REG - South32 Limited - Final Results <Origin Href="QuoteRef">S32.AX</Origin> - Part 3
24/08/2017 07:06
- Part 3: For the preceding part double click ID:nRSX8689Ob
Capital expenditure(e) 43 15 6 20 64 112 28 9 14 36 6 (37) 316
Equity accounted investments - - - - 10 - - - - - - 559 569
Total assets(f) 3,564 1,478 630 860 936 1,667 597 493 800 371 4,011 (674) 14,733
Total liabilities(f) 521 273 96 169 1,020 261 278 186 189 156 2,017 (668) 4,498
(a) The segment information reflects the Group's interest in the manganese
operations and is presented on a proportional consolidation basis, which is
the measure used by the Group's management to assess their performance. The
manganese operations are equity accounted in the consolidated financial
statements. The statutory adjustment column reconciles the proportional
consolidation to the equity accounting position.
(b) 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$1 million for
aluminium raw materials.
(c) Share of profit/(loss) of equity accounted investments includes the
impacts of earnings adjustments to Underlying EBIT.
(d) Refer to Earnings adjustments.
(e) Capital expenditure excludes the purchase of intangibles and capitalised
exploration expenditure.
(f) Total assets and liabilities for each operating segment represent
operating assets and liabilities which predominately exclude the carrying
amount of equity accounted investments, cash, interest bearing liabilities and
tax balances.
FY16 SEGMENT INFORMATION
Year ended30 June 2016 US$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 542 1,161 431 323 1,009 642 476 230 333 786 - (706) 5,227
Third party products(b) - - - - - - - - - - 587 (2) 585
Inter-segment revenue 469 - - 23 - - - 4 - - (492) (4) -
Total revenue 1,011 1,161 431 346 1,009 642 476 234 333 786 95 (712) 5,812
Underlying EBITDA 199 147 35 140 182 132 154 (11) 2 330 (13) (166) 1,131
Depreciation and amortisation (157) (65) (35) (62) (87) (193) (89) (36) (90) (56) (30) 125 (775)
Underlying EBIT 42 82 - 78 95 (61) 65 (47) (88) 274 (43) (41) 356
Comprising:
Group production 42 82 - 78 94 (60) 65 (47) (88) 274 (49) (18) 373
Third party products(b) - - - - - - - - - - 6 - 6
Share of profit/(loss) of equity accounted investments(c) - - - - 1 (1) - - - - - (23) (23)
Underlying EBIT 42 82 - 78 95 (61) 65 (47) (88) 274 (43) (41) 356
Net finance cost (125)
Income tax (expense)/benefit (93)
Underlying earnings 138
Earnings adjustments(d) (1,753)
Profit/(loss) after tax (1,615)
Capital expenditure(e) 44 19 7 12 63 185 68 11 18 27 8 (79) 383
Equity accounted investments - - - - 13 - - - - - - 557 570
Total assets(f) 3,647 1,334 656 874 728 1,745 577 517 889 401 2,654 (648) 13,374
Total liabilities(f) 439 275 91 167 827 229 236 175 206 159 1,796 (648) 3,952
(a) The segment information reflects the Group's interest in the manganese
operations and is presented on a proportional consolidation basis, which is
the measure used by the Group's management to assess their performance. The
manganese operations are equity accounted in the consolidated financial
statements. The statutory adjustment column reconciles the proportional
consolidation to the equity accounting position.
(b) Third party product sold comprise US$264 million for aluminium, US$59
million for alumina, US$72 million for coal, US$90 million for freight
services and US$100 million for aluminium raw materials. Underlying EBIT on
third party products comprise US$3 million for aluminium, (US$3) million for
alumina, US$5 million for coal, US$1 million for freight services and nil for
aluminium raw materials.
(c) Share of profit/(loss) of equity accounted investments includes the
impacts of earnings adjustments to Underlying EBIT.
(d) Refer to Earnings adjustments.
(e) Capital expenditure excludes the purchase of intangibles and
capitalised exploration expenditure.
(f) Total assets and liabilities for each operating segment represent
operating assets and liabilities which predominately exclude the carrying
amount of equity accounted investments, cash, interest bearing liabilities and
tax balances.
EARNINGS ADJUSTMENTS
The following table shows earnings adjustments in determining Underlying
earnings:
Earnings adjustments
US$M FY17 FY16
Adjustments to Underlying EBIT
Significant items(a) - 24
Exchange rate (gains)/losses on restatement of monetary items(b) 37 (43)
Impairment losses(b)(c) - 1,386
Fair value (gains)/losses on derivative instruments(b) (194) 60
Major corporate restructures(b) 2 63
Impairment losses included in profit/(loss) of equity accounted investments(d) - 291
Earnings adjustments included in profit/(loss) of equity accounted investments(d) 8 16
Total adjustments to Underlying EBIT (147) 1,797
Adjustments to net finance cost
Significant items(a) - 9
Exchange rate variations on net debt 35 (30)
Total adjustments to net finance cost 35 (21)
Adjustments to income tax expense
Significant items(a) - 31
Tax effect of earnings adjustments to Underlying EBIT 42 (187)
Tax effect of earnings adjustments to net finance cost (9) 9
Exchange rate variations on tax balances (6) 124
Total adjustments to income tax expense 27 (23)
Total earnings adjustments (85) 1,753
(a) Refer to significant items.
(b) Recognised in expenses excluding net finance cost in the Consolidated
Income Statement.
(c) US$1,310 million in FY16 relates to the impairment of non-financial
assets. US$76 million in FY16 relates to impairment of available for sale
investments.
(d) Recognised in share of profit/(loss) of equity accounted investments in
the Consolidated Income Statement.
Significant items
Significant items are those items, not separately identified in earnings
adjustments, where their nature and amount is considered material to the
consolidated financial statements. There were no such items included within
the Group's (income)/expense for the year ended 30 June 2017.
Year ended 30 June 2016
US$M Gross Tax Net
Set-up costs(a) 60 (17) 43
Adjustment to Australian tax balances post-demerger including reset of tax assets - (85) (85)
Derecognition of deferred tax assets - 126 126
Brazil Aluminium Smelter impairment 32 (11) 21
Brazil Alumina tax accounting adjustments - 20 20
Change in discount rate(b) 9 (1) 8
Closure and rehabilitation provisions(a) (68) (1) (69)
Total significant items 33 31 64
(a) Recognised in expenses excluding net finance cost in the Consolidated
Income Statement.
(b) Recognised in net finance cost in the Consolidated Income Statement.
Set-up costs
Set-up costs related to the ongoing establishment of the Group's corporate and
regional offices following the demerger. The costs primarily relate to
transitionary contractor and consultant support, information technology
infrastructure and system support. The amount recognised is inclusive of US$30
million paid to BHP under an agreement for information technology services.
Those costs related to all operating segments. All remaining set-up costs
relate to group and unallocated items.
Adjustment to Australian tax balances post-demerger including reset of tax
assets
The tax basis of the Group's wholly owned Australian operations was reset on
demerger from BHP. The net increase/(decrease) to tax assets is
charged/(credited) to income tax expense in the Consolidated Income
Statement.
Derecognition of deferred tax assets
As a result of the significant and continued weakening of commodity markets,
certain deferred tax assets associated with provisions for closure and
rehabilitation were derecognised as utilisation is no longer probable.
Brazil Aluminium Smelter impairment
The Group recognised an impairment of assets of US$97 million to reflect the
probability of restarting its Brazil Aluminium Smelter. US$32 million of this
is considered a significant item as it related to smelter consumables and
indirect taxes.
Brazil Alumina tax accounting adjustments
The Group's cash and profit repatriation practices result in a probable
expectation that tax deferrals will ultimately unwind. This has resulted in
the recognition of associated deferred tax balances at a rate closely aligned
to the country statutory rate and the reassessment of future tax losses as a
result of revised interpretation of the applicability of local tax laws.
Closure and rehabilitation provisions and Change in discount rate
Following a review of cash flow assumptions and discount rates, the Group
recognised a net decrease in closure and rehabilitation provisions of US$59
million. Where this related to closed sites, US$68 million was recognised as a
benefit in expenses and US$9 million as a charge in net finance cost in the
Consolidated Income Statement. The benefit recognised in expenses included
US$18 million related to South Africa Energy Coal and US$50 million related to
the closed Bayside operation, formerly part of South Africa Aluminium.
NET FINANCE COST
US$M FY17 FY16
Finance expenses
Interest on borrowings (21) (10)
Finance lease interest (52) (37)
Discounting on provisions and other liabilities (98) (96)
Change in discount rate on closure and rehabilitation provisions 6 (9)
Net interest expense on post-retirement employee benefits (9) (7)
Fair value change on financial asset (3) (3)
Exchange rate variations on net debt (35) 30
(212) (132)
Finance income
Interest income 41 28
Net finance cost (171) (104)
INCOME TAX EXPENSE
US$M FY17 FY16
Current tax (expense)/benefit (269) (115)
Deferred tax (expense)/benefit (124) 45
Total tax (expense)/benefit (393) (70)
Australia (220) 54
Southern Africa (129) (99)
Rest of world (44) (25)
Total tax (expense)/benefit attributed to geographical jurisdiction (393) (70)
EQUITY ACCOUNTED INVESTMENTS
The Group's interests in equity accounted investments with the most
significant contribution to the Group's net profit/(loss) or net assets are as
follows:
Significant joint ventures Country of incorporation/ principal place of business Principal activity Reporting date Acquisition date Ownership interest
FY17 FY16
% %
Australia Manganese(a)(b) Australia Integrated producer of manganese ore and alloy 30 Jun 2017 8 May 2015 60 60
South Africa Manganese(a)(c) South Africa Integrated producer of manganese ore and alloy 30 Jun 2017 3 Feb 2015 60 60
(a) Whilst the Group holds a greater than 50 per cent interest in the joint
ventures, joint control is contractually achieved as joint venture parties
unanimously consent on decisions over the joint venture's relevant
activities.
(b) Australia Manganese consists of an investment in Groote Eylandt Mining
Company Pty Limited.
(c) South Africa Manganese consists of an investment in Samancor Holdings
(Proprietary) Limited.
The following table summarises the financial information of the Group's
significant equity accounted investments:
Share of profit/(loss) of equity accounted investments
US$M FY17 FY16
Australia Manganese and South Africa Manganese 287 (339)
Individually immaterial(a) 25 9
Total 312 (330)
(a) Individually immaterial consists of investments in Samancor AG (60 per
cent), Samancor Marketing Pte Ltd (60 per cent), Richards Bay Coal Terminal
Proprietary Limited (21.1 per cent) and Port Kembla Coal Terminal Limited
(16.7 per cent).
INTERESTS IN JOINT OPERATIONS
Significant joint operations of the Group, which are those with the most
significant contributions to the Group's net profit/(loss) or net assets, are
as follows:
Effective interest
Significant joint operations Country of operation Principal activity Acquisition date FY17 FY16
% %
Brazil Alumina Brazil Alumina refining 3 Jul 2014 36 36
Aluminium smelting 3 Jul 2014 40 40
Mozal Aluminium(a) Mozambique Aluminium smelting 27 Mar 2015 47.1 47.1
Worsley Alumina(b) Australia Bauxite mining and alumina refining 8 May 2015 86 86
(a) This joint arrangement is an incorporated entity. It is classified as a
joint operation as the participants are entitled to receive output, not
dividends, from the arrangement.
(b) Whilst the Group holds a greater than 50 per cent interest in Worsley,
participants jointly approve the operating and capital budgets. The Group
therefore has joint control over the relevant activities of Worsley.
disclaimer
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements, including statements about
trends in commodity prices and currency exchange rates; demand for
commodities; production forecasts; plans, strategies and objectives of
management; capital costs and scheduling; operating costs; anticipated
productive lives of projects, mines and facilities; and provisions and
contingent liabilities. These forward-looking statements reflect expectations
at the date of this release, however they are not guarantees or predictions of
future performance. They involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, and which may cause
actual results to differ materially from those expressed in the statements
contained in this release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws or
regulations, the South32 Group does not undertake to publicly update or review
any forward looking statements, whether as a result of new information or
future events. Past performance cannot be relied on as a guide to future
performance.
NON-IFRS FINANCIAL INFORMATION
This release includes certain non-IFRS financial measures, including
Underlying earnings, Underlying EBIT and Underlying EBITDA, Underlying basic
earnings per share, Underlying effective tax rate, Underlying EBIT margin,
Underlying EBITDA margin, Underlying return on capital, Free cash flow, net
debt, net operating assets and ROIC. These measures are used internally by
management to assess the performance of our business, make decisions on the
allocation of our resources and assess operational management. Non-IFRS
measures have not been subject to audit or review and should not be considered
as an indication of or alternative to an IFRS measure of profitability,
financial performance or liquidity.
NO OFFER OF SECURITIES
Nothing in this release should be read or understood as an offer or
recommendation to buy or sell South32 securities, or be treated or relied upon
as a recommendation or advice by South32.
NO FINANCIAL OR INVESTMENT ADVICE - SOUTH AFRICA
South32 does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
FURTHER INFORMATION
INVESTOR RELATIONS
Alex VolanteT +61 8 9324 9029M +61 403 328 408E Alex.Volante@south32.net Rob WardT +61 8 9324 9340M +61 431 596 831E Robert.Ward@south32.net
MEDIA RELATIONS
Hayley Cardy James Clothier
T +61 8 9324 9008M +61 409 448 288E Hayley.Cardy@south32.net T +61 8 9324 9697M +61 413 319 031E James.Clothier@south32.net
Further information on South32 can be found at www.south32.net.
South32 Limited (ABN 84 093 732 597)
Registered in Australia
(Incorporated in Australia under the Corporations Act 2001)
Registered Office: Level 35, 108 St Georges Terrace
Perth Western Australia 6000 Australia
ISIN: AU000000S320
JSE Sponsor: UBS South Africa (Pty) Ltd
24 August 2017
This information is provided by RNS
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