South32 share price edges lower after 80% collapse in profits

The South32 Ltd (ASX: S32) share price is edging lower in early trade after reporting a US$65 million loss after tax. 

Why is the South32 share price on the move?

Despite record production across three operations, revenue fell 16% lower to US$6,075 million. Those three operations were Australian Manganese Ore, Hillside Aluminium and Brazil Alumina.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 46% to US$1,185 million with an underlying EBITDA margin down 1,200 basis points to 21.9%.

Underlying profit took a big hit, plummeting 81% to $193 million for the year ended 30 June 2020 (FY20). That saw the Aussie miner report earnings per share of 3.9 cents, down 80% from FY19.

Volatile macroeconomic conditions sparked by the coronavirus pandemic hurt the company's bottom line alongside US$115 million of impairment and restructuring charges.

Lower average realised prices across alumina, manganese ore, metallurgical coal, aluminium and energy coal also offset higher volumes.

Investors have been quick to sell down with the South32 share price falling more than 1% at the open before recovering slightly to its current price of $2.14.

South32 reported a net cash balance of US$298 million following free cash flow of US$583 million including distributions from its manganese EAI.

South32 reported a US 1.0 cent per share half-year dividend, representing a payout ratio of 77%. That distribution follows a February 2020 special dividend and half-year dividend, each 1.1 cents per share.

FY21 outlook

The South32 share price is under pressure this morning. However, the Aussie miner did manage to provide FY21 guidance across its operations.

That included unchanged guidance for its Worsley Alumina, Brazil Alumina, Hillside Aluminium and Mozal Aluminium operations.

FY21 and FY22 guidance was provided for Australia Manganese. Production is expected to increase from 3,470 kwmt (thousand wet metric tonnes) to 3,500 in both FY21 and FY22.

FY21 guidance was increased by 10% for South32's Cannington zinc, silver and lead operations.

Foolish takeaway

The South32 share price has been under pressure in 2020 and that is continuing this morning.

Weaker commodity prices offset strong production numbers across many of its key operations in FY20. However, the Aussie miner did pay a full-year dividend despite the current challenges.