REG - South32 Limited - Financial Results & Outlook Half Year 31 Dec 2017 <Origin Href="QuoteRef">S32.AX</Origin> - Part 3
15/02/2018 07:05
- Part 3: For the preceding part double click ID:nRSO9698Eb
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 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 31 December 2017 Average for the half year ended 31 December 2016 As at 31 December 2017 As at 30 June 2017 As at 31 December 2016
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 ended31 December 2017 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 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$1) million for freight services and nil for
aluminium raw materials.
(3) Share of profit/(loss) of equity accounted investments includes the impact of earnings adjustments to Underlying
EBIT.
(4) Refer to note 3(b)(i) Earnings adjustments.
(5) Capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(6) Total assets and liabilities for each operating segment represent operating assets and liabilities which
predominantly exclude the carrying amount of equity accounted investments, cash, interest bearing liabilities and tax
balances.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
3. Segment information (continued)
(b) Segment results (continued)
Half year ended31 December 2016 US$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 - - - - - - - Part 3: For the preceding part double click ID:nRSO9698Eb
investments((6)) - - - - 10 - - - - - - 559 569
Total assets((6)) 3,564 1,478 630 860 936 1,667 597 493 800 371 4,011 (674) 14,733
Total liabilities((6)) 521 273 96 169 1,020 261 278 186 189 156 2,017 (668) 4,498
(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$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$9 million for coal, nil for freight services and nil for aluminium
raw materials.
(3) Share of profit/(loss) of equity accounted investments includes the
impact of earnings adjustments to Underlying EBIT.
(4) Refer to note 3(b)(i) Earnings adjustments.
(5) Capital expenditure excludes the purchase of intangibles and
capitalised exploration expenditure.
(6) Total assets and liabilities for each operating segment are as at 30
June 2017 and represent operating assets and liabilities which predominantly
exclude the carrying amount of equity accounted investments, cash, interest
bearing liabilities and tax balances.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
4. Segment information (continued)
(b) Segment results (continued)
(i) Earnings adjustments
The following table shows earnings adjustments in determining Underlying
earnings:
US$M H1 FY18 H1 FY17
Adjustments to Underlying EBIT
Significant items((1)) (31) -
Exchange rate (gains)/losses on restatement of monetary items((2)) 17 20
Impairment losses((2)) - 4
Fair value (gains)/losses on non-trading derivative instruments((2)) 65 (189)
Major corporate restructures((2)) - 2
Earnings adjustments included in profit/(loss) of equity accounted - (3)
investments((3))
Total adjustments to Underlying EBIT 51 (166)
Adjustments to net finance cost
Exchange rate variations on net debt 11 (11)
Total adjustments to net finance cost 11 (11)
Adjustments to income tax expense
Tax effect of earnings adjustments to Underlying EBIT (23) 45
Tax effect of earnings adjustments to net finance cost (4) 4
Exchange rate variations on tax balances (34) (13)
Total adjustments to income tax expense (61) 36
Total earnings adjustments 1 (141)
(1) Refer to note 3(b)(ii) Significant items.
(2) Recognised in expenses excluding net finance cost in the Consolidated
Income Statement.
(3) Recognised in share of profit/(loss) of equity accounted investments
in the Consolidated Income Statement.
(ii) Significant items
31 December 2017
US$M Gross Tax Net
Unwind of the investment in Dreamvision((1)) (31) - (31)
Total significant items (31) - (31)
(1) The Group's investment in Dreamvision Investments 15 (RF) (Pty) Ltd
(Dreamvision) originated in 2006 through the formation of a Broad-Based Black
Economic Empowerment (B-BBEE) transaction. The transaction contained a lock-in
period which expired in November 2016 and the process to unwind the investment
was triggered. Consequently, the Group elected to receive shares in Exxaro
Resources Limited in exchange for its shareholding in Dreamvision. The net
valuation gain on the available for sale investment in Dreamvision has been
transferred from the Financial assets reserve and recognised in the
Consolidated Income Statement.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
4. Dividends
US$M H1 FY18 H1 FY17
Prior year final dividend((1)) 333 53
Total dividends declared and paid during the period 333 53
(1) On 24 August 2017, the Directors resolved to pay a fully franked final
dividend of US6.4 cents per share (US$334 million) in respect of the 2017
financial year. The dividend was paid on 12 October 2017. The South32 Employee
Incentive Plans Trust waived its right to receive dividends from South32
Limited, therefore reducing the dividends paid by US$1 million.
5. Earnings per share
Basic earnings per share (EPS) amounts are calculated based on profit
attributable to equity holders of South32 Limited and the weighted average
number of shares outstanding during the period.
Dilutive EPS amounts are calculated based on profit attributable to equity
holders of South32 Limited and the weighted average number of shares
outstanding after adjustment for the effects of all dilutive potential shares.
The following reflects the profit/(loss) and share data used in the basic and
diluted EPS computations:
Profit/(loss) attributable to equity holders
US$M H1 FY18 H1 FY17
Profit/(loss) attributable to equity holders of South32 Limited (basic) 543 620
Profit/(loss) attributable to equity holders of South32 Limited (diluted) 543 620
Weighted average number of shares
Million H1 FY18 H1 FY17
Basic earnings per share denominator((1)) 5,191 5,319
Shares and options contingently issuable under employee share ownership 71 55
plans((2))
Diluted earnings per share denominator 5,262 5,374
(1) The basic EPS denominator is the aggregate of the weighted average
number of shares after deduction of the weighted average number of Treasury
shares outstanding and shares permanently cancelled through the on-market
share buy-back during the period.
(2) Diluted EPS calculation excludes 6,932,916 (31 December 2016:
15,371,165) rights which are considered anti-dilutive and are subject to
service and performance conditions.
Earnings per share
US cents H1 FY18 H1 FY17
Basic earnings per share 10.5 11.7
Diluted earnings per share 10.3 11.5
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
6. Net finance cost
US$M H1 FY18 H1 FY17
Finance expenses
Interest on borrowings 6 8
Finance lease interest 27 26
Discounting on provisions and other liabilities 52 48
Net interest expense on post-retirement employee benefits 3 5
Fair value change on financial asset 1 1
Exchange rate variations on net debt 11 (11)
100 77
Finance income
Interest income 30 17
Net finance cost 70 60
7. Financial assets and financial liabilities
The following table presents the Group's financial assets and liabilities by
class at their carrying amounts which approximates their fair value.
31 December 2017 Held at fair value through profit or loss Other financial assets and liabilities at amortised cost
Available for sale securities
Loans and receivables
US$M Total
Financial assets
Cash and cash equivalents 2,495 - - - 2,495
Trade and other receivables((1)) 698 - 65 - 763
Derivative contracts - - 144 - 144
Loans to equity accounted investments 103 - - - 103
Interest bearing loans receivable 42 - - - 42
Other investments - 455 - - 455
Total 3,338 455 209 - 4,002
Financial liabilities
Trade and other payables((2)) - - - 830 830
Finance leases - - - 616 616
Unsecured other - - - 448 448
Total - - - 1,894 1,894
(1) Excludes input taxes of US$167 million included in trade and other
receivables.
(2) Excludes input taxes of US$19 million included in trade and other
payables.
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
7. Financial assets and financial liabilities (continued)
30 June 2017 Other financial assets and liabilities at amortised cost
Available for sale securities Held at fair value through profit or loss
Loans and receivables
US$M Total
Financial assets
Cash and cash equivalents 2,675 - - - 2,675
Trade and other receivables((1)) 540 - 76 - 616
Derivative contracts - - 202 - 202
Loans to equity accounted investments 251 - - - 251
Interest bearing loans receivable 42 - - - 42
Other investments - 366 - - 366
Total 3,508 366 278 - 4,152
Financial liabilities
Trade and other payables((2)) - - 3 800 803
Finance leases - - - 613 613
Unsecured other - - - 422 422
Total - - 3 1,835 1,838
(1) Excludes input taxes of US$174 million included in other receivables.
(2) Excludes input taxes of US$51 million included in other payables.
Measurement of fair value
The following table shows the Group's financial assets and liabilities carried
at fair value with reference to the nature of valuation inputs used:
Level 1 - Valuation is based on unadjusted quoted prices in active markets for
identical financial assets and liabilities.
Level 2 - Valuation includes inputs (other than quoted prices included in
Level 1) that are observable for the financial asset or liability, either
directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices).
Level 3 - Valuation is based on inputs that are not based on observable market
data.
31 December 2017
US$M Level 1 Level 2 Level 3 Total
Financial assets and liabilities
Trade and other receivables - 65 - 65
Derivative contracts - 1 143 144
Investments - available for sale 198 150 107 455
Total 198 216 250 664
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
7. Financial assets and financial liabilities (continued)
Level 3 financial assets and liabilities
The following table shows the movements in the Group's Level 3 financial
assets and liabilities:
US$M H1 FY18 H1 FY17
As at the beginning of the period 334 161
Disposals recognised in the Consolidated Income Statement((1)) (31) -
Realised gains/(losses) recognised in the Consolidated Income Statement((2)) (47) -
Unrealised gains/(losses) recognised in the Consolidated Income Statement((3)) (11) 189
Unrealised gains/(losses) recognised in the Consolidated Statement of 5 (9)
Comprehensive Income((4))
At the end of the period 250 341
(1) Refer to note 3(b)(ii) Significant items.
(2) Realised gains and losses recognised in the Consolidated Income
Statement are recorded in expenses excluding net finance cost.
(3) Unrealised gains and losses recognised in the Consolidated Income
Statement are recorded in expenses excluding net finance cost.
(4) Unrealised gains and losses recognised in the Consolidated Statement
of Comprehensive Income are recorded in the financial assets reserve.
Sensitivity analysis
The carrying amount of financial assets and liabilities that are valued using
inputs other than observable market data are calculated using appropriate
valuation models, including discounted cash flow modelling, with inputs such
as commodity prices, foreign exchange rates and inflation. The potential
effect of using reasonably possible alternative assumptions in these models,
based on changes in the most significant inputs by 10 per cent while holding
all other variables constant, is shown in the following table.
31 December 2017 Profit before tax Other Comprehensive Income, net of tax
Carrying amount Significant inputs 10% increase in input 10% decrease in input 10% increase in input 10% decrease in input
US$M
Financial assets and liabilities
Derivative contracts((1)) 143 Aluminium price((2)) (177) 167 - -
Foreign exchange rate((2))
Electricity price((3))
Investments - available for sale((1)(4)) 107 Aluminium price((2)) - - 46 (54)
Foreign exchange rate((2))
Total 250 (177) 167 46 (54)
(1) Sensitivity analysis is performed assuming all inputs are
directionally moving unfavourably and favourably.
(2) Aluminium prices are comparable to market consensus forecast and
foreign exchange rates are aligned with forward market rates.
(3) Electricity prices are determined as a market equivalent price based
on inputs from published data.
(4) When a decrease in fair value recognised in equity reflects an
impairment, such amounts are recognised in profit before tax.
NOTES TO FINANCIAL STATEMENTS - OTHER NOTES
8. Subsequent events
On 15 February 2018, the Directors resolved to pay a fully franked interim
dividend of US4.3 cents per share (US$223 million) in (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 investments(6) - - - - 10 - - - - - - 559 569
Total assets(6) 3,564 1,478 630 860 936 1,667 597 493 800 371 4,011 (674) 14,733
Total liabilities(6) 521 273 96 169 1,020 261 278 186 189 156 2,017 (668) 4,498
(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$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$9 million for coal, nil for freight services and nil
for aluminium raw materials.
(3) Share of profit/(loss) of equity accounted investments includes the impact of earnings adjustments to Underlying
EBIT.
(4) Refer to note 3(b)(i) Earnings adjustments.
(5) Capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(6) Total assets and liabilities for each operating segment are as at 30 June 2017 and represent operating assets and
liabilities which predominantly exclude the carrying amount of equity accounted investments, cash, interest bearing
liabilities and tax balances.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
4. Segment information (continued)
(b) Segment results (continued)
(i) Earnings adjustments
The following table shows earnings adjustments in determining Underlying earnings:
US$M H1 FY18 H1 FY17
Adjustments to Underlying EBIT
Significant items(1) (31) -
Exchange rate (gains)/losses on restatement of monetary items(2) 17 20
Impairment losses(2) - respect of the 2018 half
year and a partially franked (to 81%) special dividend of US3 cents per share
(US$155 million). The dividends will be paid on 5 April 2018. The dividends
have not been provided for in the half year consolidated financial statements
and will be recognised in the 2018 financial year.
On 15 February 2018, the Group announced an extension of the existing capital
management program, announced on 27 March 2017, by US$250 million to a total
of US$1 billion. This program has US$540 million remaining with 143 million
shares having been purchased to 31 December 2017 for a cash consideration of
US$305 million and the special dividend of US$155 million.
No other matters or circumstances have arisen since the end of the half year
that have significantly affected, or may significantly affect, the operations,
results of operations or state of affairs of the Group in subsequent
accounting periods.
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of the Group, we state that:
In the opinion of the Directors:
(a) The consolidated financial statements and notes that are set out on
pages 27 to 43 for the half year ended 31 December 2017 are in accordance with
the Corporations Act, including:
(i) Giving a true and fair view of the Group's financial position as
at 31 December 2017 and of its performance for the half year ended on that
date; and
(ii) Complying with Australian Accounting Standard AASB 134 Interim
Financial Reporting and Corporations Regulations 2001.
(b) There are reasonable grounds to believe that the Group will be able to
pay its debts as and when they become due and payable.
Signed in accordance with a resolution of the Board of Directors.
David Crawford AO
Chairman
Graham Kerr
Chief Executive Officer and Managing Director
Date: 15 February 2018
DIRECTORS' REPORT
The Directors of the Group present the Consolidated Financial Report for the
half year ended 31 December 2017 and the auditor's review report thereon.
Directors
The Directors of the Company during or since the end of the half year are:
David Crawford AO
Frank Cooper AO
Graham Kerr
Xiaoling Liu - Appointed 1 November 2017
Xolani Mkhwanazi
Ntombifuthi (Futhi) Mtoba
Wayne Osborn
Keith Rumble
Karen Wood - Appointed 1 November 2017
The company secretaries of the Company during or since the end of the half
year are:
Nicole Duncan
Melanie Williams
Review and results of operations
A review of the operations of the consolidated entity during the period and of
the results of those operations is contained on pages 3 to 26.
Principal risks and uncertainties
Due to the international scope of the Group's operations and the industries in
which it is engaged, there are a number of risk factors and uncertainties
which could have an effect on the Group's results and operations over the next
six months.
The following information outlines the most significant strategic, external
and operational risks identified across the Group. The list is not exhaustive,
nor listed in any particular order:
· Fluctuations in commodity prices, exchange rates, interest rates
and global economy
· Political events, actions by governments, or tax authorities
· Cost inflation and labour disputes could impact operating margins
and expansion opportunities
· Climate change
· Failure to maintain, realise or enhance existing reserves
· Deterioration in liquidity and cash flow
· Health and safety risks in respect of our activities
· Access to water and power
· Water and waste water management, and environmental risks
· Unexpected operational or natural catastrophes
· Counterparties that we transact with may not meet their
obligations
· Risks of fraud and corruption
· Breaches of information technology security
· Failure to retain and attract key employees
Further information on these risks and how they are managed can be found on
pages 19 to 22 of the Annual Report for the year ended 30 June 2017, a copy of
which is available on the Group's website at www.south32.net
(http://www.south32.net) .
DIRECTORS' REPORT
Events subsequent to the balance date
On 15 February 2018, the Directors resolved to pay a fully franked interim
dividend of US4.3 cents per share (US$223 million) in respect of the 2018 half
year and a partially franked (to 81%) special dividend of US3 cents per share
(US$155 million). The dividends will be paid on 5 April 2018. The dividends
have not been provided for in the half year consolidated financial statements
and will be recognised in the 2018 financial year.
On 15 February 2018, the Group announced an extension of the existing capital
management program, announced on 27 March 2017, by US$250 million to a total
of US$1 billion. This program has US$540 million remaining with 143 million
shares having been purchased to 31 December 2017 for a cash consideration of
US$305 million and the special dividend of US$155 million.
No other matters or circumstances have arisen since the end of the half year
that have significantly affected, or may significantly affect, the operations,
results of operations or state of affairs of the Group in subsequent
accounting periods.
UK responsibility statements
The Directors state that to the best of their knowledge:
· The Financial Results and Outlook on pages 3 to 26, includes a
fair review of important events during the first six months of the current
financial year and their impact on the half year consolidated financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the year; and
· That disclosure has been made for related party transactions that
have taken place in the first six months of the current financial year and
that have materially affected the financial position or performance of the
Group during that period, and any changes in the related party transactions
described in the last annual report that could have such a material effect.
Lead auditor's independence declaration
A copy of the lead auditor's independence declaration as required under
Section 307C of the Corporations Act is set out on page 47.
Rounding of amounts
The Australian Securities and Investments Commission (ASIC) Corporations
(Rounding in Financial/Directors' Reports) Instrument 2016/191 applies to the
Group and amounts in the half year consolidated financial statements and this
Directors' Report have been rounded in accordance with this instrument to the
nearest million US dollars, unless stated otherwise.
This Directors' Report is made in accordance with a resolution of the Board.
David Crawford AO
Chairman
Graham Kerr
Chief Executive Officer and Managing Director
Date: 15 February 2018
Lead Auditor's Independence Declaration under Section 307C of the Corporations
Act 2001
To the Directors of South32 Limited
I declare that, to the best of my knowledge and belief, in relation to the
review of South32 Limited for the half-year ended 31 December 2017 there have
been:
(i) no contraventions of the auditor independence requirements
as set out in the Corporations Act 2001 in relation to the review; and
(ii) no contraventions of any applicable code of professional
conduct in relation to the review.
KPMG
Denise McComish
Partner
Perth
15 February 2018
Liability limited by a scheme approved under Professional Standards
Legislation.
KPMG, an Australian partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity.
Independent Auditor's Review Report
To the shareholders of South32 Limited
Conclusion
We have reviewed the accompanying Half-year Financial Statements of South32 The Half-year Financial Statements comprise:
Limited.
· Consolidated Balance Sheet as at 31 December 2017
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the Half-year Financial Statements of · Consolidated Income Statement, Consolidated Statement of Comprehensive
South32 Limited are not in accordance with the Corporations Act 2001, Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow
including: Statement for the half-year ended on that date
· giving a true and fair view of the Group's financial position as at 31 · Notes 1 to 8 comprising a summary of significant accounting policies
December 2017 and of its performance for the half-year ended on that date; and and other explanatory information
· complying with Australian Accounting Standard AASB 134 Interim · The Directors' Declaration.
Financial Reporting and the Corporations Regulations 2001.
The Group comprises South32 Limited (the Company) and the entities it
controlled at the half-year's end or from time to time during the half-year.
Responsibilities of the Directors for the Half-year Financial Statements
The Directors of the Company are responsible for:
· the preparation of the Half-year Financial Statements that give a
true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001
· such internal control as the Directors determine is necessary to
enable the preparation of the Half-year Financial Statements that is free from
material misstatement, whether due to fraud or error.
Liability limited by a scheme approved under Professional Standards
Legislation.
KPMG, an Australian partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity.
Auditor's responsibility for the review of the Half-year Financial Statements
Our responsibility is to express a conclusion on the Half-year Financial
Statements based on our review. We conducted our review in accordance with
Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report
Performed by the Independent Auditor of the Entity, in order to state whether,
on the basis of the procedures described, we have become aware of any matter
that makes us believe that the Half-year Financial Statements are not in
accordance with the Corporations Act 2001 including: giving a true and fair
view of the Group's financial position as at 31 December 2017 and its
performance for the half-year ended on that date; and complying with
Australian Accounting Standard AASB 134 Interim Financial Reporting and the
Corporations Regulations 2001. As auditor of South32 Limited, ASRE 2410
requires that we comply with the ethical requirements relevant to the audit of
the annual Financial Report.
A review of Half-year Financial Statements consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Australian Auditing
Standards and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
In conducting our review, we have complied with the independence requirements
of the Corporations Act 2001.
KPMG
Denise McComish
Partner
Perth
15 February 2018
KPMG, an Australian partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity.
Liability limited by a scheme approved under Professional Standards
Legislation.
disclaimer
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements, including statements about
trends in commodity prices and currency exchange rates; demand for
commodities; production forecasts; plans, strategies and objectives of
management; capital costs and scheduling; operating costs; anticipated
productive lives of projects, mines and facilities; and provisions and
contingent liabilities. These forward-looking statements reflect expectations
at the date of this release, however they are not guarantees or predictions of
future performance. They involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, and which may cause
actual results to differ materially from those expressed in the statements
contained in this release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws or
regulations, the South32 Group does not undertake to publicly update or review
any forward-looking statements, whether as a result of new information or
future events. Past performance cannot be relied on as a guide to future
performance.
NON-IFRS FINANCIAL INFORMATION
This release includes certain non-IFRS financial measures, including
Underlying earnings, Underlying EBIT and Underlying EBITDA, Basic Underlying
earnings per share, Underlying effective tax rate, Underlying EBIT margin,
Underlying EBITDA margin, Underlying return on capital, Free cash flow, net
debt, net operating assets and ROIC. These measures are used internally by
management to assess the performance of our business, make decisions on the
allocation of our resources and assess operational management. Non-IFRS
measures have not been subject to audit or review and should not be considered
as an indication of or alternative to an IFRS measure of profitability,
financial performance or liquidity.
NO OFFER OF SECURITIES
Nothing in this release should be read or understood as an offer or
recommendation to buy or sell South32 securities, or be treated or relied upon
as a recommendation or advice by South32.
NO FINANCIAL OR INVESTMENT ADVICE - SOUTH AFRICA
South32 does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
FURTHER INFORMATION
INVESTOR RELATIONS
Alex Volante Rob Ward
T +44 20 7798 1778 T +61 8 9324 9340
M +44 7468 353 005 M +61 431 596 831
E Alex.Volante@south32.net E Robert.Ward@south32.net
MEDIA RELATIONS
Hayley Cardy T +61 8 9324 9008 James Clothier T +61 8 9324 9697
M +61 409 448 288 M +61 413 319 031
E Hayley.Cardy@south32.net E James.Clothier@south32.net
Further information on South32 can be found at www.south32.net
(http://www.south32.net) .
South32 Limited (ABN 84 093 732 597) Registered in Australia
(Incorporated in Australia under the Corporations Act 2001) Registered Office:
Level 35, 108 St Georges Terrace Perth Western Australia 6000 Australia
ISIN: AU000000S320
JSE Sponsor: UBS South Africa (Pty) Ltd 15 February 2018
This information is provided by RNS
The company news service from the London Stock Exchange
4
Fair value (gains)/losses on non-trading derivative instruments(2) 65 (189)
Major corporate restructures(2) - 2
Earnings adjustments included in profit/(loss) of equity accounted investments(3) - (3)
Total adjustments to Underlying EBIT 51 (166)
Adjustments to net finance cost
Exchange rate variations on net debt 11 (11)
Total adjustments to net finance cost 11 (11)
Adjustments to income tax expense
Tax effect of earnings adjustments to Underlying EBIT (23) 45
Tax effect of earnings adjustments to net finance cost (4) 4
Exchange rate variations on tax balances (34) (13)
Total adjustments to income tax expense (61) 36
Total earnings adjustments 1 (141)
(1) Refer to note 3(b)(ii) Significant items.
(2) Recognised in expenses excluding net finance cost in the Consolidated Income Statement.
(3) Recognised in share of profit/(loss) of equity accounted investments in the Consolidated Income Statement.
(ii) Significant items
31 December 2017
US$M Gross Tax Net
Unwind of the investment in Dreamvision(1) (31) - (31)
Total significant items (31) - (31)
(1) The Group's investment in Dreamvision Investments 15 (RF) (Pty) Ltd (Dreamvision) originated in 2006 through the
formation of a Broad-Based Black Economic Empowerment (B-BBEE) transaction. The transaction contained a lock-in period
which expired in November 2016 and the process to unwind the investment was triggered. Consequently, the Group elected to
receive shares in Exxaro Resources Limited in exchange for its shareholding in Dreamvision. The net valuation gain on the
available for sale investment in Dreamvision has been transferred from the Financial assets reserve and recognised in the
Consolidated Income Statement.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
4. Dividends
US$M H1 FY18 H1 FY17
Prior year final dividend(1) 333 53
Total dividends declared and paid during the period 333 53
(1) On 24 August 2017, the Directors resolved to pay a fully franked final dividend of US6.4 cents per share (US$334
million) in respect of the 2017 financial year. The dividend was paid on 12 October 2017. The South32 Employee Incentive
Plans Trust waived its right to receive dividends from South32 Limited, therefore reducing the dividends paid by US$1
million.
5. Earnings per share
Basic earnings per share (EPS) amounts are calculated based on profit attributable to equity holders of South32 Limited and
the weighted average number of shares outstanding during the period.
Dilutive EPS amounts are calculated based on profit attributable to equity holders of South32 Limited and the weighted
average number of shares outstanding after adjustment for the effects of all dilutive potential shares.
The following reflects the profit/(loss) and share data used in the basic and diluted EPS computations:
Profit/(loss) attributable to equity holders
US$M H1 FY18 H1 FY17
Profit/(loss) attributable to equity holders of South32 Limited (basic) 543 620
Profit/(loss) attributable to equity holders of South32 Limited (diluted) 543 620
Weighted average number of shares
Million H1 FY18 H1 FY17
Basic earnings per share denominator(1) 5,191 5,319
Shares and options contingently issuable under employee share ownership plans(2) 71 55
Diluted earnings per share denominator 5,262 5,374
(1) The basic EPS denominator is the aggregate of the weighted average number of shares after deduction of the weighted
average number of Treasury shares outstanding and shares permanently cancelled through the on-market share buy-back during
the period.
(2) Diluted EPS calculation excludes 6,932,916 (31 December 2016: 15,371,165) rights which are considered anti-dilutive
and are subject to service and performance conditions.
Earnings per share
US cents H1 FY18 H1 FY17
Basic earnings per share 10.5 11.7
Diluted earnings per share 10.3 11.5
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
6. Net finance cost
US$M H1 FY18 H1 FY17
Finance expenses
Interest on borrowings 6 8
Finance lease interest 27 26
Discounting on provisions and other liabilities 52 48
Net interest expense on post-retirement employee benefits 3 5
Fair value change on financial asset 1 1
Exchange rate variations on net debt 11 (11)
100 77
Finance income
Interest income 30 17
Net finance cost 70 60
7. Financial assets and financial liabilities
The following table presents the Group's financial assets and liabilities by class at their carrying amounts which
approximates their fair value.
31 December 2017 US$M Loans and receivables Available for sale securities Held at fair value through profit or loss Other financial assets and liabilities at amortised cost Total
Financial assets
Cash and cash equivalents 2,495 - - - 2,495
Trade and other receivables(1) 698 - 65 - 763
Derivative contracts - - 144 - 144
Loans to equity accounted investments 103 - - - 103
Interest bearing loans receivable 42 - - - 42
Other investments - 455 - - 455
Total 3,338 455 209 - 4,002
Financial liabilities
Trade and other payables(2) - - - 830 830
Finance leases - - - 616 616
Unsecured other - - - 448 448
Total - - - 1,894 1,894
(1) Excludes input taxes of US$167 million included in trade and other receivables.
(2) Excludes input taxes of US$19 million included in trade and other payables.
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
7. Financial assets and financial liabilities (continued)
30 June 2017 US$M Loans and receivables Available for sale securities Held at fair value through profit or loss Other financial assets and liabilities at amortised cost Total
Financial assets
Cash and cash equivalents 2,675 - - - 2,675
Trade and other receivables(1) 540 - 76 - 616
Derivative contracts - - 202 - 202
Loans to equity accounted investments 251 - - - 251
Interest bearing loans receivable 42 - - - 42
Other investments - 366 - - 366
Total 3,508 366 278 - 4,152
Financial liabilities
Trade and other payables(2) - - 3 800 803
Finance leases - - - 613 613
Unsecured other - - - 422 422
Total - - 3 1,835 1,838
(1) Excludes input taxes of US$174 million included in other receivables.
(2) Excludes input taxes of US$51 million included in other payables.
Measurement of fair value
The following table shows the Group's financial assets and liabilities carried at fair value with reference to the nature
of valuation inputs used:
Level 1 - Valuation is based on unadjusted quoted prices in active markets for identical financial assets and liabilities.
Level 2 - Valuation includes inputs (other than quoted prices included in Level 1) that are observable for the financial
asset or liability, either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices).
Level 3 - Valuation is based on inputs that are not based on observable market data.
31 December 2017US$M Level 1 Level 2 Level 3 Total
Financial assets and liabilities
Trade and other receivables - 65 - 65
Derivative contracts - 1 143 144
Investments - available for sale 198 150 107 455
Total 198 216 250 664
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
7. Financial assets and financial liabilities (continued)
Level 3 financial assets and liabilities
The following table shows the movements in the Group's Level 3 financial assets and liabilities:
US$M H1 FY18 H1 FY17
As at the beginning of the period 334 161
Disposals recognised in the Consolidated Income Statement(1) (31) -
Realised gains/(losses) recognised in the Consolidated Income Statement(2) (47) -
Unrealised gains/(losses) recognised in the Consolidated Income Statement(3) (11) 189
Unrealised gains/(losses) recognised in the Consolidated Statement of Comprehensive Income(4) 5 (9)
At the end of the period 250 341
(1) Refer to note 3(b)(ii) Significant items.
(2) Realised gains and losses recognised in the Consolidated Income Statement are recorded in expenses excluding net
finance cost.
(3) Unrealised gains and losses recognised in the Consolidated Income Statement are recorded in expenses excluding net
finance cost.
(4) Unrealised gains and losses recognised in the Consolidated Statement of Comprehensive Income are recorded in the
financial assets reserve.
Sensitivity analysis
The carrying amount of financial assets and liabilities that are valued using inputs other than observable market data are
calculated using appropriate valuation models, including discounted cash flow modelling, with inputs such as commodity
prices, foreign exchange rates and inflation. The potential effect of using reasonably possible alternative assumptions in
these models, based on changes in the most significant inputs by 10 per cent while holding all other variables constant, is
shown in the following table.
31 December 2017 Profit before tax Other Comprehensive Income, net of tax
US$M Carrying amount Significant inputs 10% increase in input 10% decrease in input 10% increase in input 10% decrease in input
Financial assets and liabilities
Derivative contracts(1) 143 Aluminium price(2)Foreign exchange rate(2)Electricity price(3) (177) 167 - -
Investments - available for sale(1)(4) 107 Aluminium price(2)Foreign exchange rate(2) - - 46 (54)
Total 250 (177) 167 46 (54)
(1) Sensitivity analysis is performed assuming all inputs are directionally moving unfavourably and favourably.
(2) Aluminium prices are comparable to market consensus forecast and foreign exchange rates are aligned with forward
market rates.
(3) Electricity prices are determined as a market equivalent price based on inputs from published data.
(4) When a decrease in fair value recognised in equity reflects an impairment, such amounts are recognised in profit
before tax.
NOTES TO FINANCIAL STATEMENTS - OTHER NOTES
8. Subsequent events
On 15 February 2018, the Directors resolved to pay a fully franked interim dividend of US4.3 cents per share (US$223
million) in respect of the 2018 half year and a partially franked (to 81%) special dividend of US3 cents per share (US$155
million). The dividends will be paid on 5 April 2018. The dividends have not been provided for in the half year
consolidated financial statements and will be recognised in the 2018 financial year.
On 15 February 2018, the Group announced an extension of the existing capital management program, announced on 27 March
2017, by US$250 million to a total of US$1 billion. This program has US$540 million remaining with 143 million shares
having been purchased to 31 December 2017 for a cash consideration of US$305 million and the special dividend of US$155
million.
No other matters or circumstances have arisen since the end of the half year that have significantly affected, or may
significantly affect, the operations, results of operations or state of affairs of the Group in subsequent accounting
periods.
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of the Group, we state that:
In the opinion of the Directors:
(a) The consolidated financial statements and notes that are set out on pages 27 to 43 for the half year ended 31
December 2017 are in accordance with the Corporations Act, including:
(i) Giving a true and fair view of the Group's financial position as at 31 December 2017 and of its performance for
the half year ended on that date; and
(ii) Complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations
2001.
(b) There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and
payable.
Signed in accordance with a resolution of the Board of Directors.
David Crawford AO
Chairman
Graham Kerr
Chief Executive Officer and Managing Director
Date: 15 February 2018
DIRECTORS' REPORT
The Directors of the Group present the Consolidated Financial Report for the half year ended 31 December 2017 and the
auditor's review report thereon.
Directors
The Directors of the Company during or since the end of the half year are:
David Crawford AO
Frank Cooper AO
Graham Kerr
Xiaoling Liu - Appointed 1 November 2017
Xolani Mkhwanazi
Ntombifuthi (Futhi) Mtoba
Wayne Osborn
Keith Rumble
Karen Wood - Appointed 1 November 2017
The company secretaries of the Company during or since the end of the half year are:
Nicole Duncan
Melanie Williams
Review and results of operations
A review of the operations of the consolidated entity during the period and of the results of those operations is contained
on pages 3 to 26.
Principal risks and uncertainties
Due to the international scope of the Group's operations and the industries in which it is engaged, there are a number of
risk factors and uncertainties which could have an effect on the Group's results and operations over the next six months.
The following information outlines the most significant strategic, external and operational risks identified across the
Group. The list is not exhaustive, nor listed in any particular order:
· Fluctuations in commodity prices, exchange rates, interest rates and global economy
· Political events, actions by governments, or tax authorities
· Cost inflation and labour disputes could impact operating margins and expansion opportunities
· Climate change
· Failure to maintain, realise or enhance existing reserves
· Deterioration in liquidity and cash flow
· Health and safety risks in respect of our activities
· Access to water and power
· Water and waste water management, and environmental risks
· Unexpected operational or natural catastrophes
· Counterparties that we transact with may not meet their obligations
· Risks of fraud and corruption
· Breaches of information technology security
· Failure to retain and attract key employees
Further information on these risks and how they are managed can be found on pages 19 to 22 of the Annual Report for the
year ended 30 June 2017, a copy of which is available on the Group's website at www.south32.net.
DIRECTORS' REPORT
Events subsequent to the balance date
On 15 February 2018, the Directors resolved to pay a fully franked interim dividend of US4.3 cents per share (US$223
million) in respect of the 2018 half year and a partially franked (to 81%) special dividend of US3 cents per share (US$155
million). The dividends will be paid on 5 April 2018. The dividends have not been provided for in the half year
consolidated financial statements and will be recognised in the 2018 financial year.
On 15 February 2018, the Group announced an extension of the existing capital management program, announced on 27 March
2017, by US$250 million to a total of US$1 billion. This program has US$540 million remaining with 143 million shares
having been purchased to 31 December 2017 for a cash consideration of US$305 million and the special dividend of US$155
million.
No other matters or circumstances have arisen since the end of the half year that have significantly affected, or may
significantly affect, the operations, results of operations or state of affairs of the Group in subsequent accounting
periods.
UK responsibility statements
The Directors state that to the best of their knowledge:
· The Financial Results and Outlook on pages 3 to 26, includes a fair review of important events during the first six
months of the current financial year and their impact on the half year consolidated financial statements, and a description
of the principal risks and uncertainties for the remaining six months of the year; and
· That disclosure has been made for related party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial position or performance of the Group during that
period, and any changes in the related party transactions described in the last annual report that could have such a
material effect.
Lead auditor's independence declaration
A copy of the lead auditor's independence declaration as required under Section 307C of the Corporations Act is set out on
page 47.
Rounding of amounts
The Australian Securities and Investments Commission (ASIC) Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191 applies to the Group and amounts in the half year consolidated financial statements and this Directors'
Report have been rounded in accordance with this instrument to the nearest million US dollars, unless stated otherwise.
This Directors' Report is made in accordance with a resolution of the Board.
David Crawford AO
Chairman
Graham Kerr
Chief Executive Officer and Managing Director
Date: 15 February 2018
Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001
To the Directors of South32 Limited
I declare that, to the best of my knowledge and belief, in relation to the review of South32 Limited for the half-year
ended 31 December 2017 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation
to the review; and
(ii) no contraventions of any applicable code of professional conduct in relation to the review.
KPMG
Denise McComish
Partner
Perth
15 February 2018
Liability limited by a scheme approved under Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative ("KPMG International"), a Swiss entity.
Independent Auditor's Review Report
To the shareholders of South32 Limited
Conclusion
We have reviewed the accompanying Half-year Financial Statements of South32 Limited.Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the Half-year Financial Statements of South32 Limited are not in accordance with the Corporations Act 2001, including: · giving a true and fair view of the Group's financial position as at 31 December 2017 and of its performance for the half-year ended on that date; and · complying with Australian Accounting Standard AASB 134Interim Financial Reporting and the The Half-year Financial Statements comprise: · Consolidated Balance Sheet as at 31 December 2017· Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow
Corporations Regulations 2001. Statement for the half-year ended on that date· Notes 1 to 8 comprising a summary of significant accounting policies and other explanatory information· The Directors' Declaration. The Group comprises South32 Limited (the Company) and the entities it
controlled at the half-year's end or from time to time during the half-year.
Responsibilities of the Directors for the Half-year Financial Statements
The Directors of the Company are responsible for: · the preparation of the Half-year Financial Statements that give a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001· such internal control as the Directors determine is necessary to enable the preparation of the Half-year Financial Statements that is free from material misstatement, whether due to fraud or error.
Liability limited by a scheme approved under Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative ("KPMG International"), a Swiss entity.
Auditor's responsibility for the review of the Half-year Financial Statements
Our responsibility is to express a conclusion on the Half-year Financial Statements based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the Half-year Financial Statements are not in accordance with the Corporations Act 2001 including:
giving a true and fair view of the Group's financial position as at 31 December 2017 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of South32 Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual Financial Report. A review of Half-year Financial Statements consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an
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