South32 1st Half Profit Falls, to Pay Another Special Dividend
By David Winning
SYDNEY--South32 Ltd. said its first-half net profit fell by 84%
as it felt the sting of weaker commodity prices and it absorbed a
higher tax rate ahead of the planned sale of its South African
Energy Coal assets.
South32 reported a net profit of US$99 million for the six
months through December, down from US$635 million at the same stage
a year ago. Underlying earnings before interest and taxes fell by
80% to US$131 million.
Still, the company said on Thursday that it would expand its
capital management program by US$180 million to US$1.43
Directors declared an interim dividend of 1.1 U.S. cents a
share, down from 5.1 cents a year earlier. They also declared a
special dividend of 1.1 U.S. cents even as the company's net cash
dropped to US$277 million at the end of December from US$504
million six months earlier.
South32 has been put on the back foot by falling prices of key
commodities, with management reacting to weakness in the market for
manganese by reducing its use of trucking to save costs and
shuttering its underground operation in South Africa for extended
maintenance. The company's first-half manganese alloy output
dropped 17% on a year earlier.
South32 also scaled back activity at the South Africa Energy
Coal operations that it wants to sell after trading conditions
worsened. That led management last month to warn that annual output
in the division would be at the bottom end of a prior guidance
Still, first-half alumina production was 4% higher than a year
earlier, driven by a record performance in Brazil, although the
company also faced significant pricing headwinds in the
South32's net profit was also dragged lower by a higher
effective tax rate of 75.0% in the half, compared to 37.3% a year
earlier. In prior periods, the mining company has been able to
reduce its tax bill by writing off losses made by some of its
assets, such as the South African Energy Coal business.
However, South32 has agreed to sell its more than 90% stake in
the South African Energy Coal business to Seriti Resources Holdings
Pty Ltd. and two trusts for ZAR100 million (US$6.8 million) in cash
and further payments that are linked to cash flow. That meant no
benefit for losses made prior to the sale completing was recorded
in the first-half result.
Write to David Winning at email@example.com
(END) Dow Jones Newswires
February 12, 2020 17:24 ET (22:24 GMT)
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