Shares of South32 Ltd (ASX: S32) have fallen 4.6% today, reversing much of the gain achieved during yesterday's 8.9% relief rally.
South32 (which demerged from parent entity BHP Billiton Limited (ASX: BHP)) first debuted on the ASX in May this year at a price of $2.13. It soon rose to a high of $2.45, although it has since shed more than 40% to trade at just $1.46 today. It maintains a market value of roughly $7.8 billion, down from an initial $11.3 billion.
The company delivered its maiden profit earlier this week with a result that was slightly below analysts' expectations. Its underlying earnings rose 41% to US$575 million, up from US$407 million in the prior year, although revenue fell by 7% to $7.7 billion on a pro forma basis.
Meanwhile, it revealed another US$416 million of asset impairments, adding to the write-downs already announced for its manganese assets as a result of plummeting commodity prices. Including these one-off items, the group's statutory profit fell 56% to just US$28 million.
In light of the headwinds facing the mining industry (including crashing commodity prices), South32 has pledged to continue cutting costs (including the possibility of job cuts) and improving efficiencies as part of its drive towards a regional operating model.
Indeed, the shares could continue to be sold off in the near future, but South32 certainly seems like one for the watchlist. To begin with, it could become a takeover target of another global mining behemoth looking to take advantage of falling prices, while its ability to improve operating efficiencies should also help improve earnings over time.
