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The South32 share price is climbing after the miner’s FY22 results broke a few records.
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The South32 Ltd (ASX: S32) share price is climbing after the miner’s FY22 results broke a few records and it declared a special dividend.
The diversified miner said its FY22 underlying earnings of US$2.6 billion and free cash flow from operations of US$2.6 billion were the highest they have ever been.
The US$139 million set aside for a special dividend, on top of the US$648 million for its final dividend, takes the total shareholder return to US$1.3 billion for FY22. This is also the most South32 has ever paid to shareholders.
The news sent the South32 share price jumping 4% to a high of $4.44 this morning, while the S&P/ASX 200 Index (ASX: XJO) is up 0.52% in morning trade.
It wasn’t only high commodity prices that helped South32 deliver the strong FY22 results. The miner also managed to increase production at several of its mines.
While some ASX mining shares were complaining of a margin squeeze due to higher prices, the double tailwind allowed South32 to expand its profit margin even though it was also dealing with the same price inflation issues.
Management also credited the change in its mining portfolio towards minerals needed for a low-carbon future for the good result. The transition gave South32 greater exposure to higher-margin businesses.
Meanwhile, its ability to navigate logistical bottlenecks to ship more of its commodities also helped.
The CEO of South32, Graham Kerr, said:
We achieved record production at Worsley Alumina, while Hillside Aluminium and Mozal Aluminium continued to test maximum technical capacity. At Cannington we exceeded production guidance as we transitioned to a new mine configuration.
Looking forward, we are well positioned to navigate the current economic uncertainty. We have a strong balance sheet with net cash of US$538 million after funding our new investments during the year, while our ongoing focus on cost management and an expected 14% increase in production will mitigate industry-wide cost inflation.
South32 presented a positive outlook as it guided for increased FY23 output from most of its mines. This includes Worsley Alumina and Brazil Alumina, Hillside Aluminium, Sierra Gorda, Cannington, and Cerro Matoso.
The miner is also looking to further its cost-cutting exercise. It has so far clawed back US$50 million in annualised savings.
Shareholders will be hoping that South32 can beat its record-breaking FY22 results in the current year.
The South32 share price has been one of the better performing large-cap ASX mining shares. The shares have gained 44% over the past year when the ASX 200 fell 7%.
Other major miners are also struggling to keep up. The BHP Group Ltd (ASX: BHP) share price fell 8% while the OZ Minerals Limited (ASX: OZL) share price gained 14% over the same period.
Motley Fool contributor Brendon Lau has positions in BHP Billiton Limited, OZ Minerals Limited, and South32 Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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