South32 returns more cash to shareholders
AUSTRALIAN-based South32, the base metals and coal mining company, yesterday returned more cash to its shareholders and firmed its balance sheet on the back of strengthening commodity prices in the full year to June 2017.
South32, which was spun off from BHP Billiton in 2015, said it had expanded its share buyback programme to $750 million (R9.9 billion) from $500m.
The group also declared a final dividend of $334m , representing 50 percent of underlying earnings in the June 2017 half year. Revenuesurged 20 percent to $7bn.
“The combination of our high operating leverage and stronger commodity prices delivered a substantial increase in financial performance,” South32 chief executive Graham Kerr said. He said free cash flow more than tripled to $1.9bn and the company finished the year with a net cash balance of $1.6bn.
Higher metallurgical coal and manganese prices had helped to boost its sales revenue to $1.1bn despite lower volumes. Its net cash balance was at at $1.6bn and it had swung to a $1.2bn profit from a $1.6bn loss in 2016.
Production at South Africa Energy Coal was, however, expected to decline in 2018 as previously flagged.
Among some of the highlights was firm production from South Africa’s manganese operations.
“South Africa manganese saleable ore production increased by 19 percent to 2 million wet metric ton (Mwmt) as we continued to take advantage of stronger demand
and pricing by utilising higher cost trucking activity and opportunistically selling fine grained Wessels concentrate,” Kerr said.
Kerr said production at the Hotazel mines in the Northern Cape was expected to reach 3.1 Mwmt in 2018 and production in 2019 would be adjusted in response to market demand. He said aluminium smelters and refineries had operated at their maximum technical capability and Mozal in Mozambique, achieved record production.
“We adjusted production in our manganese business to take advantage of higher prices, consistent with our focus on value over volume,” said Kerr. However, South Africa
Energy Coal saleable production declined by 9 percent to 28.9 tons in the period.
South32 president and chief operating officer for the Africa Region, Mike Fraser, voiced his concerns about Eskom’s proposed tariff application for 2018/19.
“We are very concerned, we are doing whatever we can to influence the conversation.
“The tariff application does not appear to make sense. The industry has demonstrated it will be difficult to absorb costs if the tariff is approved,” he said.
Eskom had applied to the National Energy Regulator of South Africa for a 19.9 percent hike for 2018/19.