South32 Reports Annual Loss Due to Accounting Cleanup, Plans Dividend and Capital Boost

Company News

by Glenn Dyer

An anticipated accounting cleanup has resulted in South32 (ASX:S32) reporting a loss for the fiscal year ending on June 30. However, despite this loss, shareholders are set to receive a reduced dividend along with an additional $US50 million through the ongoing buyback program.

The annual net loss for South32 was primarily influenced by a $US1.3-billion write-down related to the Taylor deposit at the Hermosa copper and manganese project in southern Arizona, USA. This impairment contributed to a statutory loss of $US173 million for the year ending in June, a significant drop from the $US2.67 billion profit recorded in the previous year (2021-22).

The company's revenue also experienced a decline of 15%, totaling just over $US9 billion for the fiscal year.

South32 had previously signaled the need for an impairment against the Hermosa project, which has faced various challenges since its acquisition in 2018. Delays linked to the pandemic and inflation were among the factors negatively impacting the project.

A more accurate assessment of the company's performance in 2022-23 can be derived from underlying earnings, which saw a 65% decrease to $US916 million. This slide can be attributed to lower commodity prices, higher inflation, weakened demand, and uncontrollable costs that offset increased output.

In an official statement released on Thursday via the ASX, South32 stated, "During the year, we delivered strong production growth in commodities that are critical for a low-carbon future. We set three annual production records and realised the benefit of our recent portfolio improvements, increasing aluminum production by 14%, base metals by 17%, and manganese by 4%."

Despite the challenges, the company managed to achieve an underlying EBITDA of $US2.5 billion, demonstrating a continued focus on cost efficiency.

South32 also highlighted its ongoing investment in critical commodities production and major milestones achieved at the Hermosa project. The company is on track to make a final investment decision to develop the Taylor base metals deposit in the next fiscal year (FY24) and continues to advance opportunities for battery-grade manganese supply.

A final dividend of 3.2 US cents per share will be paid by the company. The total dividends for 2022-23, amounting to 8.1 US cents, reflect a 65% decrease compared to the previous year.

To further support its capital management program, South32 has added $US50 million, leaving a balance of $US133 million for use by March 2024.

Looking ahead to 2024 and beyond, South32 anticipates production growth in aluminum and copper of 4% in FY24 and 3% in FY25, building upon the growth achieved through recent portfolio improvements.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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