South32 Limited (ASX: S32) released its June quarterly report this morning showing arguably mixed results for the quarter and its 2019 financial year (FY19). Here’s what you need to know.
About South32
South32 is a mining company that was spun out of BHP in 2015. They produce bauxite, alumina, aluminium, nickel and various other metals through operations in Australia, Southern Africa and South America. South32 shares are listed on the ASX and also have secondary listings on the London and Johannesburg stock exchanges.
Here Are The 3 Key Points
- Record production was achieved at Hillside Aluminium and strong performance at Mozal Aluminium
- Saleable production at Illawarra Metallurgical Coal increased 57% to 6.6 Mt, exceeding FY19 guidance
- Energy coal production, South32’s biggest commodity by volume, fell 7% in FY19
Results Improved Quarter-on-Quarter
FY19 production results were down against FY18 for every commodity except metallurgical coal (up 69%) and payable zinc (up 25%).
However, quarter-on-quarter production saw double-digit growth for almost every commodity, with manganese ore the only one to see production fall compared to 3Q19.
This suggests that, while full-year results are down, South32 finished the financial year with a strong quarter.
Results vs Guidance
Most of the production results for each operation came in around FY19 guidance, give or take 1% or 2%.
However, the performance of South Africa Energy Coal was notable. It saw energy coal production miss guidance by 5%, domestic coal production by 3% and export coal production by 7%. This was due to lower than expected sales of stockpiles and difficulties with equipment availability.
Australia Manganese was down 4% on guidance due to extended periods of wet weather, but South Africa Manganese production was 3% above guidance.
Cannington production was strong, with zinc, silver, lead and zinc equivalent production all coming in above guidance. Realised prices were lower in FY19 than in FY18 in all but three operations which could hurt FY19 performance.
What To Make Of The Report
The best operation for South32 right now is Illawarra Metallurgical Coal, with total production up 57% and beating guidance by 2%. However, overall the mixed production results combined with mostly lower realised prices than in FY18 could make for a lacklustre annual report. Based on this quarterly, I’d rather invest in one of the businesses mentioned in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
