The South32 Ltd (ASX: S32) share price is down by 2.03% at time of writing, after the ASX miner released its quarterly report for the period ending June 2020 earlier this morning.
South32 is a diversified miner producing bauxite, alumina, aluminium, energy and metallurgical coal, manganese, nickel, silver and lead in Australia, South Africa and South America. It was originally a part of BHP Group Ltd (ASX: BHP) before a demerger took place in 2015.
What did South32 announce today?
In its Q4 FY20 report, South32 revealed it achieved record production at its Brazil Alumina, Hillside Aluminium and Australia Manganese mines in FY20.
Production of materials was mostly above guidance. However, the miner’s Illawarra metallurgical coal production was below guidance, which was attributed to challenging strata conditions in Q4 FY20.
To strengthen its balance sheet, South32 decided to suspend its on-market share buy-back program on 27 March. As a result, the group confirmed its capital management program remains 92% complete.
In the report, South32 also confirmed it has access to a further US$1.4 billion in liquidity as a result of extending the expiry date of its undrawn revolving credit facility by one year to the end of February 2023.
Commenting on the quarter, CEO Graham Kerr said:
With uncertainty remaining in global markets we continue to manage our financial position to ensure we retain the right balance of flexibility, efficiency and prudence… Our strong balance sheet and simple capital management framework are designed to reward shareholders as our financial performance improves.
Impairment charge
In the report, South32 confirmed it expects to recognise an impairment as a result of its Metalloys and TEMCO smelters. The hit to its FY20 results is expected to be a pre-tax, non-cash impairment charge of US$109 million. Additionally, one-off pre-tax restructuring costs, which includes redundancies at Metalloys, is estimated to be US$7 million.
The charges will impact its equity accounted investments and will be excluded from its underlying earnings in FY20.
About the South32 share price
South32 is currently trading at $2.18. In the past year, the share price has fallen 27.74%. In contrast, the S&P/ASX 200 Index (ASX: XJO) has fallen 10.38%.
According to an ASX release on 27 March 2020, South32 has returned US$2.9 billion to shareholders by way of dividends and a capital management program.
Additionally, the group is focused on reducing costs to help absorb the potential impact of lower commodity prices over an extended period of time.
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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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