REG - South32 Limited - Final Results <Origin Href="QuoteRef">S32.AX</Origin> - Part 2
24/08/2017 07:06
- Part 2: For the preceding part double click ID:nRSX8689Oa
price-linked royalties and a stronger Australian dollar.
Operating unit cost guidance for Illawarra Metallurgical Coal will be provided
when we have finalised our operating plans for FY18.
Financial performance
Underlying EBIT increased by US$419M to US$358M in FY17 as the benefit of
higher average realised coal prices (+US$576M) outweighed the impact of lower
sales volumes (-US$85M), higher royalties (-US$32M) and a stronger
Australian dollar (-US$16M). Our average realised price for FY17 reflected a
modest discount to the premium low-volatile hard coking coal index on a volume
weighted M-1 basis(19) as our shipping schedule was affected by our prior
declaration of force majeure and the drawdown of finished goods inventory in
the second half.
Capital expenditure
Total capital expenditure decreased by 39% in FY17 to US$112M, including
underground development of approximately US$63M.
Sustaining capital expenditure is expected to increase by US$46M in FY18 to
US$150M. This includes underground development of US$80M, part of which will
provide access to two new longwall panels at Dendrobium.
South32 share FY17 FY16
Metallurgical coal production (kt) 5,697 7,059
Energy coal production (kt) 1,376 1,307
Metallurgical coal sales (kt) 5,952 6,984
Energy coal sales (kt) 1,344 1,333
Realised metallurgical coal sales price (US$/t)(a) 175 84
Realised energy coal sales price (US$/t)(a) 69 43
Operating unit cost (US$/t)(b) 80 61
(a) Realised sales price is calculated as sales revenue divided by sales
volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by sales
volume.
South32 share (US$M) FY17 FY16
Revenue(a) 1,133 642
Underlying EBITDA 548 132
Underlying EBIT 358 (61)
Net operating assets 1,406 1,516
Capital expenditure 112 185
Major projects (>US$100M) 8 30
All other capital expenditure 104 155
Exploration expenditure 5 4
Exploration expensed 5 4
(a) Includes metallurgical coal and energy coal sales revenue.
Australia Manganese
(60% SHARE)
Volumes
Australia Manganese saleable ore production decreased by 3% (or 77kwmt) to
3.0Mwmt in FY17 as performance was impacted by heavy rainfall and Tropical
Cyclone Alfred in the March 2017 quarter. The PC02 circuit operated at
approximately 90% of its 500kwmt (100% share) capacity in the June 2017
quarter, contributing 6% of total production across FY17 (FY16: 1%). Saleable
manganese alloy production increased by 11% (or 14kt) to 147kt in FY17 as
third party power supply to TEMCO was restored and all four furnaces ramped-up
to full capacity in the June 2017 quarter.
Ore production is expected to increase to 3.1Mwmt in FY18. This assumes the
low cost PC02 circuit operates at nameplate capacity. Production in FY19 will
be adjusted in response to market demand, consistent with our focus on value
over volume, albeit we are positioned to deliver an increase in primary
concentrator availability.
Operating costs
FOB manganese ore Operating unit costs increased by 8% to US$1.52/dmtu in FY17
as a result of a stronger Australian dollar and higher price-linked
royalties.
Operating unit costs are expected to decline to US$1.50/dmtu in FY18 as the
PC02 circuit operates at capacity and a general improvement in productivity is
achieved. Exchange rate and price assumptions for FY18 unit cost guidance are
detailed on page 12, footnote a.
Financial performance
Underlying EBIT increased by US$402M in FY17 to US$467M. A significant
improvement in average ore and alloy prices (+US$392M), and a reduction in
depreciation and amortisation (+US$35M) were only partially offset by higher
royalties (-US$8M) and a stronger Australian dollar (-US$8M). Our average
realised price for external sales of Australian ore in FY17 reflected the high
grade 44% manganese lump ore index (CIF Tianjin, China) on a volume weighted
M-1 basis(20), despite the contribution of 40% grade PC02 product to the sales
mix.
Capital expenditure
Sustaining capital expenditure decreased by 59% to US$28M in FY17 following
the completion of the PC02 project, while exploration drilling at GEMCO's
Southern Areas commenced in the December 2016 quarter. Sustaining capital
expenditure will rise to US$47M in FY18 as we invest in additional tailings
storage capacity at GEMCO. Our FY18 plan also includes investment within our
alloys business of US$5M.
South32 share FY17 FY16
Manganese ore production (kwmt) 2,994 3,071
Manganese alloy production (kt) 147 133
Manganese ore sales (kwmt)(a) 3,087 3,084
External customers 2,777 2,771
TEMCO 310 313
Manganese alloy sales (kt)(a) 155 150
Realised external manganese ore sales price (US$/dmtu, FOB)(a)(b) 5.22 2.57
Realised manganese alloy sales price (US$/t)(a) 1,174 860
Ore operating unit cost (US$/dmtu)(b)(c) 1.52 1.41
Alloy operating unit cost (US$/t)(c) 755 833
(a) Volumes and realised prices do not include any third party trading that
may be undertaken independently of equity production. Realised ore prices are
calculated as external sales revenue less freight and marketing costs, divided
by external sales volume. Realised alloy prices are calculated as sales
revenue, including sinter revenue, divided by alloy sales volume. Ore
converted to sinter and alloy, and sold externally, is eliminated as an
intracompany transaction.
(b) FY17 average manganese content of ore sales was 46.2% on a dry basis
(FY16: 47.3%). 95% of FY17 external manganese ore sales (FY16: 94%) were
completed on a CIF basis. FY17 realised FOB ore prices and operating unit
costs have been adjusted for freight and marketing costs of US$30M (FY16:
US$24M), consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight
and marketing costs, divided by ore sales volume. Alloy operating unit costs
is Revenue less Underlying EBITDA divided by alloy sales volumes and includes
costs associated with sinter sold externally.
South32 share (US$M) FY17 FY16
Revenue(a) 851 476
Manganese Ore 694 372
Manganese Alloy 182 129
Intra-segment elimination (25) (25)
Underlying EBITDA 521 154
Manganese Ore 456 150
Manganese Alloy 65 4
Underlying EBIT 467 65
Manganese Ore 406 67
Manganese Alloy 61 (2)
Net operating assets 319 341
Manganese Ore 313 338
Manganese Alloy 6 3
Capital expenditure 28 68
Major projects (>US$100M) - -
All other capital expenditure 28 68
Exploration expenditure 1 1
Exploration expensed - -
(a) Revenues of sales from GEMCO to TEMCO are eliminated as part of the
consolidation. Internal sales occur on a commercial basis.
South Africa Manganese
(ORE 44.4% SHARE, ALLOY 60% SHARE)
Volumes
South Africa Manganese saleable ore production increased by 19% (or 327kwmt)
to 2.0Mwmt in FY17 as we continued to take advantage of stronger demand and
pricing by utilising higher cost trucking activity and opportunistically
selling fine grained Wessels concentrate. This low cost product, which
accounted for 9% of sales across FY17 (FY16: 4%), receives a substantial
product discount when referenced to index prices. Manganese alloy saleable
production decreased by 20% (or 18kt) to 73kt in FY17 as a result of furnace
instability. Metalloys continues to operate one of its four furnaces.
In H1 FY16 we reconfigured the Hotazel mines to operate at a rate of 2.9Mwmt
pa, but with greater flexibility. Production of 3.1Mwmt(16) is expected in
FY18. Production in FY19 will be adjusted in response to market demand,
consistent with our focus on value over volume.
Operating costs
FOB manganese ore Operating unit costs increased by 9% to US$2.09/dmtu in FY17
as a result of a stronger South African rand, general inflation and higher
price-linked royalties. The drawdown of low cost Wessels concentrate
stockpiles largely offsets higher costs associated with opportunistic trucking
activity.
FOB manganese ore Operating unit costs are expected to remain largely
unchanged at US$2.06/dmtu in FY18, despite a reduction in sales volumes, as
the ramp-up of the Wessels Central Block is expected to reduce cycle times and
improve productivity. Exchange rate and price assumptions for FY18 unit cost
guidance are detailed on page 12, footnote a.
Financial performance
Underlying EBIT increased by US$157M in FY17 to US$110M as a significant
improvement in average ore and alloy prices (+US$171M) and stronger ore sales
volumes (+US$10M) were only partially offset by higher royalties (-US$15M) and
an increase in trucking activity (-US$5M). Our average realised manganese ore
price for external sales reflected a 12% discount to the medium grade 37%
manganese lump ore index (FOB Port Elizabeth, South Africa) on a volume
weighted M-1 basis(21) as a result of the larger discount received for Wessels
concentrate.
Capital expenditure
While Sustaining capital expenditure decreased by 18% to US$9M in FY17, it is
expected to rise to US$23M in FY18, including US$4M for alloys. This rise in
investment primarily reflects a general increase in mine and equipment
maintenance.
South32 share FY17 FY16
Manganese ore production (kwmt) 2,038 1,711
Manganese alloy production (kt) 73 91
Manganese ore sales (kwmt)(a) 2,024 1,834
External customers 1,866 1,736
Metalloys 158 98
Manganese alloy sales (kt)(a) 74 110
Realised external manganese ore sales price (US$/dmtu, FOB)(a)(b) 4.01 2.09
Realised manganese alloy sales price (US$/t)(a) 1,027 682
Ore operating unit cost (US$/dmtu)(b)(c) 2.09 1.91
Alloy operating unit cost (US$/t)(c) 1,000 882
(a) Volumes and prices do not include any third party trading that may be
undertaken independently of equity production. Realised ore prices are
calculated as external sales revenue less freight and marketing costs, divided
by external sales volume. Realised alloy prices are calculated as sales
revenue, divided by alloy sales volume. Ore converted to sinter and alloy, and
sold externally, is eliminated as an intracompany transaction. Manganese ore
sales are grossed-up to reflect a 60% accounting effective interest.
(b) FY17 average manganese content of ore sales was 40.1% on a dry basis
(FY16: 39.9%). 63% of FY17 external manganese ore sales (FY16: 57%) were
completed on a CIF basis. FY17 realised FOB ore prices and operating costs
have been adjusted for freight and marketing costs of US$24M (FY16: US$17M),
consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight
and marketing costs, divided by ore sales volume. Alloy operating unit costs
is Revenue less Underlying EBITDA divided by alloy sales volumes.
South32 share (US$M) FY17 FY16
Revenue(a) 391 234
Manganese Ore(b) 328 166
Manganese Alloy 76 75
Intra-segment elimination (13) (7)
Underlying EBITDA 140 (11)
Manganese Ore(b) 138 11
Manganese Alloy 2 (22)
Underlying EBIT 110 (47)
Manganese Ore(b) 120 (13)
Manganese Alloy (10) (34)
Net operating assets 307 342
Manganese Ore(b) 245 258
Manganese Alloy 62 84
Capital expenditure 9 11
Major projects (>US$100M) - -
All other capital expenditure 9 11
Exploration expenditure - -
Exploration expensed - -
(a) Revenues of sales from Hotazel mines to Metalloys are eliminated as
part of the consolidation. Internal sales occur on a commercial basis.
(b) Consistent with the presentation of South32's segment information,
South Africa Manganese ore production and sales have been reported at 60%. The
group's financial statements will continue to reflect a 54.6% interest in
South Africa Manganese ore.
Cerro Matoso
(99.9% SHARE)
Volumes
Cerro Matoso payable nickel production remained largely unchanged in FY17 as a
reduction in furnace availability was offset by the delivery of first ore from
the higher grade La Esmeralda deposit in March 2017. Payable nickel production
is expected to increase by 14% in FY18 to 41.6kt as a higher proportion of ore
feed is sourced from La Esmeralda.
Operating costs
Operating unit costs decreased by 8% in FY17 to US$3.77/lb as contractor
activity was curtailed and higher grades and lower throughput led to a modest
reduction in variable costs.
The forecast 6% reduction in Operating unit costs to US$3.53/lb in FY18
reflects the increasing contribution of higher grade La Esmeralda ore and the
associated increase in payable nickel production. Exchange rate and price
assumptions for FY18 unit cost guidance are detailed on page 12, footnote a.
Financial performance
Underlying EBIT increased by US$72M in FY17 to a loss of US$16M as the average
realised price of nickel increased by 14% (+US$45M) and cost efficiencies
delivered a (+US$32M) benefit.
Capital expenditure
In FY17, additional sustaining capital expenditure was directed towards the
accelerated development of La Esmeralda. The rate of expenditure at Cerro
Matoso will rise to US$20M in FY18 as the permanent bridge that connects La
Esmeralda to our processing facilities is completed.
South32 share FY17 FY16
Ore mined (kwmt) 4,447 6,009
Ore processed (kdmt) 2,561 2,699
Ore grade processed (%, Ni) 1.59 1.54
Payable nickel production (kt) 36.5 36.8
Payable nickel sales (kt) 36.6 36.8
Realised nickel sales price (US$/lb)(a) 4.67 4.10
Operating unit cost (US$/lb)(b) 3.77 4.08
(a) Inclusive of by-products. Realised sales price is calculated as sales
revenue divided by sales volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by
Payable nickel sales volume.
South32 share (US$M) FY17 FY16
Revenue 377 333
Underlying EBITDA 74 2
Underlying EBIT (16) (88)
Net operating assets 611 683
Capital expenditure 14 18
Major projects (>US$100M) - -
All other capital expenditure 14 18
Exploration expenditure 5 5
Exploration expensed 4 2
Cannington
(100% SHARE)
Volumes
Cannington silver, lead and zinc saleable production decreased by 27%, 24% and
11%, respectively, in FY17 as high grade stope 60L was only partially
extracted and run-of-mine stocks were consumed to support processing rates
following an underground fire in April 2017.
The existing crusher chamber is now expected to become inoperable in September
2017. Commissioning of the replacement crusher is anticipated in March 2018
with shaft haulage to be replaced by additional trucking in the intervening
period. The stope sequence within the mine is also being adjusted to
re-establish above ground stocks. Mill throughput for FY18 has been revised to
2.6Mt, with payable metal production to decline accordingly. An increase in
payable metal production is expected in FY19 as crushing capacity is restored
and mill throughput rises to 3.0Mt.
Operating costs
Operating unit costs decreased by 8% in FY17 to US$133/t as treatment and
refining charges declined. Operating unit costs are expected to increase by 7%
in FY18 to US$142/t as a result of a temporary rise in trucking activity and
lower mill throughput. Exchange rate and price assumptions for FY18 unit cost
guidance are detailed in a footnote earlier.
Financial performance
Underlying EBIT increased by US$34M in FY17 to US$308M. Higher average
realised prices (+US$158M), lower treatment and refining charges (+US$43M),
and a reduction in labour costs (+US$11M) were partially offset by the
reduction in sales volumes (-US$175M). Finalisation adjustments and the
provisional pricing of Cannington concentrates increased Underlying EBIT by
US$4.1M in FY17 (-US$11M: FY16, US$0.5M: H1 FY17). Outstanding concentrate
sales (containing 2.4Moz of silver, 26.2kt of lead and 4.6kt of zinc) were
revalued at 30 June 2017. The final price of these sales will be determined in
H1 FY18.
Capital expenditure
Sustaining capital expenditure increased by US$9M in FY17 to US$36M. Ongoing
development of the underground crusher will result in a further rise in
expenditure in FY18 to US$42M.
South32 share FY17 FY16
Ore mined (kwmt) 2,909 3,289
Ore processed (kdmt) 3,036 3,149
Ore grade processed (g/t, Ag) 194 255
Ore grade processed (%, Pb) 5.4 6.6
Ore grade processed (%, Zn) 3.4 3.8
Payable silver production (koz) 15,603 21,393
Payable lead production (kt) 132.1 173.2
Payable zinc production (kt) 70.4 79.0
Payable silver sales (koz) 16,270 20,852
Payable lead sales (kt) 138.1 169.7
Payable zinc sales (kt) 67.4 82.6
Realised silver sales price (US$/oz)(a) 17.6 16.2
Realised lead sales price (US$/t)(a) 2,223 1,780
Realised zinc sales price (US$/t)(a) 2,601 1,780
Operating unit cost (US$/t ore processed)(b) 133 145
(a) Realised sales price is calculated as sales revenue divided by sales
volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by ore
processed. Periodic movements in finished product inventory may impact
operating unit costs as related marketing costs and treatment and refining
charges may change.
South32 share (US$M) FY17 FY16
Revenue 768 786
Underlying EBITDA 364 330
Underlying EBIT 308 274
Net operating assets 215 242
Capital expenditure 36 27
Major project (>US$100M) - -
All other capital expenditure 36 27
Exploration expenditure 2 3
Exploration expensed 2 3
NOTES
(1) Revenue includes revenue from third party products.
(2) FY17 basic earnings per share is calculated as Profit/(loss) after tax
divided by the weighted average number of shares for FY17 (5,307 million).
FY17 basic Underlying earnings per share is calculated as Underlying earnings
divided by the weighted average number of shares for FY17. FY16 basic earnings
per share is calculated as Profit/(loss) after tax divided by the weighted
average number of shares for FY16 (5,324 million). FY16 basic Underlying
earnings per share is calculated as Underlying earnings divided by the
weighted average number of shares for FY16.
(3) FY17 dividend per share is calculated as H1 FY17 total dividend
announced (US$192M) divided by the number of shares on issue at 31 December
2016 (5,324 million) plus H2 FY17 total dividend announced (US$334M) divided
by the number of shares on issue at 30 June 2017 (5,218 million).
(4) Underlying EBIT is profit before net finance costs, tax and any
earnings adjustment items, including impairments. Underlying EBIT is reported
inclusive of South32's share of net finance costs and tax of equity accounted
investments. Underlying EBITDA is Underlying EBIT, before depreciation and
amortisation. Underlying earnings is Profit/(loss) after tax and earnings
adjustment items. Underlying earnings is the key measure that South32 uses to
assess the performance of the South32 Group, make decisions on the allocation
of resources and assess senior management's performance. In addition, the
performance of each of the South32 operations and operational management are
assessed based on Underlying EBIT. In order to calculate Underlying earnings,
Underlying EBIT and Underlying EBITDA, the following items are adjusted as
applicable each period, irrespective of materiality:
· Exchange rate gains/losses on restatement of monetary items;
· Impairment losses/reversals;
· Net gain/loss on disposal and consolidation of interests in
businesses;
· Fair value gain/loss on derivative instruments;
· Major corporate restructures; and
· The income tax impact of the above items.
In addition, items that do not reflect the underlying operations of South32,
and are individually significant to the financial statements, are excluded to
determine Underlying earnings. Significant items are detailed in the Financial
Information.
(5) Comprises Underlying EBITDA excluding third party product EBITDA,
divided by revenue excluding third party product revenue.
(6) Comprises Underlying EBIT excluding third party product EBIT, divided
by revenue excluding third party product revenue.
(7) Return on invested capital (ROIC) is a key measure that South32 uses to
assess performance. ROIC is calculated as Underlying EBIT less the discount on
rehabilitation provisions included in net finance cost, tax effected by the
Group's Underlying effective tax rate (ETR), divided by the sum of fixed
assets (excluding any rehabilitation asset and impairments) and inventories.
Manganese is included in the calculation on a proportional consolidation
basis.
(8) Market capitalisation as at 18 August 2017. Calculated as the number of
shares on issue (5,218 million) and the South32 closing share price (A$2.95).
(9) Sales revenue reflects statutory numbers.
(10) Sales price variance reflects the revenue impact of changes in commodity
prices, based on the current period's sales volume. Price-linked costs
variance reflects the change in royalties together with the change in input
costs driven by changes in commodity prices or market traded consumables.
Foreign exchange reflects the impact of exchange rate movements on local
currency denominated costs and sales. Volume variance reflects the revenue
impact of sales volume changes, based on the comparative period's sales
prices. Controllable costs variance represents the impact from changes in the
Group's controllable local currency cost base, including the variable cost
impact of production volume changes on expenditure, and period-on-period
movements in inventories. The controllable cost variance excludes earnings
adjustments including significant items.
(11) Underlying net finance cost and Underlying tax expense are actual FY17
results, not year-on-year variances.
(12) Underlying effective tax rate (ETR) is Underlying income tax expense,
excluding royalty related tax, divided by Underlying profit before tax; both
the numerator and denominator exclude equity accounted investments.
(13) Total capital expenditure comprises Capital expenditure, the purchase of
intangibles and capitalised exploration expenditure. Capital expenditure
comprises Sustaining capital expenditure and Major projects capital
expenditure. Sustaining capital expenditure comprises Stay-in-business (SIB),
Minor discretionary and Deferred stripping (including underground development)
capital expenditure.
(14) South32's ownership share of operations are as follows: Worsley Alumina
(86%), South Africa Aluminium (100%), Mozal Aluminium (47.1% share), Brazil
Alumina (Alumina 36% share, Aluminium 40% share), South Africa Energy Coal
(92% share), Illawarra Metallurgical Coal (100%), Australia Manganese (60%
share), South Africa Manganese (60% share), Cerro Matoso (99.9% share), and
Cannington (100%).
(15) South32's interest in South Africa Energy Coal is accounted at 100%
until broad-based black economic empowerment (B-BBEE) vendor loans are
repaid.
(16) Presented on a 100% basis.
(17) Operating unit cost is Revenue less Underlying EBITDA and excluding
third party sales divided by sales volumes. Operating cost is Revenue less
Underlying EBITDA and excluding third party sales. Additional manganese
disclosures are included.
(18) Third party products sold comprise US$282 million for aluminium, US$133
million for alumina, US$169 million for coal, US$113 million for freight
services and US$93 million for aluminium raw materials. Underlying EBIT on
third party products comprise US$13 million for aluminium, (US$4) million for
alumina, US$2 million for coal, nil for freight services and US$1 million for
aluminium raw materials.
(19) The quarterly sales volume weighted average of the premium low-volatile
hard coking coal Platts index (FOB Australia) on the basis of a one month lag
to published pricing (Month minus one or "M-1") was US$179/t in the 2017
financial year.
(20) The quarterly sales volume weighted average of the Metal Bulletin 44%
manganese lump ore index (CIF Tianjin, China) on the basis of a one month lag
to published pricing (Month minus one or "M-1") was US$5.54/dmtu in the 2017
financial year.
(21) The quarterly sales volume weighted average of the Metal Bulletin 37%
manganese lump ore index (FOB Port Elizabeth, South Africa) on the basis of a
one month lag to published pricing (Month minus one or "M-1") was US$4.54/dmtu
in the 2017 financial year.
(22) Figures in Italics indicate that an adjustment has been made since the
figures were previously reported.
The following abbreviations may be used throughout this report: US$ million
(US$M); US$ billion (US$B); financial year (FY); grams per tonne (g/t); tonnes
(t); thousand tonnes (kt); thousand tonnes per annum (ktpa); million tonnes
(Mt); million tonnes per annum (Mtpa); thousand ounces (koz); million ounces
(Moz); thousand wet metric tonnes (kwmt); million wet metric tonnes (Mwmt);
million wet metric tonnes per annum (Mwmt pa); thousand dry metric tonnes
(kdmt); dry metric tonne unit (dmtu); pound (lb); megawatt (MW); Australian
Securities Exchange (ASX); London Stock Exchange (LSE); Johannesburg Stock
Exchange (JSE); and American Depositary Receipts (ADR).
SOUTH32 FINANCIAL INFORMATION
For the year ended 30 June 2017
BASIS OF PREPARATION
The financial information included in this document for the year ended 30 June
2017 is unaudited. The financial information does not constitute the South32
Group's (the Group) full financial statements for the year ended 30 June 2017,
which will be approved by the Board, reported on by the auditors, and filed
with the Australian Securities and Investments Commission. The Group's full
financial statements will be prepared in accordance with the requirements of
the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board.
The financial information set out for the year ended 30 June 2017 has been
prepared on the basis of accounting policies and methods of computation
consistent with those applied in the 30 June 2016 financial statements
contained within the Annual Report of the Group.
As required, and unless otherwise stated, comparative statutory financial
information for the Group has been presented for the 2016 financial year.
All amounts are expressed in US dollars unless otherwise stated. The Group's
presentation currency and the functional currency of the majority of its
operations is US dollars as this is the principal currency of the economic
environment in which it operates.
Comparative figures have been prepared on the same basis as the current period
figures. Amounts in this Financial Information have, unless otherwise
indicated, been rounded to the nearest million dollars (US$M or US$ million).
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2017
US$M FY17 FY16
Revenue
Group production 6,160 5,227
Third party products 790 585
6,950 5,812
Other income 275 324
Expenses excluding net finance cost (5,742) (7,247)
Share of profit/(loss) of equity accounted investments 312 (330)
Profit/(loss) 1,795 (1,441)
Comprising:
Group production 1,783 (1,447)
Third party products 12 6
Profit/(loss) 1,795 (1,441)
Finance expenses (212) (132)
Finance income 41 28
Net finance cost (171) (104)
Profit/(loss) before tax 1,624 (1,545)
Income tax (expense)/benefit (393) (70)
Profit/(loss) after tax 1,231 (1,615)
Attributable to:
Equity holders of South32 Limited 1,231 (1,615)
Profit/(loss) for the year attributable to the equity holders of South32 Limited
Basic earnings per share (cents) 23.2 (30.3)
Diluted earnings per share (cents) 22.9 (30.3)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2017
US$M FY17 FY16
Profit/(loss) for the year 1,231 (1,615)
Other comprehensive income
Items that may be reclassified to the income statement:
Available for sale investments:
Net gain/(loss) taken to equity 19 (54)
Net (gain)/loss transferred to the income statement - 23
Tax benefit/(expense) recognised within other comprehensive income 1 9
Total items that may be reclassified to the income statement 20 (22)
Items not to be reclassified to the income statement:
Equity accounted investments - share of other comprehensive income/(loss) 1 1
Actuarial gain/(loss) on pension and medical schemes 8 3
Tax benefit/(expense) recognised within other comprehensive income (2) (1)
Total items not to be reclassified to the income statement 7 3
Total other comprehensive income/(loss) 27 (19)
Total comprehensive income/(loss) 1,258 (1,634)
Attributable to:
Equity holders of South32 Limited 1,258 (1,634)
CONSOLIDATED BALANCE SHEET
as at 30 June 2017
FY17 FY16
ASSETS
Current assets
Cash and cash equivalents 2,675 1,225
Trade and other receivables 718 618
Other financial assets 103 32
Inventories 781 714
Current tax assets 27 61
Other 28 18
Total current assets 4,332 2,668
Non-current assets
Trade and other receivables 365 445
Other financial assets 465 260
Inventories 81 88
Property, plant and equipment 8,373 8,651
Intangible assets 252 288
Equity accounted investments 569 570
Deferred tax assets 276 382
Other 20 22
Total non-current assets 10,401 10,706
Total assets 14,733 13,374
LIABILITIES
Current liabilities
Trade and other payables 850 676
Interest bearing liabilities 391 282
Other financial liabilities - 1
Current tax payable 116 6
Provisions 383 408
Deferred income 4 4
Total current liabilities 1,744 1,377
Non-current liabilities
Trade and other payables 4 5
Interest bearing liabilities 644 631
Other financial liabilities - 16
Deferred tax liabilities 518 501
Provisions 1,577 1,410
Deferred income 11 12
Total non-current liabilities 2,754 2,575
Total liabilities 4,498 3,952
Net assets 10,235 9,422
EQUITY
Share capital 14,747 14,958
Treasury shares (26) (3)
Reserves (3,503) (3,555)
Retained earnings/(accumulated losses) (982) (1,977)
Total equity attributable to equity holders of South32 Limited 10,236 9,423
Non-controlling interests (1) (1)
Total equity 10,235 9,422
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2017
US$M FY17 FY16
Operating activities
Profit/(loss) before tax 1,624 (1,545)
Adjustments for:
Non-cash significant items - (27)
Depreciation and amortisation expense 763 775
Impairments of property, plant and equipment, financial assets, intangibles and equity accounted investments - 1,386
Employee share awards expense 37 23
Net finance cost 171 95
Share of (profit)/loss of equity accounted investments (312) 330
Fair value (gains)/losses on derivative instruments (194) 60
Other non-cash or non-operating items (21) (18)
Changes in assets and liabilities:
Trade and other receivables (119) 163
Inventories (60) 191
Trade and other payables 137 (244)
Provisions and other liabilities (63) (121)
Cash generated from operations 1,963 1,068
Interest received 41 27
Interest paid (73) (46)
Income tax (paid)/received (127) (52)
Dividends received 15 14
Dividends received from equity accounted investments 313 19
Net cash flows from operating activities 2,132 1,030
Investing activities
Purchases of property, plant and equipment (316) (383)
Exploration expenditure (27) (13)
Exploration expenditure expensed and included in operating cash flows 25 9
Purchase of intangibles (1) (13)
Investment in financial assets (331) (53)
Investment in equity accounted investments (21) (1)
Cash outflows from investing activities (671) (454)
Proceeds from sale of property, plant and equipment and intangibles 16 5
Proceeds from financial assets 344 107
Distribution from equity accounted investments 22 -
Net cash flows from investing activities (289) (342)
Financing activities
Proceeds from interest bearing liabilities 109 31
Repayment of interest bearing liabilities (20) (127)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts (27) (3)
Share buy-back (211) -
Dividends paid (244) -
Net cash flows from financing activities (393) (99)
Net increase/(decrease) in cash and cash equivalents 1,450 589
Cash and cash equivalents, net of overdrafts, at the beginning of the financial year 1,225 644
Foreign currency exchange rate changes on cash and cash equivalents - (8)
Cash and cash equivalents, net of overdrafts, at the end of the financial year 2,675 1,225
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2017
Attributable to equity holders of South32 Limited
US$M Share capital Treasury shares Reserves Retained earnings/ (accumulated losses) Total Non- controlling interests Total equity
Balance as at 1 July 2016 14,958 (3) (3,555) (1,977) 9,423 (1) 9,422
Profit/(loss) for the year - - - 1,231 1,231 - 1,231
Other comprehensive income/(loss) - - 20 7 27 - 27
Total comprehensive income/(loss) - - 20 1,238 1,258 - 1,258
Transactions with owners:
Accrued employee entitlement for unexercised awards - - 37 - 37 - 37
Dividends - - - (244) (244) - (244)
Purchase of shares by ESOP Trusts - (27) - - (27) - (27)
Employee share awards exercised - 4 (5) 1 - - -
Shares bought back and cancelled (211) - - - (211) - (211)
Balance as at 30 June 2017 14,747 (26) (3,503) (982) 10,236 (1) 10,235
Balance as at 1 July 2015 14,958 - (3,557) (365) 11,036 (1) 11,035
Profit/(loss) for the year - - - (1,615) (1,615) - (1,615)
Other comprehensive income/(loss) - - (22) 3 (19) - (19)
Total comprehensive income/(loss) - - (22) (1,612) (1,634) - (1,634)
Transactions with owners:
Accrued employee entitlement for unexercised awards - - 24 - 24 - 24
Purchase of shares by ESOP Trusts - (3) - - (3) - (3)
Balance as at 30 June 2016 14,958 (3) (3,555) (1,977) 9,423 (1) 9,422
SEGMENT INFORMATION
(a) Description of segments
The operating segments (also referred to as "operations") are organised and
managed separately according to the nature of products produced. The members
of the executive management team (the "chief operating decision maker") and
the Board of Directors monitor the segment results regularly for the purpose
of making decisions about resource allocation and performance assessment. The
segment information for the manganese operations are presented on a
proportional consolidation basis, which is the measure used by the Group's
management to assess their performance.
The principal activities of each operating segment as the Group is currently
structured are summarised as follows:
Operating segment Principal activities
Worsley Alumina Integrated bauxite mine and alumina refinery in Western Australia, Australia.
South Africa Aluminium Aluminium smelter in Richards Bay, South Africa.
Brazil Alumina Alumina refinery in Brazil.
Mozal Aluminium Aluminium smelter in Mozambique.
South Africa Energy Coal Open-cut and underground energy coal mines and processing operations in South Africa.
Illawarra Metallurgical Coal Underground metallurgical coal mines in New South Wales, Australia.
Australia Manganese Integrated producer of manganese ore in the Northern Territory and manganese alloys in Tasmania, Australia.
South Africa Manganese Integrated producer of manganese ore and alloy in South Africa.
Cerro Matoso Integrated laterite ferronickel mining and smelting complex in Colombia.
Cannington Silver, lead and zinc mine in Queensland, Australia.
All operations are operated, or jointly operated, by the Group except Alumar
(which forms part of Brazil Alumina), which is operated by Alcoa.
(b) Segment results
Segment performance is measured on Underlying EBIT and Underlying EBITDA.
Underlying EBIT is profit before net finance cost, tax and other earnings
adjustment items including impairments. Underlying EBITDA is Underlying EBIT,
before depreciation and amortisation. A reconciliation of Underlying EBIT,
Underlying EBITDA and the Group's consolidated profit after tax from
operations is set out below. Segment revenue is measured on the same basis as
in the Consolidated Income Statement.
Revenue is not reduced for royalties and other taxes payable from group
production.
The Group separately discloses sales of group production from sales of third
party products because of the significant difference in profit margin earned
on these sales.
It is the Group's policy that inter-segment transactions are made on a
commercial basis.
Group and unallocated items/elimination represent group centre functions and
consolidation adjustments. Group financing (including finance expense and
finance income) and income taxes are managed on a Group basis and are not
allocated to operating segments.
Total assets and liabilities for each operating segment represent operating
assets and liabilities which predominantly exclude the carrying amount of
equity accounted investments, cash, interest bearing liabilities and tax
balances. The carrying amount of investments accounted for using the equity
method represents the balance of the Group's investment in equity accounted
investments, with no adjustment for cash, interest bearing liabilities and tax
balances of the equity accounted investment.
FY17 SEGMENT INFORMATION
Year ended30 June 2017 US$M Worsley Alumina South Africa Aluminium Mozal Aluminium Brazil Alumina South Africa Energy Coal Illawarra Metallurgical Coal Australia Manganese(a) South Africa Manganese(a) Cerro Matoso Cannington Group and unallocated items/ elimination Statutory adjustment(a) Group
Revenue
Group production 630 1,324 521 304 1,103 1,133 851 387 377 768 - (1,238) 6,160
Third party products(b) - - - - - - - - - - 792 (2) 790
Inter-segment revenue 476 - - 81 - - - 4 - - (557) (4) -
Total revenue 1,106 1,324 521 385 1,103 1,133 851 391 377 768 235 (1,244) 6,950
Underlying EBITDA 326 287 113 123 273 548 521 140 74 364 (21) (337) 2,411
Depreciation and amortisation (167) (68) (37) (57) (61) (190) (54) (30) (90) (56) (37) 84 (763)
Underlying EBIT 159 219 76 66 212 358 467 110 (16) 308 (58) (253) 1,648
Comprising:
Group production 159 219 76 66 216 358 467 110 (16) 308 (70) (577) 1,316
Third party products(b) - - - - - - - - - - 12 - 12
Share of profit/(loss) of equity accounted investments(c) - - - - (4) - - - - - - 324 320
Underlying EBIT 159 219 76 66 212 358 467 110 (16) 308 (58) (253) 1,648
Net finance cost (136)
Income tax (expense)/benefit (366)
Underlying earnings 1,146
Earnings adjustments(d) 85
Profit/(loss) after tax 1,231
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