South32 share price gains ground on record FY22 earnings and special dividend

The South32 share price is climbing after the miner's FY22 results broke a few records.

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Key points

  • The South32 share price is climbing higher today after the miner announced its FY22 results, which broke a few records due to strong commodity prices and production output
  • The miner also increased its fully franked ordinary dividend and declared a special dividend on top of that
  • South32 gave a positive outlook and is expecting production at most of its mines to increase in FY23 over FY22

The South32 Ltd (ASX: S32) share price is climbing after the miner's FY22 results broke a few records and it declared a special dividend.

The diversified miner said its FY22 underlying earnings of US$2.6 billion and free cash flow from operations of US$2.6 billion were the highest they have ever been.

The US$139 million set aside for a special dividend, on top of the US$648 million for its final dividend, takes the total shareholder return to US$1.3 billion for FY22. This is also the most South32 has ever paid to shareholders.

The news sent the South32 share price jumping 4% to a high of $4.44 this morning, while the S&P/ASX 200 Index (ASX: XJO) is up 0.52% in morning trade.

Summary of South32's FY22 results

  • Group revenue jumped 69% in FY22 over FY21 to US$9.3 billion
  • Statutory net profit after tax (NPAT) swung to US$2.7 billion (FY21 NPAT was a loss of US$195 million)
  • Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) surged 156% to US$4.8 billion
  • Underlying EBITDA margin increased to 47.1% in FY22 compared to 26.4% in FY21
  • Ordinary dividends per share increased by 363% year over year (yoy) to US22.7 cents
  • The special dividend was increased by 1 US cent yoy to 3 US cents per share.

Other highlights from South32's FY22 results

It wasn't only high commodity prices that helped South32 deliver the strong FY22 results. The miner also managed to increase production at several of its mines.

While some ASX mining shares were complaining of a margin squeeze due to higher prices, the double tailwind allowed South32 to expand its profit margin even though it was also dealing with the same price inflation issues.

Management also credited the change in its mining portfolio towards minerals needed for a low-carbon future for the good result. The transition gave South32 greater exposure to higher-margin businesses.

Meanwhile, its ability to navigate logistical bottlenecks to ship more of its commodities also helped.

What South32 said

The CEO of South32, Graham Kerr, said:

We achieved record production at Worsley Alumina, while Hillside Aluminium and Mozal Aluminium continued to test maximum technical capacity. At Cannington we exceeded production guidance as we transitioned to a new mine configuration.

Looking forward, we are well positioned to navigate the current economic uncertainty. We have a strong balance sheet with net cash of US$538 million after funding our new investments during the year, while our ongoing focus on cost management and an expected 14% increase in production will mitigate industry-wide cost inflation.

Outlook

South32 presented a positive outlook as it guided for increased FY23 output from most of its mines. This includes Worsley Alumina and Brazil Alumina, Hillside Aluminium, Sierra Gorda, Cannington, and Cerro Matoso.

The miner is also looking to further its cost-cutting exercise. It has so far clawed back US$50 million in annualised savings.

Shareholders will be hoping that South32 can beat its record-breaking FY22 results in the current year.

South32 share price snapshot

The South32 share price has been one of the better performing large-cap ASX mining shares. The shares have gained 44% over the past year when the ASX 200 fell 7%.

Other major miners are also struggling to keep up. The BHP Group Ltd (ASX: BHP) share price fell 8% while the OZ Minerals Limited (ASX: OZL) share price gained 14% over the same period.

Motley Fool contributor Brendon Lau has positions in BHP Billiton Limited, OZ Minerals Limited, and South32 Ltd. 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 Scott Phillips.

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