To its unit
Arrowhead to transfer properties
SOUTH32 was focusing on increasing shareholder returns and not solely on raising output volumes, it said yesterday.
The diversified metals and mining company was spun off from commodities giant BHP Billiton earlier this year.
These comments come as the mining industry has been hit by the rapid decline in metal prices this year, which saw platinum decline by 25 percent and the price of coal drop to a 12-year low as the slowdown from China cut demand.
David Crawford, chairman of the Perth-headquartered firm, said in a statement at its inaugural annual general meeting yesterday that the operating environment was tough.
“We are of the view that market uncertainties are likely to persist for some time. We are responding to this global challenge through a targeted programme of reducing operational and capital expenditure, and changing the way we work,” he said.
In spite of the challenges, South32 was focused on distributing a minimum of 40 percent of underlying earnings as dividends at the end of each six-month reporting period.
Crawford believed that despite the challenging market conditions, South32 had the right strategy, to deliver sectorleading returns.
As part of its strategy, the company planned to cut costs by at least $350 million (R4.97 billion) a year by the end of 2018, and reduce sustaining capital expenditure by 9 percent to $650m next year.
South32 chief executive
Amount South32 aims to cut costs by each year until 2018
Grahm Kerr said later during a telephonic press conference that management’s focus would be driven by managing cash, rather than pushing volumes.
“We want to ensure that all operations are able to break even even in this period of the cycle. We want to get to cash positive,” Kerr said.
This come after the company announced that its Samancor Manganese joint venture in the Northern Cape, which it operates with Anglo American, would stay closed until a strategic review had been complete next month.
The mines were closed earlier this month after a fatality at the Mamatwan mine.
South32 warned in July that it would write down about $1.9bn on manganese in South Africa and Australia as well as on South African coal.
“While production will be significantly impacted in the 2016 financial year, rail and customer commitments will be met by drawing down inventory during this period,” it said.
South32 shares on the JSE fell by 3.94 percent to close at R12.45 yesterday. ARROWHEAD, the listed property company, is planning to transfer 101 of its lowervalue commercial properties to a separate subsidiary that the company proposes to list on the JSE in March.
These 101 properties are valued at R1.9 billion and the transfer will reduce the number of properties owned by Arrowhead to 56 properties valued at R5.5bn at an average property value of R97 million.
Arrowhead’s property portfolio is valued at a total of R8.5bn and comprises 157 commercial properties and 95 residential properties comprising of 3 690 units through its 70 percent interest in listed subsidiary Indluplace.
The average value of the commercial properties in its portfolio is R44.5m.
Gerald Leissner, the chief executive of Arrowhead, said yesterday the average length of leases for the properties to be transferred would be just under four years and 9 percent would be let to government.
Leissner added that the new company would have its own dedicated and incentivised management team who would focus on growing the portfolio in the company on an accretive basis with properties valued at under R50m a property.
He said Arrowhead would no longer acquire commercial properties valued at under R50m but this was the market in which there were “significant opportunities”.
Revenue growth
Arrowhead yesterday reported an almost 13 percent growth in distributions to R150.30 for the year to September from R133.24 in the previous year. Revenue increased by 71 percent from R712m to R1.218bn.
Leissner said the main driver of the increase in revenue was the acquisition of Vividend Income Fund in 2014 but the revenue growth was also attributable to the partial impact of acquisitions concluded during this year and annual escalation to existing leases.
Vacancies within the commercial portfolio rose to 7.3 percent from 6.3 percent, with retail at 5.19 percent, office vacancies at 10.38 percent and industrial vacancies at 5.66 percent.
The vacancy rate within the residential portfolio is 3 percent. Escalation of 8.4 percent were achieved on lease renewals across the commercial portfolio and the average lease profile increased to 3.73 years.
Leissner said income growth to Arrowhead’s investors remained their focus and they held a firm grip on their lease terms and renewals, vacancies and costs associated with the portfolio.
He said that the past year was exciting for Arrowhead, especially with the listing of Indluplace, the only focused residential real estate investment trust on the JSE.
Mark Kaplan, the chief operating officer of Arrowhead, said the shareholding in Indluplace provided Arrowhead with the opportunity to participate in the substantial growth opportunities within the residential sector.
Shares fell 1.04 percent percent at R9.55, which valued the company at R8.3bn.