REG - South32 Limited - Financial Results & Outlook Half Year 31 Dec 2016 <Origin Href="QuoteRef">S32.AX</Origin> - Part 2
16/02/2017 07:06
- Part 2: For the preceding part double click ID:nRSP0230Xa
coal sales (kt) 2,788 3,132
Energy coal sales (kt) 817 609
Realised metallurgical coal sales price (US$/t)(a) 151 82
Realised energy coal sales price (US$/t)(a) 62 43
Operating unit cost (US$/t)(b) 75 63
(a) Realised sales price is calculated as sales revenue divided by sales
volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by sales
volume.
South32 share (US$M) H1 FY17 H1 FY16
Revenue(a) 471 284
Underlying EBITDA 202 50
Underlying EBIT 109 (37)
Net operating assets/(liabilities)(b) 1,514 1,516
Capital expenditure 54 111
Major projects (>US$100M) 6 26
All other capital expenditure 48 85
Exploration expenditure 2 1
Exploration expensed 2 1
(a) Includes metallurgical coal and energy coal sales revenue.
(b) H1 FY16 reflects balance as at 30 June 2016.
Australia Manganese
(60% SHARE)
Volumes
Australia Manganese saleable ore production in H1 FY17 decreased by 6% (or
90kwmt) from the prior period's record rate to 1.5Mwmt as lower yields and
reduced plant availability resulted in lower production from the primary high
grade circuit. This impact was partially offset by the opportunistic ramp-up
of the Premium Concentrate ore (PC02) circuit to its annualised capacity of
500kwmt in the December 2016 quarter.
FY17 production guidance of 3.1Mwmt remains unchanged, albeit with a greater
proportion of PC02 product. The share of PC02 product in H1 FY17 production
was 5% (H1 FY16: Nil). Our PC02 fines product has a manganese content of
approximately 40% which leads to both grade and product-type discounts when
referenced to the high grade 44% manganese lump ore index.
Saleable manganese alloy production decreased by 8% (or 7kt) to 78kt in H1
FY17 as furnace instability impacted performance. All four furnaces are
expected to operate at full capacity once scheduled maintenance is completed
in the March 2017 quarter.
Costs
FOB manganese ore operating unit costs increased by 10% to US$1.44/dmtu in H1
FY17 as a result of a stronger Australian dollar and higher price-linked
royalties.
We have restated FY17 Operating unit costs, including Sustaining capital
expenditure guidance to US$1.72/dmtu (FY16: US$1.88/dmtu FOB) to reflect
updated exchange rate and price-linked royalty assumptions and the greater
proportion of lower cost PC02 product. The strip ratio is now expected to
increase to 3.5 from 3.3 in FY16. Cost guidance includes Sustaining capital
expenditure of US$31M. Revised exchange rate and price assumptions for our
FY17 unit cost targets are detailed on page 27, footnote 14.
Financial performance
Underlying EBIT increased by US$197M in H1 FY17 to US$207M. Higher average
realised manganese ore and alloy prices increased Underlying EBIT by US$159M,
net of price-linked costs. The impacts of a stronger Australian dollar and
inflation decreased Underlying EBIT by US$6M. Non-cash charges declined by
US$36M as depreciation and amortisation was rebased following the prior
recognition of impairments. Our average realised price for external ore sales
reflected a modest premium to the high grade 44% manganese lump ore index on
an M-1 basis, despite the greater proportion of PC02 product.
Capital expenditure decreased by US$26M to US$15M in H1 FY17 following the
completion of the PC02 project. Exploration drilling at GEMCO's Southern Areas
commenced in the December 2016 quarter.
South32 share H1 FY17 H1 FY16
Manganese ore production (kwmt) 1,499 1,589
Manganese alloy production (kwmt) 78 85
Manganese ore sales (kwmt)(a) 1,500 1,457
External customers 1,362 1,286
TEMCO 138 171
Manganese alloy sales (kt)(a) 82 76
Realised external manganese ore sales price (US$/dmtu, FOB)(a)(b) 4.91 2.51
Realised manganese alloy sales price (US$/t)(a) 988 868
Ore operating unit cost (US$/dmtu)(b)(c) 1.44 1.31
Alloy operating unit cost (US$/t)(b)(c) 720 882
(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) H1 FY17 average manganese content of ore sales was 46.4% on a dry basis
(H1 FY16: 47.6%). 95% of H1 FY17 external manganese ore sales (H1 FY16: 91%)
were completed on a CIF basis. H1 FY17 realised FOB ore prices and operating
unit costs have been adjusted for freight and marketing costs of US$13M (H1
FY16: US$13M), consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight
and marketing costs, divided by ore sales volume. Alloy operating unit costs
is Revenue less Underlying EBITDA divided by alloy sales volumes and includes
costs associated with sinter sold externally.
South32 share (US$M) H1 FY17 H1 FY16
Revenue(a) 390 226
Manganese Ore 320 173
Manganese Alloy 81 66
Intra-segment elimination (11) (13)
Underlying EBITDA 233 72
Manganese Ore 211 73
Manganese Alloy 22 (1)
Underlying EBIT 207 10
Manganese Ore 187 15
Manganese Alloy 20 (5)
Net operating assets/(liabilities)(b) 357 341
Manganese Ore 369 338
Manganese Alloy (12) 3
Capital expenditure 15 41
Major projects (>US$100M) - -
All other capital expenditure 15 41
Exploration expenditure 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.
(b) H1 FY16 reflects balance as at 30 June 2016.
South Africa Manganese
(ORE 44.4% SHARE, ALLOY 60% SHARE)
Volumes
South Africa Manganese saleable ore production increased by 23% (or 177kwmt)
to 934kwmt in H1 FY17 as market conditions supported a drawdown of Wessels
concentrate stockpiles and the use of higher cost trucking to access export
opportunities. Wessels concentrate accounted for 15% of H1 FY17 external sales
(H1 FY16: 4%). South Africa Manganese ore production will remain configured
for an optimised rate of 2.9Mwmt pa (100% basis), although we will continue to
act opportunistically when market fundamentals are supportive.
Manganese alloy saleable production decreased by 20% (or 9kt) to 37kt in H1
FY17 as a result of furnace instability. Metalloys continues to operate one of
its four furnaces.
Costs
FOB manganese ore operating unit costs decreased by 13% to US$1.96/dmtu in H1
FY17. The benefit of a weaker South African rand was partially offset by
higher price-linked royalties and the impact of inflation. The drawdown of low
cost Wessels concentrate stockpiles offset the costs absorbed to
opportunistically increase trucking of ore to port.
We have restated FOB Operating unit costs, including Sustaining capital
expenditure guidance to US$2.20/dmtu in FY17 (FY16: US$2.01/dmtu FOB) to
reflect updated exchange rate and price-linked royalty assumptions. This
includes Sustaining capital expenditure of US$9M. Revised exchange rate and
price assumptions for our FY17 unit cost targets are detailed on page 27,
footnote 14.
Financial performance
Underlying EBIT increased by US$97M in H1 FY17 to US$46M as higher average
realised manganese ore and alloy prices increased Underlying EBIT by US$66M,
net of price-linked costs. Our average realised price for external sales
reflects a 12% discount to the medium grade 37% manganese lump ore index on an
M-1 basis as our Wessels concentrate is a fine grained product. Non-cash
charges declined by US$8M as depreciation and amortisation was rebased
following the prior recognition of impairments.
Capital expenditure decreased to US$4M in H1 FY17. The Wessels Central Block
project remains on track to be completed in the March 2017 quarter.
South32 share H1 FY17 H1 FY16
Manganese ore production (kwmt) 934 757
Manganese alloy production (kwmt) 37 46
Manganese ore sales (kwmt)(a) 928 879
External customers 859 862
Metalloys 69 17
Manganese alloy sales (kt)(a) 40 50
Realised external manganese ore sales price (US$/dmtu, FOB)(a)(b) 3.87 2.00
Realised manganese alloy sales price (US$/t)(a) 875 740
Ore operating unit cost (US$/dmtu)(b)(c) 1.96 2.24
Alloy operating unit cost (US$/t)(b)(c) 925 1,120
(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) H1 FY17 average manganese content of ore sales was 40.3% on a dry basis
(H1 FY16: 40.1%). 61% of H1 FY17 external manganese ore sales (H1 FY16: 54%)
were completed on a CIF basis. H1 FY17 realised FOB ore prices and operating
costs have been adjusted for freight and marketing costs of US$10M (H1 FY16:
US$9M), consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight
and marketing costs, divided by ore sales volume. Alloy operating unit costs
is Revenue less Underlying EBITDA divided by alloy sales volumes.
South32 share (US$M) H1 FY17 H1 FY16
Revenue(a) 175 114
Manganese Ore(b) 145 78
Manganese Alloy 35 37
Intra-segment elimination (5) (1)
Underlying EBITDA 61 (28)
Manganese Ore(b) 63 (9)
Manganese Alloy (2) (19)
Underlying EBIT 46 (51)
Manganese Ore(b) 54 (25)
Manganese Alloy (8) (26)
Net operating assets/(liabilities)(c) 337 342
Manganese Ore(b) 263 258
Manganese Alloy 74 84
Capital expenditure 4 7
Major projects (>US$100M) - -
All other capital expenditure 4 7
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 statement will continue to reflect a 54.6% interest in South
Africa Manganese ore.
(c) H1 FY16 reflects balance as at 30 June 2016.
Cerro Matoso
(99.9% SHARE)
Volumes
Cerro Matoso payable nickel production remained largely unchanged at 17.7kt in
H1 FY17 as plant performance was further optimised and higher recoveries were
achieved.
Payable nickel production guidance for Cerro Matoso remains unchanged at
approximately 36kt for FY17. Accelerated development of the higher grade La
Esmeralda Mineral Resource will increase production by 16% in FY18 to
approximately 42kt. Production from La Esmeralda is now expected to commence
in the June 2017 quarter.
Costs
Operating unit costs decreased by 14% to US$3.81/lb in H1 FY17. Modest
inflationary pressure was more than offset by lower electricity costs, a
reduction in contract services and lower raw material consumption rates.
We have restated FY17 Operating unit costs, including Sustaining capital
expenditure guidance to US$3.98/lb
(FY16: US$4.30/lb) to reflect updated exchange rate and price-linked royalty
assumptions. This includes Sustaining capital expenditure of US$16M. Revised
exchange rate and price assumptions for our FY17 unit cost targets are
detailed on page 27, footnote 14.
Financial performance
Underlying EBIT increased by US$44M in H1 FY17 to a loss of US$4M as higher
average realised prices (+US$21M, net of price-linked costs) and embedded cost
saving initiatives (+US$22M) underpinned an improvement in financial
performance.
Capital expenditure of US$4M was 67% lower than the prior period.
South32 share H1 FY17 H1 FY16
Ore mined (kwmt) 2,347 3,017
Ore processed (kdmt) 1,289 1,312
Ore grade processed (%, Ni) 1.5 1.5
Payable nickel production (kt) 17.7 17.5
Payable nickel sales (kt) 17.6 17.5
Realised nickel sales price (US$/lb)(a) 4.85 4.30
Operating unit cost (US$/lb)(b) 3.81 4.43
(a) Inclusive of by-products. Realised sales price is calculated as sales
revenue divided by sales volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by
Payable nickel sales volume.
South32 share (US$M) H1 FY17 H1 FY16
Revenue 188 166
Underlying EBITDA 40 (5)
Underlying EBIT (4) (48)
Net operating assets/(liabilities)(a) 647 683
Capital expenditure 4 12
Major projects (>US$100M) - -
All other capital expenditure 4 12
Exploration expenditure 2 3
Exploration expensed 2 1
(a) H1 FY16 reflects balance as at 30 June 2016.
Cannington
(100% SHARE)
Volumes
Payable zinc production increased by 1% (or 0.3kt) to 42.1kt in H1 FY17, while
payable silver and lead production decreased by 27% and 24%, respectively.
Lower silver and lead ore grades were the primary contributors to the
reduction in metal production.
The optimised longer term mine plan at Cannington seeks to maximise total
silver, lead and zinc extraction across the remaining years of the underground
operation and reduce geotechnical risk. FY17 production guidance (silver
19.05Moz, lead 163kt, zinc 80kt) remains predicated on the extraction of the
higher grade (silver/lead) 60L stope that is in close proximity to the
existing underground crusher chamber, while the development of the replacement
underground crusher is expected to be commissioned in the March 2018 quarter.
Guidance will be revised should geotechnical conditions dictate a change to
the current stope sequence and the extraction of the 60L stope be deferred,
albeit with no net loss of metal production in the forward plan.
Costs
Operating unit costs declined by 10% to US$131/t of ore processed in H1 FY17
as the impact of a stronger Australian dollar was more than offset by lower
labour and contractor costs and a decline in haulage rates.
We have restated Operating unit costs, including Sustaining capital
expenditure guidance to US$141/t of ore processed (FY16: US$153/t) to reflect
updated exchange rate and price-linked royalty assumptions and incremental
cost savings. This includes Sustaining capital expenditure of US$39M. Revised
exchange rate and price assumptions for our FY17 unit cost targets are
detailed on page 27, footnote 14.
Financial performance
Underlying EBIT increased by US$12M in H1 FY17 to US$165M. Higher average
realised prices increased Underlying EBIT by US$105M, net of price-linked
costs, although this impact was offset by a US$104M reduction in sales
volumes, as lower grades impacted payable metal production. Controllable cost
savings (+US$26M), which benefitted from a favourable movement in inventory,
more than offset the impact of a stronger Australian dollar (-US$6M).
Finalisation adjustments and the provisional pricing of Cannington
concentrates increased Underlying EBIT by US$0.5M in H1 FY17 (-US$11M in FY16;
-US$19M in H1 FY16). Outstanding concentrate sales (containing 2Moz of silver,
25kt of lead and 12kt of zinc) were revalued at 31 December 2016. The final
price of these sales will be determined in H2 FY17.
Capital expenditure of US$18M was 20% higher than the prior period.
South32 share H1 FY17 H1 FY16
Ore mined (kt) 1,639 1,743
Ore processed (kt) 1,669 1,657
Ore grade processed (g/t, Ag) 198 266
Ore grade processed (%, Pb) 5.5 7.0
Ore grade processed (%, Zn) 3.7 3.7
Payable silver production (koz) 8,729 11,878
Payable lead production (kt) 73.9 97.5
Payable zinc production (kt) 42.1 41.8
Payable silver sales (koz) 8,860 11,898
Payable lead sales (kt) 73.3 95.5
Payable zinc sales (kt) 40.8 41.2
Realised silver sales price (US$/oz)(a) 17.4 15.3
Realised lead sales price (US$/t)(a) 2,128 1,817
Realised zinc sales price (US$/t)(a) 2,475 1,641
Operating unit cost (US$/t ore processed)(b) 131 146
(a) Realised sales price is calculated as sales revenue divided by sales
volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by ore
processed. Periodic movements in finished product inventory may impact
operating unit costs as related marketing costs and treatment and refining
charges may change.
South32 share (US$M) H1 FY17 H1 FY16
Revenue 412 423
Underlying EBITDA 194 181
Underlying EBIT 165 153
Net operating assets/(liabilities)(a) 227 242
Capital expenditure 18 15
Major project (>US$100M) - -
All other capital expenditure 18 15
Exploration expenditure 1 2
Exploration expensed 1 2
(a) H1 FY16 reflects balance as at 30 June 2016.
NOTES
(1) Revenue includes revenue from third party products.
(2) H1 FY17 basic earnings per share is calculated as Profit/(loss) after
taxation from continuing operations divided by the weighted average number of
shares for H1 FY17 (5,319 million). H1 FY17 basic Underlying earnings per
share is calculated as Underlying earnings divided by the weighted average
number of shares for H1 FY17. H1 FY16 basic earnings per share is calculated
as Profit/(loss) after taxation from continuing operations divided by the
weighted average number of shares for H1 FY16 (5,324 million). H1 FY16 basic
Underlying earnings per share is calculated as Underlying earnings divided by
the weighted average number of shares for H1 FY16.
(3) H1 FY17 dividend per share is calculated as total dividend (US$192M)
divided by the number of shares on issue at 31 December 2016 (5,324 million).
(4) Underlying EBIT is profit from continuing operations before net finance
costs, taxation and any earnings adjustment items, including impairments.
Underlying EBIT is reported inclusive of South32's share of net finance costs
and taxation of equity accounted investments. Underlying EBITDA is Underlying
EBIT, before depreciation and amortisation. Underlying earnings is
Profit/(loss) after taxation 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 annualised 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) Refer to exchange release dated 3 November 2016.
(9) 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.
(10) 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%).
(11) South32's interest in South Africa Energy Coal is accounted at 100%
broad-based black economic empowerment (B-BBEE) vendor loans are repaid.
(12) Operating unit cost, including Sustaining capital expenditure is
operating cost plus Sustaining capital expenditure (excludes Major Project
capital expenditure) divided by sales. Operating cost is Revenue less
Underlying EBITDA. Additional manganese disclosures are included on pages 23
and 24.
(13) Prior FY17 Operating unit cost guidance, including Sustaining capital
expenditure, and Sustaining capital expenditure guidance, include royalties
(where appropriate) and the influence of exchange rate assumptions, and were
predicated on: an alumina price of US$259/t; an average blended coal price of
US$83/t for Illawarra Metallurgical Coal; a manganese ore price of
US$3.23/dmtu for 44% manganese product; a nickel price of US$3.95/lb; a
thermal coal price of US$54/t (API4) for South Africa Energy Coal; a silver
price of US$17.50/troy oz; a lead price of US$1,723/t; a zinc price of
US$1,907/t; an AUD:USD exchange rate of 0.72; a USD:ZAR exchange rate of
16.57; and a USD:COP exchange rate of 3,025; all of which reflected forward
markets as at May 2016 or our internal expectations.
(14) New FY17 Operating unit cost guidance, including Sustaining capital
expenditure, and Sustaining capital expenditure guidance, include royalties
(where appropriate) and the influence of exchange rates, and are predicated on
various assumptions for H2 FY17, including: an alumina price of US$316/t; an
average blended coal price of US$146/t for Illawarra Metallurgical Coal; a
manganese ore price of US$6.79/dmtu for 44% manganese product; a nickel price
of US$4.65/lb; a thermal coal price of US$84/t (API4) for South Africa Energy
Coal; a silver price of US$17.04/troy oz; a lead price of US$2,267/t; a zinc
price of US$2,746/t; an AUD:USD exchange rate of 0.75; a USD:ZAR exchange rate
of 14.20; and a USD:COP exchange rate of 2,943; all of which reflected forward
markets as at January 2017 or our internal expectations.
(15) FY17 Capital expenditure guidance is predicated on forward markets as
at January 2017, or our internal expectations, for H2 FY17, including: an
AUD:USD exchange rate of 0.75; a USD:ZAR exchange rate of 14.20; and a USD:COP
exchange rate of 2,943.
(16) Underlying effective tax rate (ETR) is Underlying income tax expense
excluding royalty related taxation divided by Underlying profit before tax;
both the numerator and denominator exclude equity accounted investments.
(17) 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.
(18) Underlying net finance cost and Underlying taxation expense are actual
H1 FY17 results, not year-on-year variances.
(19) Third party products sold comprise US$135 million for aluminium, US$56
million for alumina, US$73 million for coal, US$47 million for freight
services and US$37 million for aluminium raw materials. Underlying EBIT on
third party products comprise US$6 million for aluminium, (US$4) million for
alumina, US$9 million for coal, nil for freight services and nil for aluminium
raw materials.
The following abbreviations may be used throughout this report: US$ million
(US$M); US$ billion (US$B); December half year is abbreviated to H1 FY17,
grams per tonne (g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per
annum (ktpa); million tonnes (Mt); million tonnes per annum (Mtpa); thousand
troy ounces (koz); million troy ounces (Moz); thousand wet metric tonnes
(kwmt); thousand dry metric tonnes (kdmt) dry metric tonne unit (dmtu); pound
(lb); megawatt (MW); Australian Securities Exchange (ASX); London Stock
Exchange (LSE); and Johannesburg Stock Exchange (JSE)
.
CONSOLIDATED INCOME STATEMENT
for the half year ended 31 December 2016
US$M Note H1 FY17 H1 FY16
Continuing operations
Revenue
Group production 2,873 2,691
Third party products 348 290
3,221 2,981
Other income 142 167
Expenses excluding net finance cost (2,670) (4,379)
Share of profit/(loss) of equity accounted investments 164 (356)
Profit/(loss) from continuing operations 857 (1,587)
Comprising:
Group production 846 (1,587)
Third party products 11 -
Profit/(loss) from continuing operations 857 (1,587)
Finance expenses (77) (57)
Finance income 17 12
Net finance cost 6 (60) (45)
Profit/(loss) before tax 797 (1,632)
Income tax (expense)/benefit (177) (117)
Profit/(loss) after tax from continuing operations 620 (1,749)
Attributable to:
Equity holders of South32 Limited 620 (1,749)
Profit/(loss) from continuing operations attributable to the equity holders of South32 Limited
Basic earnings per share (US cents) 5 11.7 (32.9)
Diluted earnings per share (US cents) 5 11.5 (32.9)
The accompanying notes form part of the half year financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year ended 31 December 2016
US$M H1 FY17 H1 FY16
Profit/(loss) for the period 620 (1,749)
Other comprehensive income
Items that may be reclassified to the income statement:
Available for sale investments:
Net gain/(loss) taken to equity (1) (28)
Net (gain)/loss transferred to the income statement - 23
Tax benefit/(expense) recognised within other comprehensive income 2 5
Total items that may be reclassified to the income statement 1 -
Items not to be reclassified to the income statement:
Equity accounted investments - share of other comprehensive income/(loss) - 1
Actuarial gain/(loss) on pension and medical schemes 2 6
Tax benefit/(expense) recognised within other comprehensive income (1) (2)
Total items not to be reclassified to the income statement 1 5
Total other comprehensive income/(loss) 2 5
Total comprehensive income/(loss) 622 (1,744)
Attributable to:
Equity holders of South32 Limited 622 (1,744)
The accompanying notes form part of the half year financial statements.
CONSOLIDATED BALANCE SHEET
as at 31 December 2016
US$M Note H1 FY17 FY16
ASSETS
Current assets
Cash and cash equivalents 7 1,901 1,225
Trade and other receivables 7 980 618
Other financial assets 7 73 32
Inventories 770 747
Current tax assets 22 61
Other 17 18
Total current assets 3,763 2,701
Non-current assets
Trade and other receivables 7 165 445
Other financial assets 7 394 260
Inventories 55 55
Property, plant and equipment 8,431 8,651
Intangible assets 271 288
Equity accounted investments 714 570
Deferred tax assets 309 382
Other 21 22
Total non-current assets 10,360 10,673
Total assets 14,123 13,374
LIABILITIES
Current liabilities
Trade and other payables 7 683 676
Interest bearing liabilities 7 430 282
Other financial liabilities 7 6 1
Current tax payable 17 6
Provisions 390 408
Deferred income 3 4
Total current liabilities 1,529 1,377
Non-current liabilities
Trade and other payables 7 4 5
Interest bearing liabilities 7 612 631
Other financial liabilities 7 - 16
Deferred tax liabilities 511 501
Provisions 1,455 1,410
Deferred income 11 12
Total non-current liabilities 2,593 2,575
Total liabilities 4,122 3,952
Net assets 10,001 9,422
EQUITY
Share capital 14,958 14,958
Treasury shares (10) (3)
Reserves (3,537) (3,555)
Retained earnings/(accumulated losses) (1,409) (1,977)
Total equity attributable to equity holders of South32 Limited 10,002 9,423
Non-controlling interests (1) (1)
Total equity 10,001 9,422
The accompanying notes form part of the half year financial statements.
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 31 December 2016
US$M H1 FY17 H1 FY16
Operating activities
Profit/(loss) before tax from continuing operations 797 (1,632)
Adjustments for:
Non-cash significant items - 37
Depreciation and amortisation expense 373 401
Impairments of property, plant and equipment, financial assets, intangibles and equity accounted investments 4 1,384
Employee share awards expense 22 12
Net finance cost 60 45
Share of (profit)/loss of equity accounted investments (164) 356
Fair value (gains)/losses on derivative instruments (189) 36
Other non-cash or non-operating items (3) (2)
Changes in assets and liabilities:
Trade and other receivables (164) 162
Inventories (23) 119
Trade and other payables 24 (296)
Provisions and other liabilities (40) (196)
Cash generated from continuing operations 697 426
Interest received 17 12
Interest paid (34) (30)
Income tax (paid)/received (39) 37
Dividends received - 1
Dividends received from equity accounted investments 41 19
Net cash flows from continuing operating activities 682 465
Investing activities
Purchases of property, plant and equipment (150) (237)
Exploration expenditure (7) (7)
Exploration expenditure expensed and included in operating cash flows 6 5
Purchase of intangibles (1) (14)
Investment in financial assets (28) (80)
Investment in equity accounted investments (21) -
Cash outflows from investing activities (201) (333)
Proceeds from sale of property, plant and equipment and intangibles 15 1
Proceeds from financial assets 105 112
Net cash flows from continuing investing activities (81) (220)
Financing activities
Proceeds from interest bearing liabilities 147 2
Repayment of interest bearing liabilities (9) (190)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts (12) -
Dividends paid (53) -
Net cash flows from continuing financing activities 73 (188)
Net increase/(decrease) in cash and cash equivalents 674 57
Cash and cash equivalents, net of overdrafts, at the beginning of the period 1,225 644
Foreign currency exchange rate changes on cash and cash equivalents 2 (8)
Cash and cash equivalents, net of overdrafts, at the end of the period 1,901 693
The accompanying notes form part of the half year financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year ended 31 December 2016
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 period - - - 620 620 - 620
Other comprehensive income/(loss) - - 1 1 2 - 2
Total comprehensive income/(loss) - - 1 621 622 - 622
Transactions with owners:
Accrued employee entitlements for unexercised awards - - 22 - 22 - 22
Dividends - - - (53) (53) - (53)
Purchase of shares by ESOP Trusts - (12) - - (12) - (12)
Employee share awards exercised - 5 (5) - - - -
Balance as at 31 December 2016 14,958 (10) (3,537) (1,409) 10,002 (1) 10,001
Balance as at 1 July 2015 14,958 - (3,557) (365) 11,036 (1) 11,035
Profit/(loss) for the period - - - (1,749) (1,749) - (1,749)
Other comprehensive income/(loss) - - - 5 5 - 5
Total comprehensive income/(loss) - - - (1,744) (1,744) - (1,744)
Transactions with owners:
Accrued employee entitlements for unexercised awards - - 12 - 12 - 12
Balance as at 31 December 2015 14,958 - (3,545) (2,109) 9,304 (1) 9,303
The accompanying notes form part of the half year financial statements.
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS - BASIS OF PREPARATION
The consolidated financial statements of South32 Limited referred to as the
"Company" and its subsidiaries and joint arrangements (collectively, the
"South32 Group") for the half year ended 31 December 2016 were authorised for
issue in accordance with a resolution of the Directors on 16 February 2017
1. Reporting entity
South32 Limited is a for-profit company limited by shares incorporated in
Australia with a primary listing on the Australian Securities Exchange, a
standard listing on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange. The nature of the operations and principal
activities of the South32 Group are described in note 3 Segment information.
2. Basis of preparation
The half year financial statements are a general purpose condensed financial
report which:
· Have been prepared in accordance with AASB 134 Interim Financial
Reporting, IAS 34 Interim Financial Reporting and the Corporations Act 2001;
· Have been prepared on a historical cost basis, except for derivative
financial instruments and certain other financial assets and liabilities which
are required to be measured at fair value;
· Are presented in US dollars, which is the functional currency of the
majority of the Group's operations, and all values are rounded to the nearest
million dollars (US$M or US$ million) unless otherwise stated, in accordance
with Australian Securities and Investments Commission (ASIC) Corporations
(Rounding in Financial / Directors' Reports) Instrument 2016/191;
· Present reclassified comparative information where required for
consistency with the current period's presentation; and
· Have been prepared on the basis of accounting policies and methods of
computation consistent with those applied in the 30 June 2016 annual financial
statements.
In preparing these half year financial statements, management has made
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. The significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements as at and for the year ended 30 June
2016.
For a full understanding of the financial performance and financial position
of the South32 Group it is recommended that the half year financial statements
be read in conjunction with the annual financial statements for the year ended
30 June 2016. Consideration should also be given to any public announcements
made by the Company during the half year ended 31 December 2016 in accordance
with the continuous disclosure obligations of the ASX Listing Rules.
The following exchange rates relative to the US dollar have been applied in
the financial statements.
Average for the half year ended 31 December 2016 Average for the half year ended 31 December 2015 As at 31 December 2016 As at 30 June 2016 As at 31 December 2015
Australian dollar(1) 0.75 0.72 0.72 0.74 0.73
Brazilian real 3.27 3.69 3.26 3.24 3.90
Colombian peso 2,983 2,999 3,001 2,916 3,149
South African rand 14.00 13.60 13.60 14.85 15.56
(1) Displayed as US$ to A$ based on common convention.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
3. Segment information
(i) 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 South32's
management to assess their performance.
The principal activities of each reporting segment, as the South32 Group is
currently structured, are summarised as follows:
Operating segment Principal activities
Worsley Alumina Integrated bauxite mine and alumina refinery in Western Australia
South Africa Aluminium Aluminium smelter in Richards Bay
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 Manganese Integrated producer of manganese ore in the Northern Territory and alloys in Tasmania
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
All operations are operated or jointly operated by the South32 Group except
Alumar (which forms part of Brazil Alumina), which is operated by Alcoa.
The South32 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 South32 Group's policy that inter-segment transactions are made on
commercial terms.
Group and unallocated items/eliminations represent group centre functions and
consolidation adjustments. Group financing (including finance cost and finance
income) and income taxes are managed on a South32 Group basis and are not
allocated to operating segments
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
3. Segment information (continued)
Half year ended31 December 2016 US$M Worsley Alumina South Africa Aluminium Mozal Aluminium Brazil Alumina South Africa Energy Coal Illawarra Metallurgical Coal Australia Manganese(1) South Africa Manganese(1) Cerro Matoso Cannington Group and unallocated items/ elimination Statutory adjustment(1) Group
Revenue
Group production 291 601 238 133 539 471 390 175 188 412 - (565) 2,873
Third party products(2) - - - - - - - - - - 349 (1) 348
Inter-segment revenue 201 - - 31 - - - - - - (232) - -
Total revenue 492 601 238 164 539 471 390 175 188 412 117 (566) 3,221
Underlying EBITDA 110 122 44 38 152 202 233 61 40 194 - (132) 1,064
Depreciation and amortisation (84) (32) (19) (28) (24) (93) (26) (15) (44) (29) (20) 41 (373)
Underlying EBIT 26 90 25 10 128 109 207 46 (4) 165 (20) (91) 691
Comprising:
Group Production 26 90 25 10 129 109 207 46 (4) 165 (31) (253) 519
Third party
- More to follow, for following part double click ID:nRSP0230XcRecent news on South32
See all newsREG - South32 Limited - Update to Notification of Dividend
AnnouncementREG - South32 Limited - 2026 Interim Dividend Currency Exchange Rates
AnnouncementREG - South32 Limited - South32: Chair Succession
AnnouncementREG - South32 Limited - Appendix 3Z: Final Director's Interest Notice
AnnouncementRCS - South32 Limited - Ilika at Yellowstone Advisory Investor Evening
Announcement