South32 share price recovers as earnings tumble 44%

Falling commodities dinted the company's earnings, but it still bolstered its buyback by US$50m.

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Key points

  • The South32 share price has rallied after an early dive to trade at $4.64 right now – marking a 0.43% gain
  • It follows the release of the company's first-half results, which saw its underlying earnings tumble 44% to US$560 million
  • Meanwhile, the company upped its ongoing share buyback by another US$50 million

The South32 Ltd (ASX: S32) share price is fighting back after the mining giant posted its first-half earnings this morning.

Stock in the S&P/ASX 200 Index (ASX: XJO) diversified mining and metals company plummeted on open, falling to a low of $4.45 – a 3.7% tumble.

It has since recovered to trade 0.43% in the green at $4.64.

South32 share price suffers early slip alongside profits

Here are the highlights of the half-year report:

South32's profits tumbled alongside commodity prices last half, with additional dints from inflation and uncontrollable costs.

Its production increased 12% last half, helped by investment in copper and low-carbon aluminium, while coal was the biggest earnings contributor.

It ended the period with US$1.6 billion of cash and a US$298 million net debt position.

What else did the company announce today?

In good news for those invested in South32 shares, the company has increased its buyback by around US$50 million, leaving it with US$158 million to return to shareholders before September.

The company also revealed changes to its upper management team this morning.

Its current chief financial officer (CFO) Katie Tovich will be appointed chief human resources and commercial officer, while its vice president of finance Sandy Sibenaler will step up to the CFO position.

What did management say?

South32 CEO Graham Kerr commented on the results driving the company's share price today, saying:

We delivered another period of strong production results, and while commodity prices retreated from record levels, we recorded one of our largest profit results to date with Underlying EBITDA of US$1.36 billion.

Our strong financial result was underpinned by production growth of 12%, our recent portfolio improvements, which increased our exposure to the metals critical to a low-carbon future, and continued focus on cost efficiencies.

The long-term outlook for our business is positive as a result of our portfolio investments and high-quality development options in the metals critical for a low-carbon future.

What's next?

Looking forward, South32 believes commodity markets have strengthened. That leaves it ready to benefit from the planned production growth and lower operating costs expected across the majority of its operations in the second half.

It expects its production will increase another 6% this half. That's tipped to be supported by embedded improvement projects and the ramp-up of its Brazil Aluminium smelter.

Meanwhile, its full-year capital expenditure guidance has dropped US$105 million to US$1.14 billion.

South32 share price snapshot

The South32 share price has gained 17% so far this year. It's also currently 3% higher than it was this time last year.

For comparison, the ASX 200 has risen 6% year to date and around 1% over the last 12 months.

Motley Fool contributor Brooke Cooper 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 Scott Phillips.

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