South32 (ASX:S32) share price drops on US$195 million net loss after tax

The miner has delivered its FY21 result to investors…

| More on:
Man in mining or construction uniform sits on the floor with worried look on face

Image source: Getty Images

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

The South32 Ltd (ASX: S32) share price is in reverse on Thursday morning following the mining outfit's full-year FY21 results. It may come as a surprise the company reported a relatively strong result, yet delivered a mammoth net loss after tax.

At the time of writing, South32's shares are fetching for $2.85 apiece, down 1.38%.

South32 share price stutters

The South32 share price fell wayside after the company delivered its result for the 12 months ending 30 June 2021. Here are some of the key highlights:

  • Total revenue improved to US$6,337 million, up 4% on the prior year (FY20 US$6,075 million);
  • Underlying earnings before interest and tax (EBIT) jumped to US$844 million, up 89% on the prior year (FY20 US$446 million);
  • Net loss after tax came to US$195 million, (FY20 net loss after tax US$65 million);
  • Underlying earnings per share (EPS) rocketed to US 10.3 cents, up 164% on the prior year (FY20 US 3.9 cents per share); and
  • Full-year dividend (ordinary and special) lifted to US 6.9 cents per share, up 82% on the prior year (FY20 US 3.2 cents per share).

What happened in FY21 for South32?

On the production front, South32 came in strongly. The company achieved record production at Worsley Alumina and Brazil Alumina with both refineries benefitting from higher plant availability. In addition, the company's attained its best ever output at Australia Manganese, exceeding previous earnings guidance.

Sales volumes increased and realised prices for aluminium, silver, zinc and nickel all improved. Higher base metals prices were partially offset by lower realised prices for South32's bulk commodities, with metallurgical coal and manganese ore prices declining.

The strong operating result and higher prices translated into an improved group operating margin of 26%. South32's cost base remained relatively unchanged despite higher power costs, the inflationary impact of global freight rates and stronger producer currencies.

The company's response to the pandemic continued throughout FY21 whilst controls remained in place across its operations. It noted that some of the COVID-19 local cases are in areas where it currently operates.

However, affecting the South32 share price is the company's sizeable loss on the bottom line. South32's statutory profit after tax declined by US$130 million to a loss of US$195 million following the recognition of impairment charges totalling US$728 million (US$510 million post-tax).

This is in relation to Illawarra Metallurgical Coal and a loss on sale of US$159 million following the company's divestment of South Africa Energy Coal.

What did management say?

South32 CEO Graham Kerr touched on the company's performance, saying:

During the year, we made substantial progress reshaping our portfolio, completing the divestments of South Africa Energy Coal, the TEMCO manganese alloy smelter, and a portfolio of non-core precious metals royalties. This simplifies our business, reduces capital intensity and will improve our underlying operating margin.

At Hermosa we continue to progress studies for the Taylor and Clark deposits. We have also commenced the summer field season drilling program at the Ambler Metals Joint Venture in Alaska.

What's next for South32?

Looking ahead, South32 expects to see robust volumes at its base metals operations following investment projects to increase aluminium and nickel production. This is in relation to the company's Mozal Aluminium, Cerro Matoso and Cannington sites.

While remaining subject to further potential impacts from COVID-19, FY22 guidance is unchanged. This is, however, with the exception of the company's non-operated Brazil Alumina and underground base metals operation at Cannington.

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

More on Share Market News

A woman stares at the candle on her cake, her birthday has fizzled.
Share Market News

Here are the top 10 ASX 200 shares today

The markets ended the trading week on a sad note today.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Core Lithium share price hits a multi-year low: Will the tide change soon?

Are analysts now seeing value emerge from the lithium miner's shares?

Read more »

Four young friends on a road trip smile and laugh as they sit on roof of their car.
ETFs

Records tumble! Hot ASX ETFs smash all-time highs again on Friday

It's a little strange to see these ETFs hit new highs on a red day for the ASX...

Read more »

A group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Opinions

Down 40% in under 3 years, is the Lynas share price due a bounce?

Is there any hope for Lynas shares?

Read more »

Three exuberant runners dash towards the camera. One raises her arms in triumph; another jumps in the air with arms raised. The third runner gives a satisfied smile.
Share Gainers

3 ASX 200 shares going gangbusters in June

ASX 200 investors have sent these three stocks soaring in June. But why?

Read more »

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Share Market News

Is there any chance of an interest rate cut in Australia next week?

Here's what the experts think will happen.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

a business man in a suit holds his hand over his eyes as he bows his head in a defeated post suggesting regret and remorse.
Share Fallers

Why Core Lithium, Deterra Royalties, Northern Star, and Opthea shares are dropping

These shares are ending the week deep in the red. But why?

Read more »