Key points
- South32 has flagged upcoming changes to its coal production guidance for financial year 2022 and financial year 2023
- The updates will be included in the company's half year results – set to drop on 17 February
- While South32 hasn't said whether the changes will be positive or negative, there is reason to believe the guidance could be dropped
The South32 Ltd (ASX: S32) share price tumbled 5% last week when it downgraded its manganese production guidance in its report for the December quarter.
But the company also flagged another worrying possibility. It told the market it will soon be adjusting its coal production guidance for the coming years.
Let's take a look at what investors might want to keep an eye out for in the metals and mining company's results for the first half of financial year 2022 (FY22).
At the time of writing, the South32 share price is $3.97.
Could South32 be getting ready to drop its FY22 guidance?
Own South32 shares? Let's break down what might be in the company's half year earnings report.
First off, it's expecting to update its FY22 and FY23 production guidance for Illawarra Metallurgical Coal.
The company hasn't said if the change will be an upgrade or a downgrade. However, it flagged some notable disruptions in its report for the December quarter.
South32 noted that an extended longwall move at Illawarra Metallurgical Coal saw its production drop 23% over the first half.
It also stated it made no energy coal sales of low-margin coal wash as increased freight costs made it "uneconomic".
It also said its operating unit cost for the first half of FY22 was US$101 per tonne –20% higher than its previously given guidance.
Additionally, COVID-19 is continuing to weigh on the company's activities. The company is wary workforce restrictions in New South Wales could impact its coal operation's workforce in the second half of FY22.
Finally, South32 expects to increase its FY22 operating unit cost guidance for Worsely Alumina. Though, its production guidance will likely remain the same.
It's a similar story for its Australia Manganese operation. It dropped the operation's FY22 production guidance by 9% last week and is expecting to increase its operating cost guidance later this month.
Though, it's worth noting the company upgraded its production guidance for Cannington by 5% in its quarterly results.
As a result, plenty of eyes will likely be watching the South32 share price when the company releases its half year results to the ASX on 17 February.
