 (S32) | ||||
| ORD PRICE: | 182p | MARKET VALUE: | £9.48bn | |
| TOUCH: | 181.8-182p | 12-MONTH HIGH: | 189p | LOW: 108p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 196¢ | NET CASH: | $1.64bn | |
| Year to 30 Jun | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
| 2013* | 9.93 | -1.51 | -29.4 | nil |
| 2014* | 8.34 | 0.15 | 1.93 | nil |
| 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 |
| % change | +18 | - | - | +900 |
| Ex-div: | 14 Sep | |||
| Payment: | 12 Oct | |||
| £1=$1.28 *Pro-forma figures, pre-demerger | ||||
