REG - South32 Limited - Financial Results & Outlook Half Year 31 Dec 2017 <Origin Href="QuoteRef">S32.AX</Origin> - Part 2
15/02/2018 07:05
- Part 2: For the preceding part double click ID:nRSO9698Ea
by power and raw material inputs, given the operation's high variable cost base. Mozal Aluminium utilises hydroelectric
power that is generated by Hidroeléctrica de Cahora Bassa (HCB). HCB delivers power into the South African grid to Eskom
and Mozal Aluminium sources electricity via the Mozambique Transmission Company (Motraco) under a long term contract. The
price of electricity supplied is South African rand based with the rate of escalation linked to a South Africa domestic
production price index plus margin.
Financial performance
Underlying EBIT increased by 140% (or US$35M) in H1 FY18 to US$60M as a 25% increase in the average realised price of
aluminium (+US$65M) and higher sales volumes (+US$23M) were partially offset by higher alumina, pitch and coke input costs
(-US$20M).
Capital expenditure
Sustaining capital expenditure increased to US$8M in H1 FY18. The US$18M AP3XLE energy efficiency project, which was
approved in August 2017, remains on schedule with first incremental production anticipated in FY20 and the full benefit to
be realised by FY24. The project will deliver a circa 5% (or 10kt pa) increase in annual production with no associated
increase in power consumption.
South32 share H1 FY18 H1 FY17
Aluminium production (kt) 137 136
Aluminium sales (kt)(a) 147 134
Realised sales price (US$/t)(a) 2,218 1,776
Operating unit cost (US$/t)(b) 1,694 1,448
(a) Volumes and prices do not include any third party trading that may be undertaken independently of equity production.
Realised sales price is calculated as sales revenue divided by sales volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by sales volume.
South32 share (US$M) H1 FY18 H1 FY17
Revenue 326 238
Underlying EBITDA 77 44
Underlying EBIT 60 25
Net operating assets(a) 540 534
Capital expenditure 8 3
Major projects (>US$100M) - -
All other capital expenditure 8 3
(a) H1 FY17 reflects balance as at 30 June 2017.
Brazil ALUMINA (ALUMINA 36% SHARE, ALUMINIUM 40% SHARE)
Volumes
Brazil Alumina saleable production increased by 3kt to 676kt in H1 FY18 as the refinery continued to operate at capacity.
FY18 production guidance remains unchanged at 1.3Mt with Phase I of the refinery de-bottlenecking project nearing
completion.
Operating costs
Operating unit costs at the non-operated refinery increased by 21% to US$234/t in H1 FY18 as the price of caustic soda
increased and consumption rates rose temporarily as lower quality bauxite feed was introduced following a weather related
disruption to supply from MRN.
Financial performance
Alumina Underlying EBIT increased by 392% (or US$47M) in H1 FY18 to US$59M as a 44% increase in the average realised price
of alumina (+US$73M) was partially offset by higher caustic soda (-US$9M) and fuel oil (-US$12M) costs.
Aluminium Underlying EBIT decreased by US$10M to a loss of US$12M as our obligation to purchase electricity from
Eletronorte was fulfilled during the period, following termination of the contract in December 2015. The sale of surplus
electricity generated other income of US$36M, although this was more than offset by the utilisation of the associated
onerous contract provision and the recognition of a US$12M provision to reflect transmission charges that will no longer be
offset by ongoing electricity purchases.
Capital expenditure
Sustaining capital expenditure decreased to US$10M in H1 FY18 with the de-bottlenecking Phase I project nearing
completion.
South32 share H1 FY18 H1 FY17
Alumina production (kt) 676 673
Alumina sales (kt) 649 638
Realised alumina sales price (US$/t)(a) 370 257
Alumina operating unit cost (US$/t)(b)(c) 234 194
(a) Realised sales price is calculated as sales revenue divided by sales volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by sales volume.
(c) Includes cost of acquiring bauxite mainly from MRN.
South32 share (US$M) H1 FY18 H1 FY17
Revenue 240 164
Alumina 240 164
Aluminium - -
Other income 41 86
Underlying EBITDA 76 38
Alumina 88 40
Aluminium (12) (2)
Underlying EBIT 47 10
Alumina 59 12
Aluminium (12) (2)
Net operating assets/(liabilities)(a) 675 691
Alumina 687 718
Aluminium (12) (27)
Capital expenditure 10 13
Major projects (>US$100M) - -
All other capital expenditure 10 13
(a) H1 FY17 reflects balance as at 30 June 2017.
South Africa Energy Coal (92% SHARE)
Volumes
South Africa Energy Coal saleable production decreased by 9% (or 1.4Mt) to 13.4Mt in H1 FY18. Export coal production
exceeded expectations as productivity lifted at both the Klipspruit mine and the export oriented areas of the WMC. In
contrast, domestic production was impacted by a reduction in demand from the Duvha power station and scheduled maintenance
in the domestically focused areas of the WMC. The continued build of inventory across H1 FY18 reflects ongoing constraint
in the supply chain and weather related delays at the Richards Bay Coal Terminal.
FY18 production guidance remains unchanged at 27.5Mt (11.5Mt export; 16.0Mt domestic).
Operating costs
Operating unit costs increased by 38% to US$36/t in H1 FY18 as the South African rand strengthened, the proportion of
higher margin export tonnes (with associated washing and logistics costs) increased and an area of in-pit inventory at the
WMC was written down to net realisable value.
We have updated FY18 unit cost guidance to US$34/t to reflect revised exchange rate and price assumptions. Exchange rate
and price assumptions for FY18 unit cost guidance are detailed in footnote 20.
Financial performance
Underlying EBIT decreased by 10% (or US$13M) in H1 FY18 to US$115M. Higher average export (+US$77M) and domestic (+US$28M)
realised prices were more than offset by lower sales volumes (-US$30M), an increase in planned maintenance and labour costs
(-US$48M), inflation (-US$22M) and a stronger South African rand (-US$21M). The operation's costs were also impacted by the
net realisable value write-down of an area of in-pit inventory at the WMC (-US$8M).
Capital expenditure
Sustaining capital expenditure increased to US$68M in H1 FY18 as activity previously deferred as a result of adverse
weather was completed. Sustaining capital expenditure will continue to be directed towards the WMC in H2 FY18 given the
requirement to open-up new mining areas. FY18 guidance for Sustaining capital expenditure has been increased by US$20M to
US$132M.
We also invested US$4M in H1 FY18 to progress the 4.3B South African rand KPSX project, which was approved by the Board in
November 2017. The 8Mtpa brownfield project will extend the life of the Klipspruit colliery by more than 20 years.
100 per cent terms(a) H1 FY18 H1 FY17
Energy coal production (kt) 13,423 14,825
Domestic sales (kt)(b) 7,334 8,918
Export sales (kt)(b) 5,865 5,856
Realised domestic sales price (US$/t)(b) 24 19
Realised export sales price (US$/t)(b) 76 63
Operating unit cost (US$/t)(c) 36 26
(a) South32's interest in South Africa Energy Coal is accounted at 100% until Broad-Based Black Economic Empowerment
(B-BBEE) vendor loans are repaid.
(b) Volumes and prices do not include any third party trading that may be undertaken independently of equity production.
Realised sales price is calculated as sales revenue divided by sales volume.
(c) Operating unit cost is Revenue less Underlying EBITDA divided by sales volume.
100 per cent terms(a) (US$M) H1 FY18 H1 FY17
Revenue(b) 622 539
Underlying EBITDA 149 152
Underlying EBIT 115 128
Net operating liabilities(c) (21) (84)
Capital expenditure 72 27
Major projects (>US$100M) 4 2
All other capital expenditure 68 25
(a) South32's interest in South Africa Energy Coal is accounted at 100% until B-BBEE vendor loans are repaid.
(b) Includes domestic and export sales revenue.
(c) H1 FY17 reflects balance as at 30 June 2017.
Illawarra Metallurgical Coal (100%)
Volumes
Illawarra Metallurgical Coal saleable production decreased by 50% (or 1.9Mt) to 1.9Mt in H1 FY18 as the Appin colliery
recovered from an extended outage and the Dendrobium longwall progressed through a faulted zone.
FY18 production guidance of 4.5Mt remains unchanged with a longwall move now scheduled for Dendrobium in the June 2018
quarter.
Operating costs
Operating unit costs increased by 99% to US$149/t in H1 FY18, commensurate with the significant reduction in coal sales.
We have updated FY18 unit cost guidance to US$135/t to reflect revised exchange rate and price assumptions. Exchange rate
and price assumptions for FY18 unit cost guidance in footnote 20.
Financial performance
Underlying EBIT decreased by US$193M in H1 FY18 to a loss of US$84M as lower sales volumes (-US$258M) more than offset
higher average realised coal prices (+US$36M), lower price-linked royalties (+US$15M) and a volume related reduction in
depreciation (+US$14M).
Capital expenditure
Sustaining capital expenditure decreased by 17% to US$40M in H1 FY18 as underground development was impacted by the
extended outage. FY18 guidance for Sustaining capital expenditure has been reduced by a further US$15M to US$105M to
reflect a lower level of underground activity.
South32 share H1 FY18 H1 FY17
Metallurgical coal production (kt) 1,282 2,829
Energy coal production (kt) 578 884
Metallurgical coal sales (kt) 1,057 2,788
Energy coal sales (kt) 603 817
Realised metallurgical coal sales price (US$/t)(a) 189 151
Realised energy coal sales price (US$/t)(a) 71 62
Operating unit cost (US$/t)(b) 149 75
(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 FY18 H1 FY17
Revenue(a) 243 471
Underlying EBITDA (5) 202
Underlying EBIT (84) 109
Net operating assets(b) 1,442 1,406
Capital expenditure 40 54
Major projects (>US$100M) - 6
All other capital expenditure 40 48
Exploration expenditure 4 2
Exploration expensed 4 2
(a) Includes metallurgical coal and energy coal sales revenue.
(b) H1 FY17 reflects balance as at 30 June 2017.
Australia Manganese (60% SHARE)
Volumes
Australia Manganese saleable ore production increased by 13% (or 202kwmt) to a record 1.7Mwmt in H1 FY18. Lower than
expected rainfall in the December 2017 quarter underpinned higher throughput in the primary circuit while favourable market
conditions allowed the PC02 circuit to operate at full capacity. The PC02 circuit contributed 8% of total manganese ore
production in H1 FY18 (5% H1 FY17; 6% FY17).
Saleable Manganese alloy production increased by 5%(or 4kt) to 82kt in H1 FY18.
FY18 ore production guidance remains unchanged at 3.1Mwmt with the wet season expected to impact production across H2
FY18.
Operating costs
FOB manganese ore operating unit costs increased by 8% to US$1.55/dmtu in H1 FY18 as a result of a rise in planned
maintenance expenditure, a stronger Australian dollar and higher price-linked royalties.
We have updated FY18 unit cost guidance to US$1.63/dmtu to reflect revised exchange rate and price assumptions. Exchange
rate and price assumptions for FY18 unit cost guidance are in footnote 20.
Financial performance
Underlying EBIT increased by 44% (or US$92M) in H1 FY18 to US$299M. A significant improvement in average realised ore and
alloys prices (+US$106M) and an increase in sales volumes (+US$20M) were only partially offset by a rise in planned
maintenance expenditure (-US$8M), the impact of a stronger Australian dollar and higher price-linked royalties (-US$7M).
Our average realised price for external ore sales in H1 FY18 reflected the high grade 44% manganese lump ore index (CIF
China) on a volume weighted M-1 basis(23), despite the higher contribution of 40% grade PC02 product to the sales mix.
Capital expenditure
Sustaining capital expenditure increased to US$21M in H1 FY18 as we invested in additional tailings storage capacity at
GEMCO.
South32 share H1 FY18 H1 FY17
Manganese ore production (kwmt) 1,701 1,499
Manganese alloy production (kt) 82 78
Manganese ore sales (kwmt)(a) 1,612 1,500
External customers 1,441 1,362
TEMCO 171 138
Manganese alloy sales (kt)(a) 78 82
Realised external manganese ore sales price (US$/dmtu, FOB)(a)(b) 5.96 4.91
Realised manganese alloy sales price (US$/t)(a) 1,526 988
Ore operating unit cost (US$/dmtu)(b)(c) 1.55 1.44
Alloy operating unit cost (US$/t)(c) 910 720
(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 FY18 average manganese content of ore sales was 46.1% on a dry basis (H1 FY17: 46.4%). 94% of H1 FY18 external
manganese ore sales (H1 FY17: 95%) were completed on a CIF basis. H1 FY18 realised FOB ore prices and operating unit costs
have been adjusted for freight and marketing costs of US$21M (H1 FY17: US$13M), consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales
volume. Alloy operating unit cost is Revenue less Underlying EBITDA divided by alloy sales volumes and includes costs
associated with sinter sold externally.
South32 share (US$M) H1 FY18 H1 FY17
Revenue(a) 516 390
Manganese Ore 411 320
Manganese Alloy 119 81
Intra-segment elimination (14) (11)
Underlying EBITDA 328 233
Manganese Ore 280 211
Manganese Alloy 48 22
Underlying EBIT 299 207
Manganese Ore 253 187
Manganese Alloy 46 20
Net operating assets/(liabilities)(b) 312 319
Manganese Ore 318 313
Manganese Alloy (6) 6
Capital expenditure 21 15
Major projects (>US$100M) - -
All other capital expenditure 21 15
Exploration expenditure 1 1
Exploration expensed 1 -
(a) Revenues associated with sales from GEMCO to TEMCO are eliminated as part of the consolidation. Internal sales occur
on a commercial basis.
(b) H1 FY17 reflects balance as at 30 June 2017.
South Africa Manganese (ORE 44.4% SHARE, ALLOY 60% SHARE)
Volumes
South Africa Manganese ore production increased by 21% (or 195kwmt) to 1.1Mwmt in H1 FY18 as the continuation of higher
cost trucking and the sale of lower quality fines products enabled us to take advantage of favourable market conditions.
FY18 ore production guidance has been increased by 8% to 2,040kwmt, but remains subject to market demand.
Manganese alloy saleable production decreased by 3% (or 1kt) to 36kt in H1 FY18 as Metalloys continued to operate one of
its four furnaces.
Operating costs
FOB manganese ore operating unit costs increased by 18% to US$2.31/dmtu in H1 FY18 as a result of a stronger South African
rand and higher price-linked royalties. The drawdown of low cost Wessels concentrate and other fines material stockpiles
offset the cost of opportunistically trucking ore to port.
We have updated FY18 unit cost guidance to US$2.41/dmtu to reflect revised exchange rate and price assumptions, and a
continuation of higher cost trucking activity. Exchange rate and price assumptions for FY18 unit cost guidance are in
footnote 20.
Financial performance
Underlying EBIT increased by 87% (or US$40M) in H1 FY18 to US$86M as a significant improvement in ore and alloy prices
(+US$49M) was only partially offset by a stronger South African rand (-US$5M), higher price-linked royalties (-US$4M) and
an increase in trucking costs (-US$6M).
Our average realised price for external ore sales in H1 FY18 reflected the medium grade 37% manganese lump ore index(24) on
a volume weighted M-1 basis. Wessels concentrate and other fines products receive a substantial discount when referenced to
index prices. Favourable negotiated price outcomes for our primary products and a temporary increase in the proportion of
sales priced in the month of shipping (i.e. M, as opposed to M-1) offset the impact of these discounts.
Capital expenditure
Sustaining capital expenditure increased to US$8M in H1 FY18.
South32 share H1 FY18 H1 FY17
Manganese ore production (kwmt) 1,129 934
Manganese alloy production (kt) 36 37
Manganese ore sales (kwmt)(a) 1,067 928
External customers 985 859
Metalloys 82 69
Manganese alloy sales (kt)(a) 28 40
Realised external manganese ore sales price (US$/dmtu, FOB)(a)(b) 4.57 3.87
Realised manganese alloy sales price (US$/t)(a) 1,321 875
Ore operating unit cost (US$/dmtu)(b)(c) 2.31 1.96
Alloy operating unit cost (US$/t)(c) 821 925
(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 FY18 average manganese content of ore sales was 40.3% on a dry basis (H1 FY17: 40.3%). 68% of H1 FY18 external
manganese ore sales (H1 FY17: 61%) were completed on a CIF basis. H1 FY18 realised FOB ore prices and operating costs have
been adjusted for freight and marketing costs of US$16M (H1 FY17: US$10M), consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales
volume. Alloy operating unit cost is Revenue less Underlying EBITDA divided by alloy sales volumes.
South32 share (US$M) H1 FY18 H1 FY17
Revenue(a) 228 175
Manganese Ore(b) 200 145
Manganese Alloy 37 35
Intra-segment elimination (9) (5)
Underlying EBITDA 100 61
Manganese Ore(b) 86 63
Manganese Alloy 14 (2)
Underlying EBIT 86 46
Manganese Ore(b) 77 54
Manganese Alloy 9 (8)
Net operating assets(c) 301 307
Manganese Ore(b) 235 245
Manganese Alloy 66 62
Capital expenditure 8 4
Major projects (>US$100M) - -
All other capital expenditure 8 4
(a) Revenues associated with sales from Hotazel Manganese Mines (HMM) 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%. South32 has a 44.4% ownership interest in HMM. 26% of HMM is owned by a B-BBEE consortium
comprising Ntsimbintle Mining (9%), NCAB Resources (7%), Iziko Mining (5%) and HMM Education Trust (5%). The interests
owned by NCAB Resources, Iziko Mining and HMM Education Trust were acquired using vendor finance with the loans repayable
via distributions attributable to these parties, pro rata to their share in HMM. Until these loans are repaid, South32's
interest in HMM is accounted at 54.6%.
(c) H1 FY17 reflects balance as at 30 June 2017.
Cerro Matoso (99.9% SHARE)
Volumes
Cerro Matoso payable nickel production increased by 23% (or 4.1kt) to 21.8kt in H1 FY18 as ore grades improved with the
ramp-up of production at the higher grade La Esmeralda deposit.
FY18 production guidance remains unchanged at 41.6kt with additional maintenance planned for the furnace in the March 2018
quarter.
Operating costs
Operating unit costs decreased by 10% to US$3.41/lb in H1 FY18 as the operation benefitted from a substantial increase in
sales volumes.
We have updated FY18 unit cost guidance to US$3.61/lb to reflect revised exchange rate and price assumptions. Exchange rate
and price assumptions for FY18 unit cost guidance are detailed on page 25, footnote 20.
Financial performance
Underlying EBIT increased by US$45M in H1 FY18 to US$41M as the rise in sales volumes (+US$40M) and a higher average
realised nickel price (+US$16M) were partially offset by higher royalties (-US$5M) and an increase in exploration activity
(-US$3M).
Capital expenditure
Sustaining capital expenditure increased to US$11M in H1 FY18 as La Esmeralda was brought online and the project's
permanent access bridge was completed.
South32 share H1 FY18 H1 FY17
Ore mined (kwmt) 2,087 2,347
Ore processed (kdmt) 1,340 1,289
Ore grade processed (%, Ni) 1.83 1.53
Payable nickel production (kt) 21.8 17.7
Payable nickel sales (kt) 21.3 17.6
Realised nickel sales price (US$/lb)(a) 5.20 4.85
Operating unit cost (US$/lb)(b) 3.41 3.81
(a) Inclusive of by-products. Realised sales price is calculated as sales revenue divided by sales volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by Payable nickel sales volume.
South32 share (US$M) H1 FY18 H1 FY17
Revenue 244 188
Underlying EBITDA 84 40
Underlying EBIT 41 (4)
Net operating assets(a) 587 611
Capital expenditure 11 4
Major projects (>US$100M) - -
All other capital expenditure 11 4
Exploration expenditure 5 2
Exploration expensed 4 2
(a) H1 FY17 reflects balance as at 30 June 2017.
Cannington (100% SHARE)
Volumes
Cannington silver, lead and zinc payable production decreased by 41%, 33% and 52% respectively in H1 FY18 as lower ore
grades and a reduction in mill throughput impacted performance.
The stress regime within the orebody is evolving with depletion and we are moving to more challenging areas within the mine
plan. In order to deliver greater predictability and stability in the underground mine as the level of activity increases
(80 stopes to be extracted in FY19, average of 50: FY12-16), we are lowering the mining rate to 2.45 Mt p- Part 2: For the preceding part double click ID:nRSO9698Ea
basis. H1 FY18 realised FOB ore prices and
operating unit costs have been adjusted for freight and marketing costs of
US$21M (H1 FY17: US$13M), consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA,
freight and marketing costs, divided by ore sales volume. Alloy operating unit
cost is Revenue less Underlying EBITDA divided by alloy sales volumes and
includes costs associated with sinter sold externally.
South32 share (US$M) H1 FY18 H1 FY17
Revenue((a)) 516 390
Manganese Ore 411 320
Manganese Alloy 119 81
Intra-segment elimination (14) (11)
Underlying EBITDA 328 233
Manganese Ore 280 211
Manganese Alloy 48 22
Underlying EBIT 299 207
Manganese Ore 253 187
Manganese Alloy 46 20
Net operating assets/(liabilities)((b)) 312 319
Manganese Ore 318 313
Manganese Alloy (6) 6
Capital expenditure 21 15
Major projects (>US$100M) - -
All other capital expenditure 21 15
Exploration expenditure 1 1
Exploration expensed 1 -
(a) Revenues associated with sales from GEMCO to TEMCO are eliminated as
part of the consolidation. Internal sales occur on a commercial basis.
(b) H1 FY17 reflects balance as at 30 June 2017.
South Africa Manganese (ORE 44.4% SHARE, ALLOY 60% SHARE)
Volumes
South Africa Manganese ore production increased by 21% (or 195kwmt) to 1.1Mwmt
in H1 FY18 as the continuation of higher cost trucking and the sale of lower
quality fines products enabled us to take advantage of favourable market
conditions. FY18 ore production guidance has been increased by 8% to
2,040kwmt, but remains subject to market demand.
Manganese alloy saleable production decreased by 3% (or 1kt) to 36kt in H1
FY18 as Metalloys continued to operate one of its four furnaces.
Operating costs
FOB manganese ore operating unit costs increased by 18% to US$2.31/dmtu in H1
FY18 as a result of a stronger South African rand and higher price-linked
royalties. The drawdown of low cost Wessels concentrate and other fines
material stockpiles offset the cost of opportunistically trucking ore to port.
We have updated FY18 unit cost guidance to US$2.41/dmtu to reflect revised
exchange rate and price assumptions, and a continuation of higher cost
trucking activity. Exchange rate and price assumptions for FY18 unit cost
guidance are in footnote 20.
Financial performance
Underlying EBIT increased by 87% (or US$40M) in H1 FY18 to US$86M as a
significant improvement in ore and alloy prices (+US$49M) was only partially
offset by a stronger South African rand (-US$5M), higher price-linked
royalties (-US$4M) and an increase in trucking costs (-US$6M).
Our average realised price for external ore sales in H1 FY18 reflected the
medium grade 37% manganese lump ore index((24)) on a volume weighted M-1
basis. Wessels concentrate and other fines products receive a substantial
discount when referenced to index prices. Favourable negotiated price outcomes
for our primary products and a temporary increase in the proportion of sales
priced in the month of shipping (i.e. M, as opposed to M-1) offset the impact
of these discounts.
Capital expenditure
Sustaining capital expenditure increased to US$8M in H1 FY18.
H1 FY18 H1 FY17
South32 share
Manganese ore production (kwmt) 1,129 934
Manganese alloy production (kt) 36 37
Manganese ore sales (kwmt)((a)) 1,067 928
External customers 985 859
Metalloys 82 69
Manganese alloy sales (kt)((a)) 28 40
Realised external manganese ore sales price (US$/dmtu, FOB)((a)(b)) 4.57 3.87
Realised manganese alloy sales price (US$/t)((a)) 1,321 875
Ore operating unit cost (US$/dmtu)((b)(c)) 2.31 1.96
Alloy operating unit cost (US$/t)((c)) 821 925
(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 FY18 average manganese content of ore sales was 40.3% on a dry
basis (H1 FY17: 40.3%). 68% of H1 FY18 external manganese ore sales (H1 FY17:
61%) were completed on a CIF basis. H1 FY18 realised FOB ore prices and
operating costs have been adjusted for freight and marketing costs of US$16M
(H1 FY17: US$10M), consistent with our FOB cost guidance.
(c) FOB ore operating unit cost is Revenue less Underlying EBITDA,
freight and marketing costs, divided by ore sales volume. Alloy operating unit
cost is Revenue less Underlying EBITDA divided by alloy sales volumes.
South32 share (US$M) H1 FY18 H1 FY17
Revenue((a)) 228 175
Manganese Ore((b)) 200 145
Manganese Alloy 37 35
Intra-segment elimination (9) (5)
Underlying EBITDA 100 61
Manganese Ore((b)) 86 63
Manganese Alloy 14 (2)
Underlying EBIT 86 46
Manganese Ore((b)) 77 54
Manganese Alloy 9 (8)
Net operating assets((c)) 301 307
Manganese Ore((b)) 235 245
Manganese Alloy 66 62
Capital expenditure 8 4
Major projects (>US$100M) - -
All other capital expenditure 8 4
(a) Revenues associated with sales from Hotazel Manganese Mines (HMM) 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%.
South32 has a 44.4% ownership interest in HMM. 26% of HMM is owned by a B-BBEE
consortium comprising Ntsimbintle Mining (9%), NCAB Resources (7%), Iziko
Mining (5%) and HMM Education Trust (5%). The interests owned by NCAB
Resources, Iziko Mining and HMM Education Trust were acquired using vendor
finance with the loans repayable via distributions attributable to these
parties, pro rata to their share in HMM. Until these loans are repaid,
South32's interest in HMM is accounted at 54.6%.
(c) H1 FY17 reflects balance as at 30 June 2017.
Cerro Matoso (99.9% SHARE)
Volumes
Cerro Matoso payable nickel production increased by 23% (or 4.1kt) to 21.8kt
in H1 FY18 as ore grades improved with the ramp-up of production at the higher
grade La Esmeralda deposit.
FY18 production guidance remains unchanged at 41.6kt with additional
maintenance planned for the furnace in the March 2018 quarter.
Operating costs
Operating unit costs decreased by 10% to US$3.41/lb in H1 FY18 as the
operation benefitted from a substantial increase in sales volumes.
We have updated FY18 unit cost guidance to US$3.61/lb to reflect revised
exchange rate and price assumptions. Exchange rate and price assumptions for
FY18 unit cost guidance are detailed on page 25, footnote 20.
Financial performance
Underlying EBIT increased by US$45M in H1 FY18 to US$41M as the rise in sales
volumes (+US$40M) and a higher average realised nickel price (+US$16M) were
partially offset by higher royalties (-US$5M) and an increase in exploration
activity (-US$3M).
Capital expenditure
Sustaining capital expenditure increased to US$11M in H1 FY18 as La Esmeralda
was brought online and the project's permanent access bridge was completed.
H1 FY18 H1 FY17
South32 share
Ore mined (kwmt) 2,087 2,347
Ore processed (kdmt) 1,340 1,289
Ore grade processed (%, Ni) 1.83 1.53
Payable nickel production (kt) 21.8 17.7
Payable nickel sales (kt) 21.3 17.6
Realised nickel sales price (US$/lb)((a)) 5.20 4.85
Operating unit cost (US$/lb)((b)) 3.41 3.81
(a) Inclusive of by-products. Realised sales price is calculated as
sales revenue divided by sales volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by
Payable nickel sales volume.
South32 share (US$M) H1 FY18 H1 FY17
Revenue 244 188
Underlying EBITDA 84 40
Underlying EBIT 41 (4)
Net operating assets((a)) 587 611
Capital expenditure 11 4
Major projects (>US$100M) - -
All other capital expenditure 11 4
Exploration expenditure 5 2
Exploration expensed 4 2
(a) H1 FY17 reflects balance as at 30 June 2017.
Cannington (100% SHARE)
Volumes
Cannington silver, lead and zinc payable production decreased by 41%, 33% and
52% respectively in H1 FY18 as lower ore grades and a reduction in mill
throughput impacted performance.
The stress regime within the orebody is evolving with depletion and we are
moving to more challenging areas within the mine plan. In order to deliver
greater predictability and stability in the underground mine as the level of
activity increases (80 stopes to be extracted in FY19, average of 50:
FY12-16), we are lowering the mining rate to 2.45 Mt per annum which is
expected to translate to mill throughput of 2.3Mt and 2.4Mt in FY18 and FY19,
respectively.
Operating costs
Operating unit costs increased by 30% to US$170/t in H1 FY18 as a result of
the reduction in throughput and an adverse movement in finished goods
inventory.
We have updated FY18 unit cost guidance to US$159/t to reflect revised
exchange rate and price assumptions. Exchange rate and price assumptions for
FY18 unit cost guidance are in footnote 20.
Financial performance
Underlying EBIT decreased by 56% (or US$93M) in H1 FY18 to US$72M as lower
sales volumes (-US$148M) were partially offset by higher average realised
prices (+US$32M) and lower treatment and refining charges (+US$27M). The
ramp-up of underground trucking activity successfully replaced shaft haulage
in the period for a modest US$2M increase in costs. Finalisation adjustments
and the provisional pricing of Cannington concentrates increased Underlying
EBIT by US$5.5M in H1 FY18 (US$4.1M FY17; US$0.5M H1 FY17). Outstanding
concentrate sales (containing 1.8Moz of silver, 21.1kt of lead and 3.9kt of
zinc) were revalued at 31 December 2017. The final price of these sales will
be determined in H2 FY18.
Capital expenditure
Sustaining capital expenditure increased to US$23M inH1 FY18. The underground
crusher is now expected to be commissioned in February 2018, ahead of
schedule.
South32 share H1 FY18 H1 FY17
Ore mined (kwmt) 1,209 1,639
Ore processed (kdmt) 1,168 1,669
Ore grade processed (g/t, Ag) 165 198
Ore grade processed (%, Pb) 5.1 5.5
Ore grade processed (%, Zn) 2.6 3.7
Payable silver production (koz) 5,175 8,729
Payable lead production (kt) 49.4 73.9
Payable zinc production (kt) 20.2 42.1
Payable silver sales (koz) 5,429 8,860
Payable lead sales (kt) 48.6 73.3
Payable zinc sales (kt) 25.7 40.8
Realised silver sales price (US$/oz)((a)) 16.8 17.4
Realised lead sales price (US$/t)((a)) 2,517 2,128
Realised zinc sales price (US$/t)((a)) 3,192 2,475
Operating unit cost (US$/t ore processed)((b)) 170 131
(a) Realised sales price is calculated as sales revenue divided by sales
volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by ore
processed. Periodic movements in finished product inventory may impact
operating unit costs as related marketing costs and treatment and refining
charges may change.
South32 share (US$M) H1 FY18 H1 FY17
Revenue 296 412
Underlying EBITDA 97 194
Underlying EBIT 72 165
Net operating assets((a)) 187 215
Capital expenditure 23 18
Major project (>US$100M) - -
All other capital expenditure 23 18
Exploration expenditure 2 1
Exploration expensed 2 1
(a) H1 FY17 reflects balance as at 30 June 2017.
NOTES
(1) Revenue includes revenue from third party products.
(2) H1 FY18 basic earnings per share is calculated as Profit/(loss)
after tax divided by the weighted average number of shares for H1 FY18 (5,191
million). H1 FY18 basic Underlying earnings per share is calculated as
Underlying earnings divided by the weighted average number of shares for H1
FY18. H1 FY17 basic earnings per share is calculated as Profit/(loss) after
tax 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.
(3) H1 FY18 ordinary dividend per share is calculated as H1 FY18 interim
dividend announced (US$223M) divided by the number of shares on issue at 31
December 2017 (5,181 million).
(4) H1 FY18 special dividend per share is calculated as H1 FY18 special
dividend announced (US$155M) divided by the number of shares on issue at 31
December 2017 (5,181 million).
(5) 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 non-trading 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.
(6) Comprises Underlying EBITDA excluding third party product EBITDA,
divided by revenue excluding third party product revenue.
(7) Comprises Underlying EBIT excluding third party product EBIT,
divided by revenue excluding third party product revenue.
(8) 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.
(9) To ensure that incident classification definitions are applied
uniformly across our workforce, we have adopted the United States Government
Occupational Safety and Health Assessment (OSHA) guidelines for the recording
and reporting of occupational injuries and illnesses.
(10) Total Recordable Injury Frequency (TRIF): The sum of (fatalities +
lost-time cases + restricted work cases + medical treatment cases) x 1,000,000
÷ actual hours worked, for employees and contractors. Stated in units of per
million hours worked.
(11) 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.
(12) Underlying net finance cost and Underlying tax expense are actual H1
FY18 results, not half-on-half variances.
(13) South32's ownership share of operations are presented 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%).
(14) 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.
(15) The Mozambique operations are subject to a royalty on revenues
instead of income tax.
(16) 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.
(17) South32's interest in South Africa Energy Coal is accounted at 100%
until Broad-Based Black Economic Empowerment (B-BBEE) vendor loans are repaid.
(18) Operating unit cost is Revenue less Underlying EBITDA, excluding
third party sales, divided by sales volumeer annum which is
expected to translate to mill throughput of 2.3Mt and 2.4Mt in FY18 and FY19, respectively.
Operating costs
Operating unit costs increased by 30% to US$170/t in H1 FY18 as a result of the reduction in throughput and an adverse
movement in finished goods inventory.
We have updated FY18 unit cost guidance to US$159/t to reflect revised exchange rate and price assumptions. Exchange rate
and price assumptions for FY18 unit cost guidance are in footnote 20.
Financial performance
Underlying EBIT decreased by 56% (or US$93M) in H1 FY18 to US$72M as lower sales volumes (-US$148M) were partially offset
by higher average realised prices (+US$32M) and lower treatment and refining charges (+US$27M). The ramp-up of underground
trucking activity successfully replaced shaft haulage in the period for a modest US$2M increase in costs. Finalisation
adjustments and the provisional pricing of Cannington concentrates increased Underlying EBIT by US$5.5M in H1 FY18 (US$4.1M
FY17; US$0.5M H1 FY17). Outstanding concentrate sales (containing 1.8Moz of silver, 21.1kt of lead and 3.9kt of zinc) were
revalued at 31 December 2017. The final price of these sales will be determined in H2 FY18.
Capital expenditure
Sustaining capital expenditure increased to US$23M inH1 FY18. The underground crusher is now expected to be commissioned in
February 2018, ahead of schedule.
South32 share H1 FY18 H1 FY17
Ore mined (kwmt) 1,209 1,639
Ore processed (kdmt) 1,168 1,669
Ore grade processed (g/t, Ag) 165 198
Ore grade processed (%, Pb) 5.1 5.5
Ore grade processed (%, Zn) 2.6 3.7
Payable silver production (koz) 5,175 8,729
Payable lead production (kt) 49.4 73.9
Payable zinc production (kt) 20.2 42.1
Payable silver sales (koz) 5,429 8,860
Payable lead sales (kt) 48.6 73.3
Payable zinc sales (kt) 25.7 40.8
Realised silver sales price (US$/oz)(a) 16.8 17.4
Realised lead sales price (US$/t)(a) 2,517 2,128
Realised zinc sales price (US$/t)(a) 3,192 2,475
Operating unit cost (US$/t ore processed)(b) 170 131
(a) Realised sales price is calculated as sales revenue divided by sales volume.
(b) Operating unit cost is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished
product inventory may impact operating unit costs as related marketing costs and treatment and refining charges may
change.
South32 share (US$M) H1 FY18 H1 FY17
Revenue 296 412
Underlying EBITDA 97 194
Underlying EBIT 72 165
Net operating assets(a) 187 215
Capital expenditure 23 18
Major project (>US$100M) - -
All other capital expenditure 23 18
Exploration expenditure 2 1
Exploration expensed 2 1
(a) H1 FY17 reflects balance as at 30 June 2017.
NOTES
(1) Revenue includes revenue from third party products.
(2) H1 FY18 basic earnings per share is calculated as Profit/(loss) after tax divided by the weighted average number of
shares for H1 FY18 (5,191 million). H1 FY18 basic Underlying earnings per share is calculated as Underlying earnings
divided by the weighted average number of shares for H1 FY18.
H1 FY17 basic earnings per share is calculated as Profit/(loss) after tax 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.
(3) H1 FY18 ordinary dividend per share is calculated as H1 FY18 interim dividend announced (US$223M) divided by the
number of shares on issue at 31 December 2017 (5,181 million).
(4) H1 FY18 special dividend per share is calculated as H1 FY18 special dividend announced (US$155M) divided by the
number of shares on issue at 31 December 2017 (5,181 million).
(5) 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 non-trading 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.
(6) Comprises Underlying EBITDA excluding third party product EBITDA, divided by revenue excluding third party product
revenue.
(7) Comprises Underlying EBIT excluding third party product EBIT, divided by revenue excluding third party product
revenue.
(8) 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.
(9) To ensure that incident classification definitions are applied uniformly across our workforce, we have adopted the
United States Government Occupational Safety and Health Assessment (OSHA) guidelines for the recording and reporting of
occupational injuries and illnesses.
(10) Total Recordable Injury Frequency (TRIF): The sum of (fatalities + lost-time cases + restricted work cases + medical
treatment cases) x 1,000,000
÷ actual hours worked, for employees and contractors. Stated in units of per million hours worked.
(11) 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.
(12) Underlying net finance cost and Underlying tax expense are actual H1 FY18 results, not half-on-half variances.
(13) South32's ownership share of operations are presented 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%).
(14) 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.
(15) The Mozambique operations are subject to a royalty on revenues instead of income tax.
(16) 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.
(17) South32's interest in South Africa Energy Coal is accounted at 100% until Broad-Based Black Economic Empowerment
(B-BBEE) vendor loans are repaid.
(18) Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes.
Operating cost is Revenue less Underlying EBITDA excluding third party sales. Additional manganese disclosures are included
on pages 21 and 22.
(19) Prior FY18 Operating unit cost guidance included royalties (where appropriate) and the influence of exchange rate
assumptions, and were predicated on various assumptions for FY18, including: an alumina price of US$299/t; an average
blended coal price of US$119/t for Illawarra Metallurgical Coal; a manganese ore price of US$4.50/dmtu for 44% manganese
product; a nickel price of US$4.27/lb; a thermal coal price of US$72/t (API4) for South Africa Energy Coal; a silver price
of US$16.82/troy oz; a lead price of US$2,135/t; a zinc price of US$2,555/t; an AUD:USD exchange rate of 0.74; a USD:ZAR
exchange rate of 14.17; a USD:COP exchange rate of 2,961; and a reference price for caustic soda; all of which reflected
forward markets as at May 2017 or our internal expectations.
(20) New FY18 Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates,
and includes various assumptions for FY18, including: an alumina price of US$388/t; an average blended coal price of
US$168/t for Illawarra Metallurgical Coal; a manganese ore price of US$6.30/dmtu for 44% manganese product; a nickel price
of US$5.39/lb; a thermal coal price of US$90/t (API4) for South Africa Energy Coal; a silver price of US$16.96/troy oz; a
lead price of US$2,475/t; a zinc price of US$3,246t; an AUD:USD exchange rate of 0.78; a USD:ZAR exchange rate of 12.98; a
USD:COP exchange rate of 2,920; and a 17% increase in the reference price for caustic soda relative to prior guidance; all
of which reflected forward markets as at January 2018 or our internal expectations.
(21) Third party products sold comprise US$148M for aluminium, US$48M for alumina, US$128M for coal, US$85M for freight
services and US$54M for aluminium raw materials. Underlying EBIT on third party products comprise US$6M for aluminium, nil
for alumina, nil for coal, (US$1)M for freight services and nil for aluminium raw materials.
(22) Presented on a 100% basis.
(23) Metal Bulletin 44% manganese lump ore index (CIF Tianjin, China).
(24) Metal Bulletin 37% manganese lump ore index (FOB Port Elizabeth, South Africa).
(25) Figures in Italics indicate that an adjustment has been made since the figures were previously reported.
The following abbreviations may be used throughout this report: US$ million (US$M); US$ billion (US$B); December half year
(H1 FY18); grams per tonne (g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per annum (ktpa); million tonnes (Mt);
million tonnes per annum (Mtpa); thousand ounces (koz); million ounces (Moz); thousand wet metric tonnes (kwmt); million
wet metric tonnes (Mwmt); million wet metric tonnes per annum (Mwmt pa); thousand dry metric tonnes (kdmt); dry metric
tonne unit (dmtu); pound (lb); megawatt (MW); Australian Securities Exchange (ASX); London Stock Exchange (LSE);
Johannesburg Stock Exchange (JSE); and American Depositary Receipts (ADR).
SOUTH32 FINANCIAL INFORMATION
CONSOLIDATED INCOME STATEMENT
for the half year ended 31 December 2017
US$M Note H1 FY18 H1 FY17
Revenue
Group production 3,031 2,873
Third party products 463 348
3,494 3,221
Other income 130 142
Expenses excluding net finance cost (3,183) (2,670)
Share of profit/(loss) of equity accounted investments 232 164
Profit/(loss) 673 857
Comprising:
Group production 668 846
Third party products 5 11
Profit/(loss) 673 857
Finance expenses (100) (77)
Finance income 30 17
Net finance cost 6 (70) (60)
Profit/(loss) before tax 603 797
Income tax (expense)/benefit (60) (177)
Profit/(loss) after tax 543 620
Attributable to:
Equity holders of South32 Limited 543 620
Profit/(loss) for the period attributable to the equity holders of South32 Limited
Basic earnings per share (cents) 5 10.5 11.7
Diluted earnings per share (cents) 5 10.3 11.5
The accompanying notes form part of the half year consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year ended 31 December 2017
US$M H1 FY18 H1 FY17
Profit/(loss) for the period 543 620
Other Comprehensive Income
Items that may be reclassified to the Consolidated Income Statement:
Available for sale investments:
Net gains/(losses) taken to equity 76 (1)
Net (gains)/losses transferred to the Consolidated Income Statement (31) -
Tax benefit/(expense) recognised within Other Comprehensive Income (5) 2
Total items that may be reclassified to the Consolidated Income Statement 40 1
Items not to be reclassified to the Consolidated Income Statement:
Actuarial gains/(losses) on pension and medical schemes (1) 2
Tax benefit/(expense) recognised within Other Comprehensive Income - (1)
Total items not to be reclassified to the Consolidated Income Statement (1) 1
Total Other Comprehensive Income/(loss) 39 2
Total Comprehensive Income/(loss) 582 622
Attributable to:
Equity holders of South32 Limited 582 622
The accompanying notes form part of the half year consolidated financial statements.
CONSOLIDATED BALANCE SHEETas at 31 December 2017
US$M H1 FY18 FY17
ASSETS
Current assets
Cash and cash equivalents 2,495 2,675
Trade and other receivables 861 718
Other financial assets 123 103
Inventories 953 781
Current tax assets 11 27
Other 50 28
Total current assets 4,493 4,332
Non-current assets
Trade and other receivables 214 365
Other financial assets 476 465
Inventories 81 81
Property, plant and equipment 8,225 8,373
Intangible assets 237 252
Equity accounted investments 731 569
Deferred tax assets 265 276
Other 64 20
Total non-current assets 10,293 10,401
Total assets 14,786 14,733
LIABILITIES
Current liabilities
Trade and other payables 844 850
Interest bearing liabilities 429 391
Current tax payables 20 116
Provisions 345 383
Deferred income 5 4
Total current liabilities 1,643 1,744
Non-current liabilities
Trade and other payables 5 4
Interest bearing liabilities 635 644
Deferred tax liabilities 463 518
Provisions 1,651 1,577
Deferred income 10 11
Total non-current liabilities 2,764 2,754
Total liabilities 4,407 4,498
Net assets 10,379 10,235
EQUITY
Share capital 14,654 14,747
Treasury shares (38) (26)
Reserves (3,452) (3,503)
Retained earnings/(accumulated losses) (784) (982)
Total equity attributable to equity holders of South32 Limited 10,380 10,236
Non-controlling interests (1) (1)
Total equity 10,379 10,235
The accompanying notes form part of the half year consolidated financial statements.
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 31 December 2017
US$M H1 FY18 H1 FY17
Operating activities
Profit/(loss) before tax 603 797
Adjustments for:
Non-cash significant items (31) -
Depreciation and amortisation expense 363 373
Impairments of property, plant and equipment, financial assets, intangibles and equity accounted investments - 4
Employee share awards expense 24 22
Net finance cost 70 60
Share of (profit)/loss of equity accounted investments (232) (164)
Fair value (gains)/losses on derivative instruments 62 (189)
Other non-cash or non-operating items - (3)
Changes in assets and liabilities:
Trade and other receivables (223) (164)
Inventories (172) (23)
Trade and other payables 38 24
Provisions and other liabilities (64) (40)
Cash generated from operations 438 697
Interest received 30 17
Interest paid (33) (34)
Income tax (paid)/received (181) (39)
Dividends received 9 -
Dividends received from equity accounted investments 70 41
Net cash flows from operating activities 333 682
Investing activities
Purchases of property, plant and equipment (199) (150)
Exploration expenditure (23) (7)
Exploration expenditure expensed and included in operating cash flows 22 6
Purchase of intangibles (2) (1)
Investment in financial assets (63) (28)
Investment in equity accounted investments - (21)
Cash outflows from investing activities (265) (201)
Proceeds from sale of property, plant and equipment and intangibles - 15
Proceeds from financial assets s. Operating cost is Revenue less
Underlying EBITDA excluding third party sales. Additional manganese
disclosures are included on pages 21 and 22.
(19) Prior FY18 Operating unit cost guidance included royalties (where
appropriate) and the influence of exchange rate assumptions, and were
predicated on various assumptions for FY18, including: an alumina price of
US$299/t; an average blended coal price of US$119/t for Illawarra
Metallurgical Coal; a manganese ore price of US$4.50/dmtu for 44% manganese
product; a nickel price of US$4.27/lb; a thermal coal price of US$72/t (API4)
for South Africa Energy Coal; a silver price of US$16.82/troy oz; a lead price
of US$2,135/t; a zinc price of US$2,555/t; an AUD:USD exchange rate of 0.74; a
USD:ZAR exchange rate of 14.17; a USD:COP exchange rate of 2,961; and a
reference price for caustic soda; all of which reflected forward markets as at
May 2017 or our internal expectations.
(20) New FY18 Operating unit cost guidance includes royalties (where
appropriate) and the influence of exchange rates, and includes various
assumptions for FY18, including: an alumina price of US$388/t; an average
blended coal price of US$168/t for Illawarra Metallurgical Coal; a manganese
ore price of US$6.30/dmtu for 44% manganese product; a nickel price of
US$5.39/lb; a thermal coal price of US$90/t (API4) for South Africa Energy
Coal; a silver price of US$16.96/troy oz; a lead price of US$2,475/t; a zinc
price of US$3,246t; an AUD:USD exchange rate of 0.78; a USD:ZAR exchange rate
of 12.98; a USD:COP exchange rate of 2,920; and a 17% increase in the
reference price for caustic soda relative to prior guidance; all of which
reflected forward markets as at January 2018 or our internal expectations.
(21) Third party products sold comprise US$148M for aluminium, US$48M for
alumina, US$128M for coal, US$85M for freight services and US$54M for
aluminium raw materials. Underlying EBIT on third party products comprise
US$6M for aluminium, nil for alumina, nil for coal, (US$1)M for freight
services and nil for aluminium raw materials.
(22) Presented on a 100% basis.
(23) Metal Bulletin 44% manganese lump ore index (CIF Tianjin, China).
(24) Metal Bulletin 37% manganese lump ore index (FOB Port Elizabeth,
South Africa).
(25) Figures in Italics indicate that an adjustment has been made since
the figures were previously reported.
The following abbreviations may be used throughout this report: US$ million
(US$M); US$ billion (US$B); December half year (H1 FY18); grams per tonne
(g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per annum (ktpa);
million tonnes (Mt); million tonnes per annum (Mtpa); thousand ounces (koz);
million ounces (Moz); thousand wet metric tonnes (kwmt); million wet metric
tonnes (Mwmt); million wet metric tonnes per annum (Mwmt pa); thousand dry
metric tonnes (kdmt); dry metric tonne unit (dmtu); pound (lb); megawatt (MW);
Australian Securities Exchange (ASX); London Stock Exchange (LSE);
Johannesburg Stock Exchange (JSE); and American Depositary Receipts (ADR).
SOUTH32 FINANCIAL INFORMATION
CONSOLIDATED INCOME STATEMENT
for the half year ended 31 December 2017
US$M Note H1 FY18 H1 FY17
Revenue
Group production 3,031 2,873
Third party products 463 348
3,494 3,221
Other income 130 142
Expenses excluding net finance cost (3,183) (2,670)
Share of profit/(loss) of equity accounted investments 232 164
Profit/(loss) 673 857
Comprising:
Group production 668 846
Third party products 5 11
Profit/(loss) 673 857
Finance expenses (100) (77)
Finance income 30 17
Net finance cost 6 (70) (60)
Profit/(loss) before tax 603 797
Income tax (expense)/benefit (60) (177)
Profit/(loss) after tax 543 620
Attributable to:
Equity holders of South32 Limited 543 620
Profit/(loss) for the period attributable to the equity holders of South32
Limited
Basic earnings per share (cents) 5 10.5 11.7
Diluted earnings per share (cents) 5 10.3 11.5
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year ended 31 December 2017
US$M H1 FY18 H1 FY17
Profit/(loss) for the period 543 620
Other Comprehensive Income
Items that may be reclassified to the Consolidated Income Statement:
Available for sale investments:
Net gains/(losses) taken to equity 76 (1)
Net (gains)/losses transferred to the Consolidated Income Statement (31) -
Tax benefit/(expense) recognised within Other Comprehensive Income (5) 2
Total items that may be reclassified to the Consolidated Income Statement 40 1
Items not to be reclassified to the Consolidated Income Statement:
Actuarial gains/(losses) on pension and medical schemes (1) 2
Tax benefit/(expense) recognised within Other Comprehensive Income - (1)
Total items not to be reclassified to the Consolidated Income Statement (1) 1
Total Other Comprehensive Income/(loss) 39 2
Total Comprehensive Income/(loss) 582 622
Attributable to:
Equity holders of South32 Limited 582 622
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED BALANCE SHEETas at 31 December 2017
US$M H1 FY18 FY17
ASSETS
Current assets
Cash and cash equivalents 2,495 2,675
Trade and other receivables 861 718
Other financial assets 123 103
Inventories 953 781
Current tax assets 11 27
Other 50 28
Total current assets 4,493 4,332
Non-current assets
Trade and other receivables 214 365
Other financial assets 476 465
Inventories 81 81
Property, plant and equipment 8,225 8,373
Intangible assets 237 252
Equity accounted investments 731 569
Deferred tax assets 265 276
Other 64 20
Total non-current assets 10,293 10,401
Total assets 14,786 14,733
LIABILITIES
Current liabilities
Trade and other payables 844 850
Interest bearing liabilities 429 391
Current tax payables 20 116
Provisions 345 383
Deferred income 5 4
Total current liabilities 1,643 1,744
Non-current liabilities
Trade and other payables 5 4
Interest bearing liabilities 635 644
Deferred tax liabilities 463 518
Provisions 1,651 1,577
Deferred income 10 11
Total non-current liabilities 2,764 2,754
Total liabilities 4,407 4,498
Net assets 10,379 10,235
EQUITY
Share capital 14,654 14,747
Treasury shares (38) (26)
Reserves (3,452) (3,503)
Retained earnings/(accumulated losses) (784) (982)
Total equity attributable to equity holders of South32 Limited 10,380 10,236
Non-controlling interests (1) (1)
Total equity 10,379 10,235
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 31 December 2017
US$M H1 FY18 H1 FY17
Operating activities
Profit/(loss) before tax 603 797
Adjustments for:
Non-cash significant items (31) -
Depreciation and amortisation expense 363 373
Impairments of property, plant and equipment, financial assets, intangibles - 4
and equity accounted investments
Employee share awards expense 24 22
Net finance cost 70 60
Share of (profit)/loss of equity accounted investments (232) (164)
Fair value (gains)/losses on derivative instruments 62 (189)
Other non-cash or non-operating items - (3)
Changes in assets and liabilities:
Trade and other receivables (223) (164)
Inventories (172) (23)
Trade and other payables 38 24
Provisions and other liabilities (64) (40)
Cash generated from operations 438 697
Interest received 30 17
Interest paid (33) (34)
Income tax (paid)/received (181) (39)
Dividends received 9 -
Dividends received from equity accounted investments 70 41
Net cash flows from operating activities 333 682
Investing activities
Purchases of property, plant and equipment (199) (150)
Exploration expenditure (23) (7)
Exploration expenditure expensed and included in operating cash flows 22 6
Purchase of intangibles (2) (1)
Investment in financial assets (63) (28)
Investment in equity accounted investments - (21)
Cash outflows from investing activities (265) (201)
Proceeds from sale of property, plant and equipment and intangibles - 15
Proceeds from financial assets 196 105
Net cash flows from investing activities (69) (81)
Financing activities
Proceeds from interest bearing liabilities 27 147
Repayment of interest bearing liabilities (10) (9)
Purchase of shares by South32 Limited Employee Incentive Plans Trusts (ESOP (36) (12)
Trusts)
Share buy-back (93) -
Dividends paid (333) (53)
Net cash flows from financing activities (445) 73
Net increase/(decrease) in cash and cash equivalents (181) 674
Cash and cash equivalents, net of overdrafts, at the beginning of the period 2,675 1,225
Foreign currency exchange rate changes on cash and cash equivalents 1 2
Cash and cash equivalents, net of overdrafts, at the end of the period 2,495 1,901
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year ended 31 December 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 2017 14,747 (26) (3,503) (982) 10,236 (1) 10,235
Profit/(loss) for the period - - - 543 543 - 543
Other Comprehensive Income/(loss) - - 40 (1) 39 - 39
Total Comprehensive Income/(loss) - - 40 542 582 - 582
Transactions with owners:
Accrued employee entitlements for unexercised awards - - 24 - 24 - 24
Dividends - - - (333) (333) - (333)
Purchase of shares by ESOP Trusts - (36) - - (36) - (36)
Employee share awards exercised - 24 (13) (11) - - -
Shares bought back and cancelled((1)) (93) - - - (93) - (93)
Balance as at 31 December 2017 14,654 (38) (3,452) (784) 10,380 (1) 10,379
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 share 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
(1) Represents 37,168,657 shares permanently cancelled through the
on-market share buy-back during the period.
The accompanying notes form part of the half year consolidated 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 Group)
for the half year ended 31 December 2017 were authorised for issue in
accordance with a resolution of the Directors on 15 February 2018.
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 (ASX),
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 Group are described in note 3 Segment information.
2. Basis of preparation
The half year consolidated 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
· 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
· 196 105
Net cash flows from investing activities (69) (81)
Financing activities
Proceeds from interest bearing liabilities 27 147
Repayment of interest bearing liabilities (10) (9)
Purchase of shares by South32 Limited Employee Incentive Plans Trusts (ESOP Trusts) (36) (12)
Share buy-back (93) -
Dividends paid (333) (53)
Net cash flows from financing activities (445) 73
Net increase/(decrease) in cash and cash equivalents (181) 674
Cash and cash equivalents, net of overdrafts, at the beginning of the period 2,675 1,225
Foreign currency exchange rate changes on cash and cash equivalents 1 2
Cash and cash equivalents, net of overdrafts, at the end of the period 2,495 1,901
The accompanying notes form part of the half year consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year ended 31 December 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 2017 14,747 (26) (3,503) (982) 10,236 (1) 10,235
Profit/(loss) for the period - - - 543 543 - 543
Other Comprehensive Income/(loss) - - 40 (1) 39 - 39
Total Comprehensive Income/(loss) - - 40 542 582 - 582
Transactions with owners:
Accrued employee entitlements for unexercised awards - - 24 - 24 - 24
Dividends - - - (333) (333) - (333)
Purchase of shares by ESOP Trusts - (36) - - (36) - (36)
Employee share awards exercised - 24 (13) (11) - - -
Shares bought back and cancelled(1) (93) - - - (93) - (93)
Balance as at 31 December 2017 14,654 (38) (3,452) (784) 10,380 (1) 10,379
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 share 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
(1) Represents 37,168,657 shares permanently cancelled through the on-market share buy-back during the period.
The accompanying notes form part of the half year consolidated 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 Group) for the half year ended 31 December 2017 were authorised for issue in accordance
with a resolution of the Directors on 15 February 2018.
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 (ASX), 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 Group are described in note 3
Segment information.
2. Basis of preparation
The half year consolidated 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
· Have
- More to follow, for following part double click ID:nRSO9698Ec 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 ASIC Corporations Instrument 2016/191
· Present reclassified comparative information where required for
consistency with the current period's presentation
· Have been prepared on the basis of accounting policies and
methods of computation consistent with those applied in the 30 June 2017
annual consolidated financial statements
In preparing these half year consolidated 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
2017.
For a full understanding of the financial performance and financial position
of the Group it is recommended that the half year consolidated financial
statements be read in conjunction with the annual consolidated financial
statements for the year ended 30 June 2017. Consideration should also be given
to any public announcements made by the Company 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 half year consolidated financial statements.
Average for the half year ended Average for the half year ended
31 December 2017 31 December 2016 As at As at As at
31 December 2017 30 June 31 December 2016
2017
Australian dollar((1)) 0.78 0.75 0.78 0.77 0.72
Brazilian real 3.21 3.27 3.31 3.30 3.26
Colombian peso 2,982 2,983 2,984 3,038 3,001
South African rand 13.41 14.00 12.40 13.00 13.60
(1) Displayed as US$ to A$ based on common convention.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
3. 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 Lead Team (the chief operating decision makers) 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
Mozal Aluminium Aluminium smelter in Mozambique
Brazil Alumina Alumina refinery in Brazil
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 Brazil
Alumina, which is operated by Alcoa.
(b) Segment results
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/eliminations 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.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
3. Segment information (continued)
(b) Segment results (continued)
Half year ended 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
31 December 2017
US$M
Revenue
· Group production 326 734 326 240 622 243 516 221 244 296 - (737) 3,031
· Third party products((2)) - - - - - - - - - - 463 - 463
· Inter-segment revenue 342 - - - - - - 7 - - (342) (7) -
Total revenue 668 734 326 240 622 243 516 228 244 296 121 (744) 3,494
Underlying EBITDA 246 156 77 76 149 (5) 328 100 84 97 (25) (196) 1,087
Depreciation and amortisation (82) (36) (17) (29) (34) (79) (29) (14) (43) (25) (18) 43 (363)
Underlying EBIT 164 120 60 47 115 (84) 299 86 41 72 (43) (153) 724
Comprising:
Group production 164 120 60 47 115 (84) 299 86 41 72 (48) (385) 487
Third party products((2)) - - - - - - - - - - 5 - 5
Share of profit/(loss) of equity accounted investments((3)) - - - - - - - - - - - 232 232
Underlying EBIT 164 120 60 47 115 (84) 299 86 41 72 (43) (153) 724
Net finance cost (59)
Income tax (expense)/benefit (121)
Underlying earnings 544
Earnings adjustments((4)) (1)
Profit/(loss) after tax 543
Capital expenditure((5)) 22 13 8 10 72 40 21 8 11 23 - (29) 199
Equity accounted investments - - - - 10 - - - - - - 721 731
Total assets((6)) 3,543 1,537 649 805 1,037 1,672 604 511 786 348 3,848 (554) 14,786
Total liabilities((6)) 509 272 109 130 1,058 230 292 210 199 161 1,780 (543) 4,407
(1) 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 half year consolidated
financial statements. The statutory adjustment column reconciles the
proportional consolidation to the equity accounting position.
(2) Third party products sold comprise US$148 million for aluminium, US$48
million for alumina, US$128 million for coal, US$85 million for freight
services and US$54 million for aluminium raw materials. Underlying EBIT on
third party products comprise US$6 million for aluminium, nil for alumina, nil
for coal, (US$1) million for freight services and nil for aluminium raw
materials.
(3) Share of profit/(loss) of equity accounted investments includes the
impact of earnings adjustments to Underlying EBIT.
(4) Refer to note 3(b)(i) Earnings adjustments.
(5) Capital expenditure excludes the purchase of intangibles and
capitalised exploration expenditure.
(6) Total assets and liabilities for each operating segment represent
operating assets and liabilities which predominantly exclude the carrying
amount of equity accounted investments, cash, interest bearing liabilities and
tax balances.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
3. Segment information (continued)
(b) Segment results (continued)
Half year ended Worsley Alumina South Africa Aluminium Mozal Aluminium Brazil Alumina South Africa Energy Coal Illawarra Metallurgical Coal Australia Manganese((1)) South Africa Manganese((1)) Cerro Matoso Cannington Group and unallocated items/ elimination Statutory adjustment((1)) Group
31 December 2016
US$M
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 products((2)) - - - - - - - - - - 11 - 11
Share of profit/(loss) of equity accounted investments((3)) - - - - (1) - - - - - - 162 161
Underlying EBIT 26 90 25 10 128 109 207 46 (4) 165 (20) (91) 691
Net finance cost (71)
Income tax (expense)/benefit (141)
Underlying earnings 479
Earnings adjustments((4)) 141
Profit/(loss) after tax 620
Capital expenditure((5)) 19 6 3 13 27 54 15 4 4 18 6 (19) 150
Equity accounted
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