South32 share price higher despite met coal downgrade

The South32 Ltd (ASX: S32) share price is on the move on Monday morning following the release of the miner’s quarterly update.

In early trade, the mining giant’s shares are up 2.5% to $3.82.

South32 share price higher on first quarter update

Investors have been bidding the South32 share price higher today after a strong night for materials shares on Wall Street on Friday offset the release of a mixed first quarter production update.

For the three months ended 30 September, South32 reported the following production compared to the fourth quarter:

• Alumina down 8% to 1,257kt
• Aluminium up 9% to 279kt
• Copper up 12% to 19kt
• Lead down 5% 24.6kt
• Manganese down 1% to 1,460kt
• Met coal down 8% to 1,270kt
• Nickel down 11% to 14kt
• Silver down 3% to 2,748koz
• Zinc down 9% to 9.6kt

How does this compare to expectations?

This was a mixed quarter from South32, with a number of its operations outperforming expectations and other underperforming consensus estimates.

For example, aluminium, copper, manganese, and nickel production came in ahead of consensus estimates. Whereas alumina, met coal, and zinc production fell short of the market’s expectations.

The soft quarter from its met coal operations was caused by workforce disruptions and has led to management reducing its full year met coal guidance by 5%. This is particularly disappointing given the high prices that the black gold is commanding right now.

One small positive, though, is that management doesn’t expect a material impact on its FY 2023 met coal operating unit cost guidance of US$116/t, with the benefit of a weaker Australian dollar expected to offset the impact of lower volumes.

The rest of the company’s guidance for FY 2023 remains unchanged.

Management commentary

South32’s chief executive officer, Graham Kerr, appeared to be pleased with the quarter. He said:

Highlights during the September 2022 quarter included an 11 per cent increase in copper equivalent production at the Sierra Gorda copper mine in Chile, a nine per cent increase in aluminium production and a six per cent increase in manganese ore production at GEMCO. We maintain a strong outlook with 13 per cent production growth expected in FY23.

We returned US$50M to shareholders via our on-market share buy-back and finished the quarter with a net cash position of US$446M, with a further US$784M returned in October 2022 via fully-franked ordinary and special dividends. Our strong balance sheet and disciplined approach to capital management enables us to continue to make returns to shareholders while investing in our portfolio of growth options focused on metals critical to a low-carbon future.

The post South32 share price higher despite met coal downgrade appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Monday
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Opportunities across the mining sector: Expert names ASX 200 shares to buy
• Morgans names the best ASX resources shares to buy now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/lZ0Gx16