21st Apr 2016 07:21
LONDON (Alliance News) - South32 Ltd shares rose on Thursday after it said it is continuing to focus on value and not volume after reporting lower production of most of its commodities in the first three quarters of its financial year, but remains confident its full year results will hit expectations.
South32 shares were trading up 5.6% to 94.54 pence per share on Thursday morning.
The multi-commodity miner operating within Australia, Southern Africa and South America revealed eight of its ten commodity segments have experienced a fall in production in the first nine months of the current financial year as the miner, like the wider industry, restructures and realigns its business in response to tougher market conditions and lower prices.
The only two commodities that saw a rise in production in the nine months to the end of March were alumina, which was up 3% from a year earlier, and zinc, which increased by 13% year-on-year.
However, production of aluminium, coal, manganese, nickel, silver and lead have all fallen year-on-year by a range of 3% to 46%, South32 revealed on Thursday.
However, with lower production partly expected, South32 remains confident it can deliver full year production that will meet its guidance targets, adding it also expects to complete its USD300.0 million reduction in controllable costs by the end of the financial year in June.
"We continue to strengthen our balance sheet by focussing on value, not volume," said Chief Executive Graham Kerr. "We are making great progress on our cost-out program across all operations and have continued to generate cash despite volatile commodity markets."
South32 reiterated that its balance sheet remains a "key point of difference," as it reported a net cash balance of USD18.0 million at the end of March.
Alongside the affirmation of its production guidance and cost reduction target, South32 also reiterated that depreciation and amortisation charges for the full year will be around USD760.0 million whilst capital expenditure is still expected to total around USD550.0 million.
Underlying net finance costs, however, are now expected to be "marginally higher" for the full year than the run rate in the first half, when those costs totalled USD71.0 million, it said. That suggests the full year cost will be a minimum of USD142.0 million.
South32 also said it lowered its net debt in the third quarter by USD134.0 million, and said that reduction was achieved despite one-off redundancy and restructuring payments of USD23.0 million and a USD30.0 million foreign exchange rate related increase in finance lease liabilities.
Moving back to its production results over the first nine months of the financial year, South32 produced 4.0 million tonnes of alumina compared to 3.9 million tonnes a year earlier whilst the only other commodity to see a production rise, zinc, rose to 60,300 tonnes from 53,400 tonnes.
Aluminium production fell to 725,000 tonnes from 762,000 tonnes, nickel production dropped to 27,200 tonnes from 31,800 tonnes, silver production decreased to 16.4 million ounces from 17.4 million ounces and lead production declined to 134,400 tonnes from 138,700 tonnes.
Thermal coal production dropped to 25.0 million tonnes from 26.8 million tonnes whilst metallurgical coal production fell to 4.9 million tonnes from 5.5 million tonnes.
Lastly, manganese ore production decreased to 3.5 million tonnes from 4.0 million tonnes whilst manganese alloy production fell to 179,000 tonnes from 332,000 tonnes.
By Joshua Warner; [email protected]; @JoshAlliance
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