The South32 (ASX:S32) share price just hit a multi-year high

South32 shares have gone up 4% today, hitting a multi-year high.

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man jumping along increasing bar graph signifying jump in alumina share price

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The South32 Ltd (ASX: S32) share price went up by 4% today, helping it reach a multi-year high.

Shareholders of South32 hasn’t seen the shares this high since the middle of 2019.

What has been helping the South32 share price?

It has been a buoyant time for investors in the ASX 200 resource share. The last month has seen it rise by 20.2%, it has risen by almost 30% over the last six months and it has gone up 62.50% over the past 12 months.

Growth in revenue or profit are often what investors look at when deciding what to value a business at.

Just under a month ago, South32 reported a “strong” operating result with record production at Worsley Alumina, Brazil Alumina and Australia Manganese. It also beat its production guidance that it initially gave for South Africa Manganese, Cerro Matoso and Cannington.

FY21 numbers

South32 saw a slight 4% increase of revenue to US$6.34 billion. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 32% to US$1.56 billion, underlying earnings before interest and tax (EBIT) grew 89% to US$844 million and underlying ‘earnings’ increased 153% to US$489 million.

However, various items unrelated to the underlying performance of the business, such as impairment charges totalling US$764 million (primarily relating to coal), resulted in a loss after tax of US$195 million.

Another element of the result was that the board decided to pay a full year ordinary dividend of US 4.9 cents per share, an increase of 133%, as well as a special dividend of 2 cents per share. Cash dividend payouts may also assist investor thoughts about the South32 share price.

During the year, South32 also worked on reshaping its portfolio. It completed the divestment of its South Africa Energy Coal business, the TEMCO manganese alloy smelter and a portfolio of non-core precious metal royalties.

In terms of its production guidance for FY22, the guidance was largely unchanged. Worsley Alumina guidance was for production of 3,965kt in FY22, with an estimated increase to 4,000kt in FY23. However, FY22 guidance for Brazil Alumina was reduced by 6% to 1,300kt due to repair work. Cannington guidance was increased by 10% thanks to the planned transition to 100% truck haulage in the fourth quarter of FY22 as well as the continuation of underground mine efficiencies that supported production growth in FY21.

Investor thoughts on the miner

The commodity prices may also be impacting investor thoughts on the South32 share price. One of the investment funds that recently commented on the miner and owns (or owned) shares was WAM Leaders Ltd (ASX: WLE). 

The fund manager of WAM Leaders noted that:

South32 derives almost half of its cash earnings from aluminium and alumina output. In August, aluminium prices surged to 10-year highs, as smelters in China face tighter controls on energy consumption to meet green targets. Driven by strong demand and news flow on supply disruptions, aluminium prices have almost doubled in the last year and contributed to South32 announcing a strong result in August. Through both dividends and an ongoing share buy-back, South32 will have returned to shareholders approximately $800 million, or 8% of its market capitalisation, in the 2021 calendar year.

At the end of August 2021, South32 was one of WAM Leaders’ largest 20 holdings.

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Motley Fool contributor Tristan Harrison 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.

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