South32: Mining outfit set to pay healthy dividents
Company returns cash to shareholders on solid production, and high commodity prices
SOUTH32, the Australian headquartered company, edged 2.41 percent higher on the JSE as it returned cash to shareholders on solid production, including record manganese output and higher commodity prices during the six months to December.
The world’s biggest manganese producer said yesterday that it would be paying shareholders a special dividend on the back a $635 million (R8.8 billion) half-year profit, which is a 17 percent improvement from the previous period.
The group’s strong cash position gave it leeway to award shareholders with $344m, including a $86m fully franked special dividend, and a $258m fully franked interim dividend.
It said through the payment of the special dividend meant 87 percent of its $1bn capital management programme was complete, with the remaining $127m scheduled to be returned to shareholders in April, depending on market liquidity.
South32 chief executive, Graham Kerr, said the firm remained on track to divest South Africa Energy Coal with binding bids expected by the end of June. South32 is scaling down its presence in the country and is exiting the thermal coal business, which it plans to offload to an empowered company in line with the company’s transformation agenda.
Kerr told analysts in a conference call yesterday that the thermal coal business would be better placed in the hands of new owners, preferably black South Africans.
“The objective is to make a business that is truly transformed and sustainable, because we are not leaving South Africa. When we started the process, we talked about the first six months of the last calendar year for setting up a standalone entity, which has been achieved.
“The second half of the year was looking at receiving expressions of interest from different parties who met the criteria. This half year is about narrowing down the list of preferred bidders and taking them to site visits with the objective of having final binding bids by June,” Kerr said.
It emerged in September last year that black-owned JSE listed diversified group Exxaro Resources, Seriti Resources and non-profit organisation Mining Forum of South Africa had made a bid for the thermal coal operations.
In terms of electricity problems, the company said it had also been rocked by load shedding at its Hillside aluminium smelter in Richards Bay. It said incidents of load shedding at the Hillside smelter had almost doubled in the half to December to 22 incidents of load shedding compared to 12 in the 2018 financial year.
The company announced a record 106 percent increase in production at Illawarra Metallurgical Coal as the Appin colliery continued to ramp-up towards historical rates.
It generated underlying earnings before interest, tax, depreciation and amortisation of $1.3bn for an operating margin of 38 percent as stronger volumes, primarily at Illawarra Metallurgical Coal, and higher average realised prices underpinned a $300m increase in sales revenue, excluding third party products.
The group purchased 68 million shares at an average price of A$3.39 (R33.41) per share for a cash consideration of $167m.
South32 shares closed 2.41 percent up at R37.76 on the JSE yesterday.