Stronger sales prices, volumes and a $128m (£100m) boost from exchange rates made for a sturdy first half at South32 (S32), as the diversified commodity group saw off higher inflation, input costs and negative inventory movements to post a 28 per cent rise in underlying operating profit.
However, those cost rises came in below analyst forecasts, while increasing signs of stability at the Illawarra metallurgical coal division and the Cannington silver mine brought operating unit costs well under management’s previous guidance. Sweetening the surprise was a stronger-than-expected half-year dividend, which means South32 has declared $511m of shareholder returns for the period once share buybacks and the $86m special payout are accounted for. Despite this, and the $1.5bn spent on the Arizona Mining and Eagle Downs acquisitions, the balance sheet remains cash-rich.
So what lies ahead? In portfolio terms, binding bids for the South African thermal coal division are expected by the end of the financial year. Full-year unit costs have been lowered by an average of 5 per cent, and output from Illawarra has been revised up by 7 per cent to 6.5m tonnes.
Analysts at BMO expect post-tax profits of $1.27bn and earnings per share of 25¢ in the year to June, against $1.33bn and 26¢ in FY2018.
| SOUTH32 (S32) | ||||
| ORD PRICE: | 209p | MARKET VALUE: | £10.6bn | |
| TOUCH: | 208.8-209.4p | 12-MONTH HIGH: | 236p | LOW: 171p |
| DIVIDEND YIELD: | 4.2%* | PE RATIO: | 10 | |
| NET ASSET VALUE: | 214¢ | NET CASH: | $678m | |
| Half-year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢)* |
| 2017 | 3.03 | 603 | 10.5 | 4.3 |
| 2018 | 3.33 | 870 | 12.5 | 5.1 |
| % change | +10 | +44 | +19 | +19 |
| Ex-div: | 07 Mar | |||
| Payment: | 04 Apr | |||
| £1=$1.28. *Excludes special dividends of 3¢ for H1 17/18, and 1.7¢ for H1 18/19 | ||||
