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Things have been volatile for commodities, how is South32 seeing things?
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The South32 Ltd (ASX: S32) share price has been rising strongly in recent weeks.
South32 shares have climbed more than 15% over the last month and are up by around 25% since 19 July 2022.
The ASX mining share reported its FY22 results earlier this week, revealing several interesting statistics.
We’ll have a quick look at those numbers but remember – the share market moves on quickly. Investors and the market are generally forward-looking. In other words, what’s expected to happen for South32 in the future could be a more important influence on its valuation.
South32 reported its result for the 12 months to 30 June 2022.
Revenue rose by 69% to US$9.27 billion, while underlying earnings soared 432% to US$2.6 billion. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up 156% to US$4.76 billion.
The statutory net profit after tax (NPAT) recovered from a US$195 million loss in FY21 to $2.67 billion in FY22.
It grew its ordinary dividend by 363% to US 22.7 cents and it also grew its special dividend by 50% to 3 cents per share.
South32 attributed the result to stable operating performance and recent portfolio improvements, which enabled it to capitalise on the strong tailwind of commodity prices.
The ASX mining share pointed to record production at Worsley Alumina, while Hillside Aluminium and Mozal Aluminium continued to “test maximum technical capacity”.
At Cannington, it exceeded production guidance as it transitioned to a new mine configuration, bringing forward higher-grade material. At Cerro Matoso, it achieved a 22% increase in nickel production.
South32 is making “significant progress” towards transforming its portfolio. The goal is to increase its exposure to the metals that are important for a low-carbon future.
It added copper to its portfolio through the acquisition of a 45% interest in Sierra Gorda and doubled its low-carbon aluminium capacity with an additional shareholding in the hydro-powered Mozal Aluminium smelter and the restart of its 100% renewable-powered Brazil aluminium shelter.
At Hermosa, it has completed a pre-feasibility study for the zinc-lead-silver Taylor deposit, which “demonstrated its potential to be a globally significant producer of base metals”, and advanced its study of options for the battery grade manganese Clark deposit.
South32 CEO Graham Kerr said:
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.
We have repositioned our portfolio toward metals critical for a low-carbon future, having already established a pipeline of high-quality development options.
In terms of its production for FY23, South32 wanted to highlight that group copper equivalent production is expected to increase by 14% in FY23. The rest of its production is expected to be largely similar to FY22.
Looking at costs, it said that it continues to pursue cost efficiencies, having successfully delivered more than US$50 million of annualised savings across the group.
The savings, combined with an improvement in planned volumes and lower producer currencies, are expected to provide “partial relief” from further upward pressure on its operating unit costs despite continuing industry-wide inflation in raw material input prices, labour and energy.
While South32 shares are down 12% in the past six months, the miner’s share price is up 4% year-to-date and is tracking a healthy 45.8% higher over the past 12 months.
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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