South32 see earnings drop due to ‘volatile’ commodity prices

South32 see earnings drop due to ‘volatile’ commodity prices

South32 Ltd (LON:S32) have seen their earnings drop in the first half of its financial year amid a period of volatile commodity prices.

The mining firm told the market that its pretax profit had been totaled at $187 million for the six months ending in December 2019.

Notably, this sees a significant drop from the $870 million figure one year ago. Additionally, revenue declined 16% to $3.22 billion from $3.81 billion.

South32 said that six month figures had suffered from volatile macroeconomic conditions which bruised the price of commodities.

Graham, Kerr CEO commented: “Against a challenging backdrop for our key commodities we delivered another strong operating result with production for the majority of our operations tracking on or ahead of schedule. Our operating costs trended down in the half and we have lowered our cost guidance across most of our operations.

“We delivered record production at Brazil Alumina and maintained higher output rates at Worsley Alumina. We responded to lower manganese prices at South Africa Manganese, cutting higher cost trucking.

On a better note, the Australian miner paid an interim dividend of 1.1 US cents in addition to a special distribution of a further 1.1 cents.

Shareholders of South32 should not be as concerned as once thought, as the firm did reiterate its confident nature to make sure that 2020 is a successful year.

“We advanced our pre-feasibility study at Hermosa and increased exploration across the broader land package.

“Demonstrating our strong financial position, track record of returning excess capital to shareholders and positive outlook for our business, today we announced a fully franked interim dividend of US$54 million and a US$180 million increase to our capital management program, including US$54 million which will be returned via a fully franked special dividend.” Kerr concluded.

South32’s interim update

A few weeks back, the firm gave shareholders a positive interim update which showed progress for the firm.

For the first half ended December, South32’s production rose 4% year-on-year to 2.6 million tonnes, with Brazilian operations delivering a record performance.

Aluminium production was flat at 496,000 tonnes, which will not worry shareholders.

Nickel production did see a 2% slip in production to 20,600 tonnes whilst silver rose 2% to 6.1 million ounces.

The lead sector saw impressive growth for South32 as there was a rise in production to 55,300 tonnes seeing a 14% growth.

Additionally, Zinc production surged 24$ to 32,500 tonnes, and manganese ore production fell 3% to 2.9 million wet metric tonnes, and manganese alloy put was down 17% to 91,000 tonnes.

The coal sector, which is one of South32’s biggest operations saw production fall 2% to 12.6 million tonnes, as did metallurgical coal output declined by 7% to 2.9 million tonnes.

Shares in South32 trade at 134p (-2.46%). 13/2/20 10:32BST.