Why the South32 Ltd share price climbed higher today

Billiton Limited (ASX:BHP) spin-off South32 Ltd (ASX:S32) is to slash more than 770 jobs.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's been a horrible nine months for BHP Billiton Limited (ASX: BHP), and its spin-off South32 Ltd (ASX: S32), since the company listed in May last year.

As you can see from the chart below, BHP is down over 47%, and South32 is down 42%, dropping from $2.05 on its first day of trading to its current price of $1.19.

(Source: Google Finance)

Diversified miner, South 32 today announced a half year net loss of US$1.75 billion (A$2.43 billion), hurt by large write-downs at its manganese business in Australia and energy coal operations in South Africa.

"The majority of our commodities have suffered a slump in prices," chief executive Graham Kerr said.

"We don't see prices rebounding in a dramatic way for the next 12 to 18 months," he told an analysts' call.

The company flagged write-downs of US$1.7 billion earlier in February after revising down its commodity price forecasts. It also announced the loss of 620 jobs at its troubled South African manganese business after slashing production there.

Today, it said it would cut another 772 jobs at its Australian operations, reducing employee and contractor numbers at the Worsley Alumina facility in Western Australia, Illawarra Metallurgical Coal operations in NSW and GEMCO manganese mining operation in the Northern Territory.

It will cut another 350 jobs at the Cerro Matoso nickel mine and smelter in Colombia.

The reductions, to be completed by June end, are part of the company's efforts to reduce its per unit costs amid tough market conditions.

The restructuring will result in savings of US$160 million in FY17, and cut capital expenditure by US$275 million, it said.

Shares in the company jumped on the news. By 2pm, the share price was up 5.3% to $1.19.

South32, listed in May 2015 after demerging from mining giant BHP Billiton, it is the world's largest producer of manganese ore and a global producer of manganese alloy, used in making steel and aluminium products.

It also has significant interests in alumina, silver, nickel and coal.

The company has slashed its debt and cut production at several high-cost mines and smelters, after announcing in August it would strip out US$350 million in costs by the end of its 2018 financial year.

It now expects to significantly exceed that target.

The company has also cut capital expenditure forecast for the current financial year by another US$150 million, to $550 million. It has, however, maintained its production guidance for the full year.

South32 had reported a net profit of US$339 million for the year ago period.

Underlying earnings, excluding non-cash impairments and the impact of foreign exchange, slumped 94% to US$26 million in the most recent period.

Motley Fool contributor John Hopkins has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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 Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »