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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| South32 Limited | LSE:S32 | London | Ordinary Share | AU000000S320 | ORD NPV (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.90 | 1.53% | 193.00 | 193.00 | 193.40 | 193.40 | 190.90 | 191.00 | 198,317 | 11:01:49 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Miscellaneous Metal Ores,nec | 7.77B | -173M | -0.0376 | -97.07 | 16.78B |
From May 2019 to May 2024
TIDMS32
RNS Number : 6855W
South32 Limited
20 August 2020
APPIX 4E
SOUTH32 LIMITED
(ABN 84 093 732 597)
RESULTS FOR ANNOUNCEMENT TO THE MARKET
This page and the accompanying 41 pages comprise the year end financial information given to the Australian Securities Exchange (ASX) under Listing Rule 4.3A. This statement includes the unaudited consolidated results of the South32 Group for the year ended 30 June 2020 (FY20) compared with the year ended 30 June 2019 (FY19) on a statutory basis.
US$M FY20 FY19 % Revenue 6,075 7,274 down 16% ============================================ ======== ======== ========= Profit/(loss) after tax (65) 389 N/A ============================================ ======== ======== ========= Underlying earnings 193 992 down 81% ============================================ ======== ======== =========
Net tangible assets per share
Net tangible assets per ordinary share were US$1.92 as at 30 June 2020 (US$1.98 as at 30 June 2019)(1) .
Dividends
The Board has resolved to pay a final dividend of US 1 cent per share (fully franked) for the year ended 30 June 2020.
The record date for determining entitlements to dividends is 11 September 2020; payment date is 8 October 2020.
Annual General Meeting
South32 Limited's 2020 Annual General Meeting (AGM) will be held on Thursday 29 October 2020 at midday (12 noon AWST) as a virtual meeting, with shareholders participating via online facilities. Further details regarding the AGM will be made available in September 2020, and shareholders are encouraged to monitor securities exchange releases and the company's website www.south32.net for information and updates.
ASX / LSE / JSE Share Code: S32 ADR: SOUHY
20 August 2020
South32 Limited
FINANCIAL RESULTS AND OUTLOOK
YEARED 30 JUNE 2020
South32 delivers strong operating result, further strengthens balance sheet and announces dividend
"As the COVID-19 pandemic continues to impact the world, our focus remains on keeping our people well, maintaining safe and reliable operations and supporting our communities through the health crisis. Even as we face this challenge, we delivered a strong operating result, with annual production records at Australia Manganese ore, Hillside Aluminium and Brazil Alumina.
"Given the extraordinary circumstances and volatility caused by the pandemic we have been quick to act to protect our strong financial position. During the year we re-designed and re-prioritised our capital expenditure programs, maintained strong control over our operating costs and suspended our on-market share buy-back.
"Looking to next financial year we are taking further action as we continue to navigate a period of potentially extended market volatility and lower commodity prices. We expect cost efficiencies and further simplification of our Group, combined with higher volumes to result in lower operating unit costs across the majority of our operations.
"We finished the year in a strong financial position, with lower costs and a balance sheet that provides flexibility. Against this backdrop we continue to invest in the exploration and growth options we have embedded in our portfolio to create shareholder value.
"At Hermosa we are progressing our pre-feasibility study for the Taylor Deposit, releasing an updated Mineral Resource estimate following the end of the financial year and have commenced a scoping study on emerging end-market opportunities in battery technology for the Clark Deposit. Having formed the Ambler Metals Joint Venture in Alaska with Trilogy Metals, we have embedded another exciting base metals project in our growth pipeline.
"Our strong financial position and disciplined approach to capital management has supported the return of US$424 million to our shareholders in respect of the year, including the Board's resolution today for a US$48 million fully franked final dividend. While our on-market share buy-back remains suspended with US$121 million remaining, it has been extended by 12 months to September 2021, giving us the flexibility to re-commence the program as COVID-19 related operational risks subside and our financial performance improves."
Graham Kerr, South32 CEO
Hot Features
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Financial highlights
US$M FY20 FY19 % Change
=========
Revenue(2) 6,075 7,274 (16%)
============================================ ====== ======= =========
Profit/(loss) before tax and net finance
cost 261 887 (71%)
============================================ ====== ======= =========
Profit/(loss) after tax and net finance
cost (65) 389 N/A
============================================ ====== ======= =========
Basic earnings per share (US cents)(3) (1.3) 7.7 N/A
============================================ ====== ======= =========
Ordinary dividends per share (US cents)(4) 2.1 7.9 (73%)
============================================ ====== ======= =========
Special dividends per share (US cents)(5) 1.1 1.7 (35%)
============================================ ====== ======= =========
Other financial measures
============================================ ====== ======= =========
Underlying EBITDA(6) 1,185 2,197 (46%)
============================================ ====== ======= =========
Underlying EBITDA margin(7) 21.9% 33.9% (12.0%)
============================================ ====== ======= =========
Underlying EBIT(6) 446 1,440 (69%)
============================================ ====== ======= =========
Underlying EBIT margin(8) 8.4% 22.2% (13.8%)
============================================ ====== ======= =========
Underlying earnings(6) 193 992 (81%)
============================================ ====== ======= =========
Basic Underlying earnings per share (US
cents)(3) 3.9 19.7 (80%)
============================================ ====== ======= =========
ROIC(9) 2.2% 10.7 % (8.5%)
============================================ ====== ======= =========
Ordinary shares on issue (million) 4,846 5,006 (3.2%)
============================================ ====== ======= =========
Safety
We were deeply saddened by the fatal injury to one of our colleagues, Duncan Mankhedi Ngoato, a Diesel Mechanic Assistant for Modi Mining, following an incident at the Ifalethu Colliery at South Africa Energy Coal on 27 May 2020. We immediately responded with support to Mr Ngoato's family, friends and colleagues. A detailed investigation into this incident was undertaken, led by a member of our Senior Leadership Team, with the results reviewed by the Chief Executive Officer, management team and Board. The key learnings have been shared across our operations and the contractor's business to prevent a similar tragedy occurring again . Tragically two people were also fatally injured in off-site incidents within our contractors' road transport activities, which were associated with our operations.
We aim to ensure our work is well-designed and that activities are executed in a safe and predictable manner. We are committed to working together safely and continually improving our systems and processes at all our operations. Our Total Recordable Injury Frequency (TRIF)(10)(11) improved by 9% to 4.2 per million hours worked in FY20, compared with our FY19 TRIF of 4.6.
Our response to COVID-19
Our response to COVID-19 is focussed on keeping our people well, maintaining safe and reliable operations and supporting our communities through the pandemic. We continue to monitor the situation closely, deferring non-critical activity and ensuring our operations run safely, as we continue to adjust to the different phases of the pandemic across the jurisdictions where we operate. Accordingly, our guidance is subject to further potential impacts from COVID-19.
Performance summary
The Group's statutory profit after tax declined by US$454M to a loss of US$65M in FY20 following the recognition of impairment and restructuring charges totalling US$115M (US$94M post-tax) in relation to our equity accounted manganese alloy smelters.
Underlying earnings decreased by 81% to US$193M as volatile macro-economic conditions impacted the prices of our key commodities and we experienced a temporary increase in our Underlying effective tax rate (ETR)(12) . Despite the deterioration in commodity markets we delivered a strong operating result. We recorded sequentially lower Operating unit costs at the majority of our operations , delivered US$50M in annual savings(a) across the Group through the simplification of our functional support structures and took action to protect our strong balance sheet.
(a) Compared to FY18
Looking ahead, while the volatile macro-economic conditions and uncertainty of the current health crisis pose a significant challenge to the industry we are well placed entering FY21. We expect to deliver a further reduction in capital expenditure and Operating unit costs across our operations by pursuing efficiencies to offset the impact of a weaker US dollar. In addition, by exiting low returning businesses and further simplifying the Group's functional structures and footprint we expect to deliver another US$50M in annualised savings from FY22.
Specific highlights for FY20 included:
-- Record production at Australia Manganese ore, Hillside Aluminium and Brazil
Alumina;
-- Successfully returning to a three longwall configuration at Illawarra
Metallurgical Coal;
-- Unlocking additional value at Hermosa with a first time Mineral Resource
estimate for the Clark Deposit, commencing a scoping study on emerging
end-market opportunities in battery technology, and subsequent to the
end of the year, announcing an updated Mineral Resource estimate for the
Taylor Deposit as we progress its pre-feasibility study;
-- Creating additional growth options for our portfolio, forming the Ambler
Metals Joint Venture with Trilogy Metals, releasing first time Mineral
Resource estimates for the Arctic and Bornite Deposits and commencing
a pre-feasibility study for Arctic;
-- Signing a binding conditional agreement for the sale of South Africa Energy
Coal with Seriti Resources Holdings Proprietary Limited that, subject
to a number of material conditions(13) being satisfied, is on-track for
completion in H1 FY21; and
-- Placing the Metalloys manganese alloy smelter on care and maintenance,
and subsequent to the end of the year, entering into a binding agreement
to divest our TEMCO manganese alloy smelter(14) .
We finished the year with a net cash balance of US$298M, having generated free cash flow from operations, including distributions from our manganese equity accounted investments (EAI), of US$583M. Notwithstanding the volatile external environment, our strong financial position and disciplined approach to capital management supported the return of US$424M to our shareholders in respect of the period including:
-- The payment of a US$53.5M fully franked interim dividend in respect of
H1 FY20, the Board resolving to pay a US$48M fully franked final dividend
in respect of H2 FY20; and
-- US$323M as part of our ongoing capital management program, with US$269M
allocated to our on-market share buy-back program and US$53.5M returned
in the form of a fully franked special dividend.
Having expanded our capital management program by US$180M to US$1.43B in February 2020, the Board responded to the uncertainty caused by the pandemic, suspending our on-market share buy-back program on 27 March 2020 with US$121M remaining. The Board has extended the execution window for the remaining program by 12 months, to
3 September 2021, maintaining the flexibility to re-commence the program as COVID-19 related operational risks subside and our financial performance improves.
Earnings
The Group's statutory profit after tax declined by US$454M to a loss of US$ 65M in FY20. Consistent with our accounting policies, various items are excluded from the Group's statutory profit to derive Underlying earnings including: exchange rate gains on restatement of monetary items (US$72M pre-tax); losses on non-trading derivative instruments and other investments measured at fair value (US$149M pre-tax); loss associated with earnings adjustments included in our EAI (US$108M); exchange rate gains associated with the Group's non US dollar denominated net debt (US$6M pre-tax), and the tax expense for all pre-tax earnings adjustments and exchange rate variations on tax balances (US$79M). Further information on these earnings adjustments is included on page 37.
The Group generated Underlying EBITDA of US$1.2B, for an operating margin of 22%. A deterioration in commodity markets was the primary driver of the significant decline in profitability, reducing Revenue by US$1.6B. Our continued focus on costs across the Group meant Operating unit costs remained well controlled. The general strengthening of the US dollar against our producer currencies, a reduction in price-linked costs and the on-going realisation of savings across our labour, energy and materials usage combined to offset inflation and lower the Group's cost base(15) by 6% in FY20. Depreciation and amortisation decreased by a modest US$18M to US$739M, meaning that Underlying EBIT decreased by US$1.0B (or 69%) to US$446M. Underlying earnings declined by US$799M (or 81%) to US$193M as the derecognition of tax assets at South Africa Energy Coal, associated with its potential divestment, led to a temporary increase in our Underlying ETR.
Profit/(loss) to Underlying EBITDA reconciliation US$M FY20 FY19 Profit/(loss) 261 887 Earnings adjustments to derive Underlying EBIT 185 553 =============================================================== ====== ======= Underlying EBIT 446 1,440 Depreciation and amortisation 739 757 =============================================================== ====== ======= Underlying EBITDA 1,185 2,197 =============================================================== ====== ======= Profit/(loss) after tax to Underlying earnings reconciliation US$M FY20 FY19 Profit/(loss) after tax (65) 389 Earnings adjustments to derive Underlying EBIT 185 553 Earnings adjustments to derive Underlying net finance cost (6) (34) Earnings adjustments to derive Underlying income tax expense 79 84 =============================================================== ====== ======= Underlying earnings 193 992 =============================================================== ====== =======
Earnings analysis
The following key factors influenced Underlying EBIT in FY20, relative to FY19.
The reconciliation of movements in Underlying EBIT graph can be found within the National Storage Mechanism version of the release.
Earnings analysis US$M Commentary
FY19 Underlying
EBIT 1,440
---------------------------- -------- ------------------------------------------------------------
Change in sales (1,628) Lower average realised prices for our commodities,
price including:
Alumina (-US$468M)
Manganese ore (-US$397M)
Metallurgical coal (-US$363M)
Aluminium (-US$271M)
Energy coal (-US$101M)
Net impact of price-linked 195 Lower caustic soda prices at Worsley Alumina (+US$44M)
costs and Brazil Alumina (+US$20M)
Lower aluminium smelter raw material costs (+US$41M),
including pitch and coke
Lower royalties (+US$38M), primarily at South Africa
Manganese and Illawarra Metallurgical Coal
Lower LME-linked electricity costs at Hillside
Aluminium (+US$23M)
Lower electricity costs (+US$13M), primarily at
Mozal Aluminium and Cerro Matoso
Change in exchange 302 South African rand (+US$138M)
rates Australian dollar (+US$113M)
Colombian peso (+US$27M)
Change in inflation (107) Southern Africa (-US$57M)
Australia (-US$28M)
Change in sales 157 Higher volumes at:
volume Illawarra Metallurgical Coal (+US$173M)
Brazil Alumina (+US$88M)
Cannington (+US$45M)
Partially offset by lower volumes at:
South Africa Manganese (ore -US$44M, alloy -US$20M)
South Africa Energy Coal (-US$104M)
Controllable costs (77) Drawdown in inventory to normalised levels (-US$284M),
primarily at
Illawarra Metallurgical Coal, South Africa Energy
Coal, Hillside Aluminium, Cannington and
Mozal Aluminium
Costs to respond to COVID-19 (-US$16M)
Partially offset by:
Cost efficiencies (+US$188M) captured across our
business, including labour, energy,
smelter pot relining and caustic soda consumption
Lower production volumes (+US$35M), primarily at
South Africa Energy Coal
Other (27) Includes:
Lower EBIT on third party product
Proceeds from Mining Lease relinquishment at Illawarra
Metallurgical Coal in prior year
Offset by:
One-off benefit from settling a historical royalty
claim at South Africa Manganese
Interest & tax 191 Lower profitability from a weaker price environment
(EAI) for our jointly controlled manganese operations
FY20 Underlying
EBIT 446
---------------------------- -------- ------------------------------------------------------------
Operating unit cost performance
In FY20 we embedded cost savings across our operations despite the implementation of COVID-19 controls focused on keeping our people well, and maintaining safe and reliable operations. The realisation of benefits from our optimisation of labour, energy and materials usage contributed to lower Operating unit costs across the majority of our operations.
Operating unit cost(18) (19)
--------------------------------------------------------------------------------------------
FY19 FY20 Change Commentary
------------------------ ----- ----- ------ --------------------------------------------
Worsley Alumina
Higher volumes, lower caustic soda
prices and consumption rates, and
(US$/t) 238 210 (12%) lower renegotiated energy prices
------------------------ ----- ----- ------ --------------------------------------------
Brazil Alumina
(non-operated)
(US$/t) 270 244 (10%) Higher volumes and lower caustic
soda prices and consumption rates,
partially offset by a temporary increase
in bauxite costs
------------------------ ----- ----- ------ --------------------------------------------
Hillside Aluminium
Lower raw material input prices,
lower aluminium price-linked power
costs and the benefit from a major
workforce restructure concluded in
(US$/t) 2,045 1,531 (25%) June 2019
------------------------ ----- ----- ------ --------------------------------------------
Mozal Aluminium
Lower raw material input prices,
(US$/t) 2,026 1,785 (12%) including alumina and energy
------------------------ ----- ----- ------ --------------------------------------------
Illawarra Metallurgical
Coal
Higher volumes and weaker Australian
dollar partially offset by the drawdown
of finished goods and run of mine
(US$/t) 94 93 (1%) inventory
------------------------ ----- ----- ------
Australia Manganese
(FOB)
(US$/dmtu) 1.59 1.55 (3%) Equipment productivity and the optimisation
of volumes from our low cost PC02
circuit mitigated a further increase
in strip ratio
------------------------ ----- ----- ------ --------------------------------------------
South Africa Manganese
(FOB)
Weaker South African rand, lower
price-linked royalties and the one-off
benefit from settling a historical
royalty claim in the June 2020 half
year partially offset by lower sales
(US$/dmtu) 2.69 2.25 (16%) volumes
------------------------ ----- ----- ------ --------------------------------------------
Cerro Matoso
(US$/t)(a) 132 120 (9%) Weaker Colombian peso and the realisation
of ongoing benefits from our energy
optimisation strategy
(US$/lb) 3.99 3.69 (8%)
------------------------ ----- ----- ------
Cannington
(US$/t)(b) 123 113 (8%) Weaker Australian dollar, increased
mill throughput and further insourcing
of activity with efficiencies partially
offset by inventory movements
------------------------ ----- ----- ------ --------------------------------------------
South Africa Energy
Coal
(US$/t) 40 42 5% Impact of lower sales volumes and
costs to support the Klipspruit dragline's
return to full utilisation, more
than offset savings from reduced
activity in loss-making pits and
a weaker South African rand
------------------------ ----- ----- ------ --------------------------------------------
(a) US dollar per tonne of ore to kiln. Periodic movements in finished product inventory may impact Operating unit costs.
(b) US dollar per tonne of ore processed. Periodic movements in finished product inventory may impact Operating unit costs
Net finance cost
The Group's Underlying net finance cost, excluding EAI, was US$ 145 M in FY20, and largely reflects the unwinding of the discount applied to our closure and rehabilitation provisions (US$ 102 M) and interest on lease liabilities (US$ 51 M), primarily at Worsley Alumina.
Underlying net finance cost reconciliation US$M FY20 FY19 ----------------------------------------------------------- ------ ------ Unwind of discount applied to closure and rehabilitation provisions (102) (103) Finance lease interest - (47) Interest on lease liabilities (51) - Other 8 32 =========================================================== ====== ====== Underlying net finance cost (145) (118) Add back earnings adjustment for exchange rate variations on net debt 6 34 Net finance cost (139) (84) =========================================================== ====== ======
Tax expense
The Group's Underlying income tax expense, which excludes tax associated with EAI, was US$108M for an Underlying ETR of 116 % in FY20. The elevated Underlying ETR was mostly driven by the loss made at South Africa Energy Coal, following the de-recognition of tax assets associated with its potential divestment. Following its divestment we expect the Underlying ETR to more closely reflect the corporate tax rates applicable to the Group (20) .
The Underlying income tax expense for our manganese EAI was US$ 163 M, including royalty related taxation of US$ 56 M at GEMCO (Australia Manganese), for an Underlying ETR of 43.7 % (FY19: 42.2%). The higher Underlying ETR in FY20 was mostly driven by the higher proportion of profit in our Australian business and associated royalty expenses.
Underlying income tax expense reconciliation and Underlying ETR US$M FY20 FY19 Underlying EBIT 446 1,440 Include: Underlying net finance cost (145) (118) Remove: Share of profit/(loss) of equity accounted investments (208) (450) ============================================================= ====== ====== Underlying profit/(loss) before tax 93 872 ============================================================= ====== ====== Income tax expense 187 414 Tax effect of earnings adjustments to Underlying EBIT 18 (56) Tax effect of earnings adjustments to net finance cost 2 (10) Exchange rate variations on tax balances (99) (18) Underlying income tax expense 108 330 ============================================================= ====== ====== Underlying effective tax rate 116% 37.8% ============================================================= ====== ======
Cash flow
The Group generated free cash flow from operations of US$270M and received US$313M in (net) distributions from our manganese EAI(21) in FY20 despite a 20% reduction in the average realised prices for our commodities. While cash generation was impacted by the lagged effect of income tax payments from the prior period's profitability, a strong focus on controlling working capital more than offset a small increase in capital expenditure as we continued our investment in our growth and life extension projects.
Total capital expenditure(22), excluding EAI, increased by US$35M to US$745M. Major capital, excluding EAI, was US$32M higher at US$251M including US$104M at the Hermosa project as we completed the voluntary remediation program, increased the size of our landholdings in the region and established early works surface infrastructure. A further US$122M was invested at South Africa Energy Coal as we progressed the Klipspruit Life Extension (KPSX) project, advancing it to 97% completion.
Sustaining capital expenditure, excluding EAI, decreased by US$8M to US$425M, 17% below our original guidance (US$515M) as we re-designed and re-prioritised expenditure in response to the uncertainty and conditions imposed by the pandemic. Increased spend on Intangibles and capitalisation of exploration expenditure reflects a greater investment in technology to support our operations (US$36M) and exploration activity across our portfolio (US$33M), including US$19M of exploration at Hermosa. Total capital expenditure associated with our manganese EAI declined by US$5M to US$91M.
Capital expenditure
US$M FY20 FY19
Sustaining capital comprising Stay-in-business, Minor
discretionary and Deferred stripping (including underground
development) (425) (433)
Major project capital expenditure (251) (219)
Intangibles and the capitalisation of exploration
expenditure (69) (58)
====== ======
Total capital expenditure (excluding EAI) (745) (710)
EAI capital expenditure (including intangibles and
capitalised exploration) (91) (96)
============================================================== ====== ======
Total capital expenditure (including EAI) (836) (806)
-------------------------------------------------------------- ------ ------
Working capital unwound by US$287M as lower realised prices and receipt of the insurance award for the Klipspruit dragline outage that occurred in the prior year contributed to a US$367M decline in trade and other receivables. Tight management of our receivables through the current market uncertainty meant debtor days remained broadly unchanged at 23 (FY19: 24 days). Our focus on ensuring our business remains resilient extended to our management of inventory, which we drew down to normalised levels, bringing a further US$208M benefit. Lower trade and other payables and provisions partially offset the above, declining by US$184M and US$104M respectively, as input prices fell for raw material supplies purchased by our aluminium smelters and we continued our investment in progressive rehabilitation at South Africa Energy Coal.
Working capital movement reconciliation
US$M Movement
Trade and other receivables 367
Inventories 208
Trade and other payables (184)
Provisions and other liabilities (104)
=========================================
Working capital movement 287
========================================= =========
Free cash flow from operations, excluding equity
accounted investments
US$M FY20 FY19
Profit/(loss) 261 887
Non-cash items 927 1,335
(Profit)/loss from equity accounted investments (100) (467)
Change in working capital 287 (129)
======================================================= =================== ======
Cash generated 1,375 1,626
Total capital expenditure, excluding equity accounted
investments, including intangibles and capitalised
exploration (745) (710)
=================== ======
Operating cash flows before financing activities
and tax, and after capital expenditure 630 916
Interest (paid)/received (25) 1
Income tax (paid)/received (335) (346)
======================================================= =================== ======
Free cash flow from operations 270 571
------------------------------------------------------- ------------------- ------
Balance sheet, dividends and capital management
The Group's FY19 net cash position reduced by US$140M to US$364M on 1 July 2019 following the adoption of AASB 16 Leases. While the Group generated free cash flow from operations, including distributions from our manganese EAI, of US$583M during FY20, our net cash balance decreased to US$298M as we returned US$246M to shareholders in the period by way of dividends and directed US$269M to our on-market share buy-back program.
We took decisive action in H2 FY20 in response to the pandemic to protect our strong balance sheet , reducing Sustaining capital expenditure and suspending our on-market share buy-back program. We continue to manage our financial position to ensure we retain the right balance of flexibility, efficiency and prudence with additional liquidity available via an undrawn US$1.45B revolving credit facility. Reflecting our strong financial position and consistent with our commitment to maintain an investment grade credit rating, Standard and Poor's and Moody's reaffirmed their respective BBB+ and Baa1 credit ratings for the Group.
Net cash/(debt) US$M FY20 FY19 Cash and cash equivalents 1,315 1,408 Finance leases (651) (543) Other interest bearing liabilities (366) (361) ==================================== Net cash/(debt) 298 504 ==================================== ====== ======
Our capital management framework remains unchanged and we continue to believe that the combination of high operating leverage and undue financial leverage delivers a sub-optimal outcome for shareholders. Given the strength of our net cash position and available franking credits, the Board has resolved to pay a fully franked final dividend of US 1 cent per share (US$ 48 M), representing 77% of Underlying earnings in respect of H2 FY20. Reflecting the prudent management of our balance sheet and disciplined allocation of capital, we suspended our on-market share buy-back on 27 March 2020 in response to the uncertainty caused by the pandemic. The Board has extended the execution window for the remaining US$121M of our current program by 12 months, to 3 September 2021, maintaining the flexibility to re-commence the on-market share buy-back as COVID-19 related operational risks subside, and our financial performance improves.
Dividends announced
Period Dividend per US$M Franking Pay-out
share ratio
(US cents)
H1 FY19 5.1 258 100% 40%
February 2019 special dividend 1.7 86 100% NA
H2 FY19 2.8 140 100% 40%
H1 FY20 1.1 54 100% 41%
February 2020 special dividend 1.1 54 100% NA
H2 FY20 1.0 48 100% 77%
-------------------------------- ------------- ----- --------- --------
South32 shareholders registered on the South African branch register will not be able to dematerialise or rematerialise their shareholdings between 9 and 11 September 2020 (both dates inclusive), nor will transfers to/from the South African branch register be permitted between 4 and 11 September 2020 (both dates inclusive).
Details of the currency exchange rates applicable for the dividend will be announced to the relevant stock exchanges. Further dividend information is available on our website (www.south32.net).
South32 American Depositary Receipts (ADRs) each represent five fully paid ordinary shares in South32 and ADR holders will receive dividends accordingly, subject to the terms of the Depositary Agreement.
Dividend timetable Date Announce currency conversion into rand 7 September 2020 Last day to trade cum dividend on the Johannesburg 8 September 2020 Stock Exchange (JSE) Ex-dividend date on the JSE 9 September 2020 Ex-dividend date on the ASX and London Stock Exchange 10 September 2020 (LSE) Record date (including currency election date for 11 September 2020 ASX) Payment date 8 October 2020 ====================================================== ==================
Outlook
Production
We delivered a strong operating result in FY20 despite the challenging backdrop, implementing measures to keep our people safe and well, and maintaining safe and reliable operations. While all guidance is subject to further potential impacts from COVID-19, we expect to increase production at the majority of our operations in FY21.
Production guidance (South32 share) (18)
-------------------------------------------------------------------------------------------------------
FY20 FY21e FY22e Key guidance assumptions
------------------------------ ------ ------ ---------- -------------------------------------------
Worsley Alumina FY21 guidance unchanged
Refinery to achieve nameplate capacity
with further improvement in calciner
Alumina production (kt) 3,886 3,965 3,965 availability
------------------------------ ------ ------ ---------- -------------------------------------------
Brazil Alumina (non-operated) FY21 guidance unchanged
Alumina production (kt) 1,383 1,370 1,390 Planned maintenance during FY21
------------------------------ ------ ------ ---------- -------------------------------------------
Hillside Aluminium FY21 guidance unchanged (subject
to load-shedding)
Smelter to continue to test its
Aluminium production maximum technical capacity following
(kt) 718 720 720 record FY20 production
------------------------------ ------ ------ ---------- -------------------------------------------
Mozal Aluminium FY21 guidance unchanged (subject
to load-shedding)
Aluminium production Benefits of the AP3XLE energy efficiency
(kt) 268 273 273 project to be realised
------------------------------ ------ ------ ---------- -------------------------------------------
Illawarra Metallurgical FY21 guidance decreased by 4%
Coal Optimisation of Appin's dual longwall
operation for capital, labour and
equipment productivity to maximise
value, rather than volume
Saleable coal production is expected
to decline to 7.3Mt in FY22, with
metallurgical coal production largely
unchanged and lower value energy
coal volumes expected to decline
with an extra longwall move at Dendrobium,
before normalising in FY23
Total coal production
(kt) 7,006 7,700 7,300
Metallurgical coal production
(kt) 5,549 6,400 6,300
Energy coal production
(kt) 1,457 1,300 1,000
------------------------------ ------ ------ ----------
Australia Manganese FY21 and FY22 guidance provided
for the first time
(subject to market demand)
Low cost PC02 circuit to continue
Manganese ore production to operate above nameplate capacity,
(kwmt) 3,470 3,500 3,500 supporting secondary product volumes
------------------------------ ------ ------ ---------- -------------------------------------------
South Africa Manganese FY21 guidance provided for the first
time
(subject to market demand)
Manganese ore production 1,878 2,000 Subject Sales of lower quality fines product
(kwmt) to demand and use of higher cost trucking
to continue, subject to market conditions
------------------------------ ------ ------ ---------- -------------------------------------------
Cerro Matoso FY21 guidance unchanged
Ore to kiln (kdmt) 2,761 2,400 2,850 Ore to kiln volumes to benefit following
planned furnace refurbishment, scheduled
for the December 2020 quarter
Payable nickel production
(kt) 40.6 33.5 38.6
------------------------------ ------ ------ ----------
Cannington FY21 guidance increased by 10%
(23)
Ore processed to continue to benefit
from improved performance in the
underground mine
Payable metal production revised
higher in FY21 to reflect an increase
in expected mill throughput and
Ore processed (kdmt) 2,839 2,700 2,650 grades
-------------------------------------------
Payable zinc equivalent
production (kt)(23) 332.6 330.8 301.1
-------------------------------------------
Payable silver production
(koz) 11,792 11,800 10,500
Payable lead production
(kt) 110.4 113.9 103.0
Payable zinc production
(kt) 66.7 60.7 58.8
------------------------------ ------ ------ ---------- -------------------------------------------
FY20 H1 FY21e Key guidance assumptions
------------------------------ ------ ------------------ -------------------------------------------
South Africa Energy Guidance provided for H1 FY21 with
Coal divestment on-track for completion
in H1 FY21, subject to the satisfaction
of a number of material conditions
(13)
Continue to adjust volumes to maximise
margins
-------------------------------------------
Total coal production
(kt) 22,672 10,500 - 12,500
-------------------------------------------
Domestic coal production
(kt) 12,552 6,500 - 7,800
Export coal production
(kt) 10,120 4,000 - 4,700
============================== ====== ================== -------------------------------------------
Costs and capital expenditure
Operating unit cost guidance
We continue to pursue cost efficiencies in our business to offset the impact of a stronger Australian dollar and the potential for an extended period of volatility and lower commodity prices. This focus is expected to contribute to the further reduction in Operating unit costs across the majority of our operations in FY21. Although guidance is not provided for our downstream processing operations, Operating unit costs are expected to benefit from the lagged effect of a reduction in raw material prices, particularly alumina.
Operating unit cost(18)(19)
-------------------------------------------------------------------------------------------------------------
H1 FY20 H2 FY20 FY20 FY21e(a) Commentary
FY21 key guidance assumptions
------------------------------ ------- ------- ----- ------------ --------------------------------------
Worsley Alumina
Higher volumes and the reduction
of contractor rates and activity,
partially offset by higher planned
caustic consumptions rates and
(US$/t) 225 196 210 205 a stronger Australian dollar
------------------------------ ------- ------- ----- ------------ --------------------------------------
Brazil Alumina (non-operated)
Not provided but expected to
Not benefit from lower bauxite,
(US$/t) 257 231 244 provided caustic soda and energy prices
------------------------------ ------- ------- ----- ------------ --------------------------------------
Hillside Aluminium
Not provided but combined tailwinds
of lower alumina prices and
a weaker South African rand
Not are expected to mitigate higher
(US$/t) 1,657 1,413 1,531 provided power costs
------------------------------ ------- ------- ----- ------------ --------------------------------------
Mozal Aluminium
Not provided but expected to
benefit from the further insourcing
of activity and the combined
tailwinds of lower alumina prices
(US$/t) 1,904 1,671 1,785 Not provided and a weaker South African rand
------------------------------ ------- ------- ----- ------------ --------------------------------------
Illawarra Metallurgical Coal
Higher volumes and an associated
increase in productivity partially
offset by a stronger Australian
(US$/t) 91 95 93 84 dollar
------------------------------ ------- ------- ----- ------------ --------------------------------------
Australia Manganese ore (FOB)
Expected improvement in yield
due to favourable ore characteristics
and lower contractor and labour
spend, partially offset by a
(US$/dmtu) 1.62 1.48 1.55 1.48 stronger Australian dollar
------------------------------ ------- ------- ----- ------------ --------------------------------------
South Africa Manganese ore (FOB)
Higher volumes and a weaker
South African rand, offset by
the prior period's realisation
of a one-off royalty benefit
and a planned increase in trucking
(US$/dmtu) 2.60 1.78 2.25 2.25 volumes
----- ------------
Cerro Matoso
Weaker Colombian peso, lower
price-linked royalties and the
continued benefit of our energy
optimisation strategy, more
than offset by lower production
volumes from planned furnace
(US$/t)(b) 123 116 120 121 outage
(US$/lb) 3.80 3.57 3.69 3.97
----- ------------
Cannington
Insourcing of activity and the
continued benefit of lower negotiated
energy contracts , partially
offset by a stronger Australian
(US$/t)(c) 121 105 113 111 dollar and lower mill throughput
------------------------------ ------- ------- ----- ------------ --------------------------------------
South Africa Energy Coal Guidance provided for H1 FY21
Guidance range reflects our
intent to adjust volumes to
36 - maximise margins and a weaker
(US$/t) 43 40 42 39 South African rand
------------------------------ ------- ------- ----- ------------ --------------------------------------
(a) FY21e Operating unit cost guidance includes royalties (where appropriate) and commodity price and foreign exchange rate forward curves or our internal expectation, as at June 2020 (refer to page 26, footnote 24).
(b) US dollar per tonne of ore to kiln. Periodic movements in finished product inventory may impact Operating unit costs.
(c) US dollar per tonne of ore processed. Periodic movements in finished product inventory may impact Operating unit costs.
Depreciation and amortisation, and tax expense guidance
Depreciation and amortisation (excluding EAI and South Africa Energy Coal) is expected to reduce to approximately US$683M in FY21 (FY20: US$692M). Depreciation and amortisation for our manganese EAI is expected to reduce to US$96M (FY20: US$99M). We also expect depreciation and amortisation for South Africa Energy Coal of US$12M in H1 FY21.
Our geographical earnings mix will continue to have a significant bearing on our Underlying ETR given differing country tax rates (20) , while the impact of intragroup agreements, exploration expenditure in foreign entities and other permanent differences will continue to be magnified when margins are compressed or losses are incurred in specific jurisdictions. Until it is sold,
South Africa Energy Coal is expected to have an ETR of 0%, with all tax assets de-recognised and no benefit to be recorded for losses prior to sale. This will continue to influence the Group's Underlying ETR should South Africa Energy Coal make a loss prior to the planned timing of its divestment in H1 FY21 (13) . While it is therefore difficult to predict our Underlying ETR we do expect it to decline in FY21 (FY20: 116%). Following South Africa Energy Coal's divestment we expect our Underlying ETR to more closely reflect the primary corporate tax rates applicable to the Group.
Other expenditure guidance
Group and unallocated costs, excluding greenfield exploration, of US$80M are expected in FY21 as we continue to pursue savings through our exit of low returning businesses and ongoing simplification of the Group's functional structures and footprint.
We have a prospective portfolio of greenfield exploration partnerships targeting base metals in Australia, the Americas and Europe. FY21 guidance for greenfield exploration expenditure to progress these early stage projects is US$18M (FY20: US$15M).
In addition, US$50M of exploration expenditure, excluding EAI, is expected to be capitalised in FY21 (FY20: US$33M). This includes US$29M at Hermosa (FY20: US$19M) and US$10M (South32 share) at our Ambler Metals Joint Venture.
Capital expenditure guidance (excluding exploration and intangibles)
Sustaining capital expenditure, excluding EAI, is expected to decline by US$ 50 M (or 12%) to US$ 375 M in FY21. Savings are expected to be realised from the re-design and re-prioritisation of activity across our operations in response to market conditions. Expenditure at
Illawarra Metallurgical Coal is expected to decrease by US$35M (or 19%) as we reduce the level of spend on underground development to typical levels, following the substantial investment in prior periods. Sustaining capital expenditure associated with our manganese EAI is expected to decrease by US$15M (or 17%) to US$75M as we complete site infrastructure improvement projects and lower spend at our alloy smelters.
Major project capital expenditure is expected to decline by US$96M (or 38%) to US$155M in FY21 with South Africa Energy Coal's KPSX project expected to be completed in H1 FY21. Modest expenditure is anticipated at Eagle Downs Metallurgical Coal, ahead of an expected final investment decision in H1 FY21. Hermosa guidance includes development studies, surface and decline infrastructure to advance the project prior to completing the Taylor Deposit's pre-feasibility study (PFS). We expect to provide updated FY21 capital expenditure guidance for Hermosa with the PFS outcomes in the December 2020 quarter. External approvals for Dendrobium Next Domain (DND) are progressing and we expect to make a final investment decision in H2 FY21. Guidance of US$64M for DND includes critical path mine development, ventilation infrastructure and other long lead time equipment associated with the life extension project.
Capital expenditure (South32 share) (18)(22) US$M FY20 FY21e -------------------------------------- ------------------------------- ----------- Worsley Alumina 48 57 Brazil Alumina 34 27 Hillside Aluminium 13 18 Mozal Aluminium 11 8 Illawarra Metallurgical Coal 185 150 Australia Manganese 67 58 South Africa Manganese 23 17 Cerro Matoso 39 36 Cannington 52 39 South Africa Energy Coal 42 40(b) Group & unallocated 1 - Sustaining capital expenditure (including EAI) 515 450 -------------------------------------- ------------------------------- ----------- Equity accounted adjustment(a) (90) (75) -------------------------------------- ------------------------------- ----------- Sustaining capital expenditure (excluding EAI) 425 375 -------------------------------------- ------------------------------- ----------- Hermosa 104 60 Illawarra Metallurgical Coal - DND 14 64 Eagle Downs Metallurgical Coal 11 7 South Africa Energy Coal 122 24(b) Major project capital expenditure 251 155 -------------------------------------- ------------------------------- ----------- Total capital expenditure (including EAI) 766 605 -------------------------------------- ------------------------------- -----------
(a) The equity accounting adjustment reconciles the proportional consolidation of the South32 manganese operations to the treatment of the manganese operations on an equity accounted basis.
(b) Guidance for South Africa Energy Coal is for H1 FY21.
Operations analysis
A summary of the underlying performance of the Group's operations is presented below and more detailed analysis is presented on pages 15 to 24. Unless otherwise stated: a ll metrics reflect South32's share; Operating unit cost is Revenue less Underlying EBITDA excluding third party sales divided by sales volumes; Operating cost is Revenue less Underlying EBITDA excluding third party sales; and Realised sales price is calculated as sales Revenue excluding third party sales divided by sales volume.
Operations table (South32 share)
(18)
Revenue Underlying EBIT
US$M FY20 FY19 FY20 FY19
Worsley Alumina 1,118 1,619 160 541
Brazil Alumina 399 566 (15) 160
Hillside Aluminium 1,276 1,439 103 (75)
Mozal Aluminium 508 556 (24) (21)
South Africa Energy Coal 822 1,037 (155) (46)
Illawarra Metallurgical Coal 924 1,135 52 359
Australia Manganese 763 1,095 328 638
South Africa Manganese 342 553 54 188
Cerro Matoso 519 489 107 40
Cannington 476 467 105 104
Third party products and services(25) 583 815 (17) 5
Inter-segment / Group and unallocated(a) (550) (857) (68) (78)
========================================== ============== ============= ================= =================
Total 7,180 8,914 630 1,815
Equity accounting adjustment(b) (1,105) (1,640) (184) (375)
========================================== ============== ============= ================= =================
South32 Group 6,075 7,274 446 1,440
========================================== ============== ============= ================= =================
(a) Group and unallocated Underlying EBIT includes Hermosa (-US$5M).
(b) The equity accounting adjustment reconciles the proportional consolidation of the South32 manganese operations to the treatment of the manganese operations on an equity accounted basis (including third party product).
Worsley Alumina (86% share)
Volumes
Worsley Alumina saleable production increased by 2% (or 91kt) to 3,886kt in FY20, as the refinery benefitted from improved calciner availability. The refinery continues to benefit from improvement initiatives that are expected to support a sustainable increase in production to nameplate capacity of 4.6Mt (100% basis) in FY21 and FY22.
Operating costs
Operating unit costs decreased by 12% in FY20 to US$210/t as the refinery benefitted from lower caustic soda prices (FY20: US$366/t, FY19: US$489/t) and consumption rates (FY20: 93kg/t, FY19: 98kg/t), and lower renegotiated energy prices.
We expect FY21 Operating unit costs to decrease by 2% to US $205/ t as higher volumes and the reduction of contractor rates and activity, are partially offset by higher planned caustic consumption rates (FY21: 95kg/t) and a stronger Australian dollar. Exchange rate and price assumptions for FY21 Operating unit cost guidance are detailed on page 26, footnote 24.
Financial performance
Underlying EBIT decreased by 70% (or US$381M) in FY20 to US$160M as a 30% decrease in the average realised price of alumina (-US$469M) and lower sales volumes (-US$32M) were partially offset by lower caustic soda costs (price and consumption, +US$53M), a weaker Australian dollar (+US$35M) and lower renegotiated energy prices (+US$25M).
The average realised price for alumina sales was a modest premium to the Platts Alumina Index(26) (PAX) on a volume weighted M-1 basis in FY20. Price realisations in H2 FY20 were in-line with market indices as a result of specific legacy supply contracts with our Mozal Aluminium smelter that reset each calendar year. Contracts with the smelter are linked to the LME aluminium price and alumina indices on an M-1 basis, with caps and floors embedded within specific contracts. All other alumina sales were at market based prices.
Capital expenditure
Sustaining capital expenditure decreased by US$9M in FY20 to US$48M and is expected to increase to US$57M in FY21 as we continue to invest in additional bauxite residue disposal capacity and improvements in processing infrastructure to support a sustainable increase in production to nameplate capacity.
FY20 FY19
South32 share
Alumina production (kt) 3,886 3,795
====================================== ====== ======
Alumina sales (kt) 3,782 3,857
====================================== ====== ======
Realised alumina sales price (US$/t) 296 420
====================================== ====== ======
Operating unit cost (US$/t) 210 238
====================================== ====== ======
South32 share (US$M) FY20 FY19
Revenue 1,118 1,619
================================ =============== =======
Underlying EBITDA 322 702
================================ =============== =======
Underlying EBIT 160 541
================================ =============== =======
Net operating assets 2,789 2,831
================================ =============== =======
Sustaining capital expenditure 48 57
================================ =============== ======= Exploration expenditure - 1 ================================ =============== ======= Exploration expensed - 1 ================================ =============== =======
Brazil Alumina (Alumina 36% share, Aluminium 40% share)
Volumes
Brazil Alumina saleable production increased by 10% (or 128kt) to a record 1.38Mt in FY20 as the refinery achieved improved performance in steam generation, enabling the benefits of the De-bottlenecking Phase One project to be realised. Production is expected to decrease to 1. 37Mt in FY21 with planned maintenance scheduled, before increasing to 1.39Mt in FY22 as the de-bottlenecking benefits are again realised over a full year.
Operating costs
Operating unit costs decreased by 10% in FY20 to US$244/t as higher production volumes and lower caustic soda prices (FY20: US$324/t, FY19: US$503/t) and consumption rates, were partially offset by an increase in bauxite costs as we sourced third party material due to a temporary shortfall in supply from Mineração Rio do Norte S.A (MRN) .
While FY21 Operating unit cost guidance is not provided for this non-operated facility, the refinery is expected to benefit from a reduction in the use of third party bauxite and a reset in the cost of supply from MRN, in accordance with its linkage to alumina and aluminium. Lower caustic soda and energy prices are also anticipated.
Financial performance
Alumina Underlying EBIT decreased by 103% (or US$177M) in FY20 to a loss of US$5M as a 37% decline in the average realised price of alumina (-US$ 237 M), higher bauxite costs (-US$20M) and a drawdown of inventory (-US$10M) were partially offset by higher sales volumes (+US$70M) and lower caustic soda costs (price and consumption, +US$23M) .
Aluminium Underlying EBIT increased by US$2M in FY20 to a loss of US$10M as we incurred costs to maintain the smelter on care and maintenance and recognised a provision related to our electricity contract with Eletronorte that was terminated in December 2015.
Capital expenditure
Sustaining capital expenditure increased by US$8M in FY20 to US$34M and is expected to decrease by US$7M to US$27M in FY21 as the rate of investment in bauxite residue disposal capacity reduces and we undertake further de-bottlenecking work at the refinery.
Together with our partners at MRN we continue to progress the life extension project's pre-feasibility study. The project has the potential to extend the life of the mine by more than 20 years at a relatively low capital cost. MRN has a substantial 494Mt(27) high grade bauxite Mineral Resource, with the pre-feasibility study expected to be completed in H2 FY21.
FY20 FY19
South32 share
Alumina production (kt) 1,383 1,255
====================================== ============== ======
Alumina sales (kt) 1,392 1,240
====================================== ============== ======
Realised alumina sales price (US$/t) 287 456
====================================== ============== ======
Alumina operating unit cost (US$/t) 244 270
====================================== ============== ======
South32 share (US$M) FY20 FY19
Revenue 399 566
==================================== ===== =====
Alumina 399 566
===== =====
Aluminium - -
==================================== ===== =====
Other income - 3
==================================== ===== =====
Underlying EBITDA 50 219
==================================== ===== =====
Alumina 60 231
==================================== ===== =====
Aluminium (10) (12)
==================================== ===== =====
Underlying EBIT (15) 160
==================================== ===== =====
Alumina (5) 172
==================================== ===== =====
Aluminium (10) (12)
==================================== ===== =====
Net operating assets/(liabilities) 568 687
==================================== ===== =====
Alumina 584 696
==================================== ===== =====
Aluminium (16) (9)
==================================== ===== =====
Sustaining capital expenditure 34 26
==================================== ===== =====
Hillside Aluminium (100%)
Volumes
Hillside Aluminium saleable production increased by 3kt to a record 718kt in FY20 as the smelter continued to test its maximum technical capacity, despite the impact to production from increased load-shedding. Production is expected to increase to a record 720kt in FY21 and FY22, subject to load-shedding.
Operating costs
Operating unit costs decreased by 25% in FY20 to US$1,531/t as the smelter benefited from lower raw material input prices, lower aluminium price-linked power costs and a major workforce restructure that was concluded in June 2019. Alumina, coke, pitch and aluminium tri-fluoride accounted for 54% of the smelter's cost base in FY20 (FY19: 58%).
The smelter sources alumina from our Worsley Alumina refinery with prices linked to the PAX on an M-1 basis, while its power is sourced from Eskom under separate contracts for its three potlines. We have been engaging with Eskom on a new pricing arrangement for the smelter, agreeing a new tariff to cover power supplied for a 10 year period. The new tariff is South African rand based, with a rate of escalation linked to the South Africa Producer Price Index. While the new tariff is being considered for approval by the National Energy Regulator of South Africa, we have entered into an interim arrangement for power supply with Eskom.
While Operating unit cost guidance is not provided, the combined tailwinds of lower anticipated alumina prices and a weaker South African rand are expected to mitigate the impact of higher power costs in FY21.
Financial performance
Underlying EBIT increased by US$178M in FY20 to US$103M as a 13% decrease in the average realised price of aluminium (-US$198M) was more than offset by lower raw material input costs (+US$239M), increased sales volumes (+US$35M), a weaker South African rand (+US$31M), lower aluminium price-linked power costs (+US$23M) and lower labour costs (+US$22M) following the major workforce restructure concluded in June 2019. Pot relining activity also reduced (+US$23M) in FY20, with 65 pots relined at a cost of US$248k per pot (FY19: 171 pots at US$249k per pot). 142 pots are scheduled to be relined across FY21.
Capital expenditure
Sustaining capital expenditure decreased by US$6M in FY20 to US$13M. A modest increase in Sustaining capital expenditure to US$18M is expected in FY21.
FY20 FY19
South32 share
Aluminium production (kt) 718 715
============================== ====== =======
Aluminium sales (kt) 723 707
============================== ====== =======
Realised sales price (US$/t) 1,765 2,035
============================== ====== =======
Operating unit cost (US$/t) 1,531 2,045
============================== ====== =======
FY20 FY19
South32 share (US$M)
Revenue 1,276 1,439
================================ ====== =======
Underlying EBITDA 169 (7)
================================ ====== =======
Underlying EBIT 103 (75)
================================ ====== =======
Net operating assets 794 1,027
================================ ====== =======
Sustaining capital expenditure 13 19
================================ ====== =======
Mozal Aluminium (47.1% share)
Volumes
Mozal Aluminium saleable production increased by 1kt to 268kt in FY20 as the smelter continued to test its maximum technical capacity, despite the impact to production from increased load-shedding.
Production is expected to increase to a record 273kt in FY21 and FY22, as the benefits of the AP3XLE energy efficiency project are realised, subject to load-shedding.
Operating costs
Operating unit costs decreased by 12% in FY20 to US$1,785/t as raw material input costs decreased for alumina, coke, pitch and aluminium tri-fluoride, which combined to account for 46% of the smelter's cost base (FY19: 49%).
The smelter sources alumina from our Worsley Alumina refinery with approximately 50% priced as a percentage of the LME aluminium index under a legacy contract and the remainder linked to the Platts alumina index on an M-1 basis, with caps and floors embedded within specific contracts that reset each calendar year.
While Operating unit cost guidance is not provided, the cost profile of the smelter is expected to benefit in FY21 from the further insourcing of activity and the combined tailwinds of lower alumina prices and a weaker South African rand.
Financial performance
Underlying EBIT decreased by US$3M in FY20 to a loss of US$24M as a 12% decrease in the average realised price of aluminium (-US$74M) and an increase in pot relining costs (-US$3M) were offset by lower raw material prices (+US$42M), increased sales volumes (+US$26M) and reduced labour and contractor charges (+US$8M). 112(28) pots were relined across FY20 at a cost of US$278k per pot (FY19: 103(28) pots at US$234k per pot), with 120(28) pots scheduled to be relined in FY21.
Capital expenditure
Sustaining capital expenditure decreased by US$8M in FY20 to US$11M and is expected to decrease further to US$8M in FY21. The smelter continues to roll out the AP3XLE energy efficiency technology in its pot relining program. The project is expected to deliver a circa 5% (or 10kt pa) increase in annual production by FY24 with no associated increase in power consumption, improving the smelter's global competitiveness.
FY20 FY19
South32 share
Aluminium production (kt) 268 267
============================== ====== =======
Aluminium sales (kt) 279 268
============================== ====== =======
Realised sales price (US$/t) 1,821 2,075
============================== ====== =======
Operating unit cost (US$/t) 1,785 2,026
============================== ====== =======
South32 share (US$M) FY20 FY19
Revenue 508 556
================================ ===== =====
Underlying EBITDA 10 13
================================ ===== =====
Underlying EBIT (24) (21)
================================ ===== =====
Net operating assets 436 534
================================ ===== =====
Sustaining capital expenditure 11 19
================================ ===== =====
South Africa Energy Coal (100% share)
Volumes
South Africa Energy Coal saleable production decreased by 9% (or 2.3Mt) to 22.7Mt in FY20 with the operation closing loss-making pits in H1 FY20 to maximise margins, before COVID-19 restrictions further impacted activity during the June 2020 quarter.
Subject to a number of material conditions(13) being satisfied, the divestment of South Africa Energy Coal is on-track for completion in H1 FY21. Accordingly, guidance is only provided for H1 FY21 with saleable production expected to range between 10.5 and 12.5Mt as we continue to adjust volumes to maximise margins.
Operating costs
Operating unit costs increased by 5% in FY20 to US$42/t as the impact of lower sales volumes and costs to support the Klipspruit dragline's return to full utilisation, more than offset savings from reduced activity in loss-making pits and a weaker South African rand.
We expect H1 FY21 Operating unit costs to decrease by up to 14% to between US$36/t and US$39/t reflecting our intent to adjust volumes to maximise margins and a weaker South African rand. Exchange rate and price assumptions for FY21 Operating unit cost guidance are detailed on page 26, footnote 24.
Financial performance
Underlying EBIT decreased by US$109M in FY20 to a loss of US$155M as lower average export realised prices (-US$156M), lower sales volumes (-US$104M), costs to support the increase in activity at Klipspruit (-US$49M) and inventory movements (-US$45M) more than offset savings from the closure of loss-making pits at the Wolvekrans-Middelburg Complex (WMC) (+US$90M), higher average domestic realised prices (+US$78M) and a weaker South African rand (+US$67M).
Capital expenditure
Sustaining capital expenditure decreased by US$48M in FY20 to US$42M as we deferred expenditure at the WMC and reduced activity at Klipspruit following the completion of work to recover from the dragline outage in FY19. Sustaining capital expenditure of US$40M is expected in H1 FY21 as investment in new mining areas returns to typical rates .
We also invested US$122M in Major project capital expenditure in FY20 with a further US$24M expected in H1 FY21 as we progress the KPSX project towards completion.
FY20 FY19
South32 share
Energy coal production (kt) 22,672 24,979
======================================= ======= =======
Domestic sales (kt) 12,638 15,035
======================================= ======= =======
Export sales (kt) 9,715 9,875
======================================= ======= =======
Realised domestic sales price (US$/t) 25 24
======================================= ======= =======
Realised export sales price (US$/t) 53 69
======================================= ======= =======
Operating unit cost (US$/t) 42 40
======================================= ======= =======
South32 share (US$M) FY20 FY19
Revenue(29) 822 1,037
==================================== ====== =======
Underlying EBITDA (108) 42
==================================== ====== =======
Underlying EBIT (155) (46)
==================================== ====== =======
Net operating assets/(liabilities) (365) (373)
==================================== ====== =======
Capital expenditure 164 213
==================================== ====== =======
Major 122 123
==================================== ====== =======
Sustaining 42 90
==================================== ====== =======
Illawarra Metallurgical Coal (100% share)
Volumes
Illawarra Metallurgical Coal saleable production increased by 5% (or 359kt) to 7.0Mt in FY20 as the Dendrobium and Appin longwalls continued to perform strongly, with the operation returning to a three longwall configuration in the June 2020 quarter.
Notwithstanding the strong trend in longwall performance, we have lowered FY21 production guidance by 4% to 7.7Mt as Appin's dual longwall operation is optimised for capital, labour and equipment productivity to maximise value, rather than volume.
Saleable coal production is expected to decline to 7.3Mt in FY22, with metallurgical coal production largely unchanged, and lower value energy coal volumes expected to decline with an extra longwall move at Dendrobium, before normalising in FY23.
Operating costs
Operating unit costs decreased by 1% in FY20 to US$93/t as the benefit of increased sales volumes and a weaker Australian dollar were partially offset by a drawdown of finished goods and run of mine inventory.
We expect FY21 Operating unit costs to decrease by 10 % to US$ 84 /t with higher volumes and an associated increase in productivity, partially offset by a stronger Australian dollar. Exchange rate and price assumptions for FY21 Operating unit cost guidance are detailed on page 26, footnote 24.
Financial performance
Underlying EBIT decreased by US$307M in FY20 to US$52M as lower average realised prices (-US$385M), a drawdown of inventory (-US$104M) and lower other income (-US$31M) were partially offset by stronger sales volumes (+US$174M), a weaker Australian dollar (+US$32M), the benefit of coal wash diversion (+US$8M) and lower spend on consultants (+US$8M).
Capital expenditure
Sustaining capital expenditure increased by US$52M in FY20 to US$185M as we invested in infrastructure improvements and increased our underground development rates at Appin, ahead of the return to a three longwall configuration. Sustaining capital expenditure is expected to decrease by US$ 35 M in FY21 to US$150M as we lower the level of spend on underground development to US$78M (FY20: US$94M) and other sustaining expenditure returns to typical levels following the substantial investment in prior periods.
We also invested US$14M in FY20 to progress the feasibility study for the DND project . While still subject to regulatory approvals, the project has the potential to extend the life of Dendrobium to approximately FY36. With a final investment decision anticipated in H2 FY21, Major capital expenditure is expected to increase by US$50M to US$64M with pre-commitment spend on mine development and ventilation critical path works to commence in FY21.
FY20 FY19
South32 share
Metallurgical coal production (kt) 5,549 5,350
================================================= ====== ======
Energy coal production (kt) 1,457 1,297
================================================= ====== ======
Metallurgical coal sales (kt) 5,842 5,044
================================================= ====== ======
Energy coal sales (kt) 1,442 1,262
================================================= ====== ======
Realised metallurgical coal sales price (US$/t) 145 209
================================================= ====== ======
Realised energy coal sales price (US$/t) 51 66
================================================= ====== ======
Operating unit cost (US$/t) 93 94
================================================= ====== ======
South32 share (US$M) FY20 FY19
Revenue(30) 924 1,135
========================= ====== ======
Underlying EBITDA 243 542
========================= ====== ======
Underlying EBIT 52 359
========================= ====== ======
Net operating assets 1,356 1,410
========================= ====== ======
Capital expenditure 199 138
========================= ====== ======
Major 14 5
========================= ====== ======
Sustaining 185 133
========================= ====== ======
Exploration expenditure 16 9
========================= ====== ======
Exploration expensed 7 3
========================= ====== ======
Australia Manganese (60% share)
Volumes
Australia Manganese saleable ore production increased by 4% (or 121kwmt) to a record 3,470kwmt in FY20, with the operation returning to full production following the removal of temporary roster changes in response to COVID-19 restrictions during the June 2020 quarter. Manganese alloy saleable production decreased by 29% (or 44kt) to 110kt in FY20 as one of the four furnaces at TEMCO remained offline.
Ore production guidance of 3,500kwmt in FY21 and 3,500kwmt in FY22 assumes we continue to operate the low cost PC02 circuit above nameplate capacity, supporting secondary product volumes.
Operating costs
FOB manganese ore Operating unit costs decreased by 3% in FY20 to US$1.55/dmtu as equipment productivity and the optimisation of volumes from our low cost PC02 circuit mitigated a further increase in strip ratio (FY20: 5.4, FY19: 4.5).
We expect FY21 Operating unit costs for manganese ore to decrease 5% to US$ 1. 48/dmtu with an expected improvement in yield due to favourable ore characteristics and lower contractor and labour spend, partially offset by a stronger Australian dollar. Exchange rate and price assumptions for FY21 Operating unit cost guidance are detailed on page 26, footnote 24.
Manganese alloy Operating unit costs decreased by 4% to US$905/t in FY20 as the operation benefitted from lower raw material input costs. On 13 August 2020 we reached agreement to divest our shareholding in TEMCO.
Financial performance
Underlying EBIT decreased by 49% (or US$310M) in FY20 to US$328M as lower realised prices (-US$297M), lower alloy sales volumes (-US$40M) and one-off costs incurred to respond to temporary COVID-19 restrictions (-US$7M) were partially offset by lower energy, coke and freight costs (+US$22M).
Our average realised price for external sales of Australian ore was a 7% discount to the high grade 44% manganese lump ore index(31) in FY20 as we responded to market demand with an increased contribution of PC02 fines (FY20: 12%, FY19: 10%) and other secondary products.
Capital expenditure
Sustaining capital expenditure increased by US$2M in FY20 to US$67M as we continue to invest in additional tailings storage capacity and complete site infrastructure upgrades at GEMCO. Sustaining capital expenditure is expected to decrease to US$58M in FY21 as we complete upgrade work and the divestment of TEMCO during the year.
FY20 FY19
South32 share
Manganese ore production (kwmt) 3,470 3,349
===================================================================== ====== =======
Manganese alloy production (kt) 110 154
===================================================================== ====== =======
Manganese ore sales (kwmt) 3,440 3,438
====== =======
External customers 3,300 3,094
===================================================================== ====== =======
TEMCO 140 344
====== =======
Manganese alloy sales (kt) 116 151
====== =======
Realised external manganese ore sales price (US$/dmtu, FOB)(32)(33) 4.39 6.35
===================================================================== ====== =======
Realised manganese alloy sales price (US$/t)(32) 940 1,311
====== =======
Ore operating unit cost (US$/dmtu)(33)(34) 1.55 1.59
====== =======
Alloy operating unit cost (US$/t)(34) 905 947
===================================================================== ====== =======
South32 share (US$M) FY20 FY19
Revenue(35) 763 1,095
==================================== ===== =======
Manganese ore 668 930
==================================== ===== =======
Manganese alloy 109 198
==================================== ===== =======
Intra-segment elimination (14) (33)
==================================== ===== =======
Underlying EBITDA 400 698
==================================== ===== =======
Manganese ore 396 643
==================================== ===== =======
Manganese alloy 4 55
==================================== ===== =======
Underlying EBIT 328 638
==================================== ===== =======
Manganese ore 329 588
==================================== ===== =======
Manganese alloy (1) 50
==================================== ===== =======
Net operating assets/(liabilities) 242 316
==================================== ===== =======
Manganese ore 293 303
==================================== ===== =======
Manganese alloy (51) 13
==================================== ===== =======
Sustaining capital expenditure 67 65
==================================== ===== -------
Exploration expenditure 2 2
==================================== ===== =======
Exploration expensed 1 1
==================================== ===== =======
South Africa Manganese (Ore 44.4% share, Alloy 60% share)
Volumes
South Africa Manganese saleable ore production decreased by 14% (or 309kwmt) to 1,878kwmt in FY20 as we responded to weaker market conditions during H1 FY20, reducing our use of higher cost trucking and undertaking an extended maintenance shut at our underground Wessels mine. Both the open pit Mamatwan and underground Wessels mines were placed on temporary care and maintenance during the nationwide COVID-19 lockdown in the June 2020 quarter, before returning to full capacity when lockdown restrictions were lifted.
Manganese alloy saleable production decreased by 23% (or 16kt) to 53kt in FY20 as we made the decision to place the Metalloys smelter on care and maintenance.
Ore production guidance of 2, 000kwmt in FY21 assumes market conditions remain attractive for the sale of lower quality fines product and the use of higher cost trucking. Ore production guidance for FY22 is not provided with volumes from the operation to be optimised subject to market demand.
Operating costs
FOB manganese ore Operating unit costs decreased by 16% in FY20 to US$2.25/dmtu as a weaker South African rand, lower price-linked royalties and the one-off benefit from settling a historical royalty claim more than offset lower sales volumes.
We expect FY21 Operating unit costs for manganese ore to remain unchanged at US$ 2.25 /dmtu with higher volumes and a weaker South African rand expected to offset the prior period's one-off benefit and a planned increase in trucking volumes. Exchange rate and price assumptions for FY21 Operating unit cost guidance are detailed on page 26, footnote 24.
Manganese alloy Operating unit costs increased by 16% in FY20 to US$1,364/t in-line with the decline in sales volumes.
Financial performance
Underlying EBIT decreased by 71% (or US$134M) in FY20 to US$54M as lower average realised prices (-US$130M) and reduced sales volumes (-US$81M), were partially offset by a weaker South African rand (+US$20M), lower price-linked royalties (+US$16M), and reduced activity delivering lower spend on the opportunistic trucking of ore (+US$16M), contractors (+US$10M) and maintenance (+US$5M).
Our average realised price for external sales of South African ore was a 6% discount to the medium grade 37% manganese lump ore index (FOB Port Elizabeth, South Africa)(36) in FY20 as the contribution of our lower quality fines product increased (FY20: 13%, FY19: 6%) in response to market conditions throughout the year.
Capital expenditure
Sustaining capital expenditure decreased by US$7M in FY20 to US$23M and is expected to decline further to US$17M in FY21 with the Metalloys smelter placed on care and maintenance.
FY20 FY19
South32 share
Manganese ore production (kwmt) 1,878 2,187
===================================================================== ====== ======
Manganese alloy production (kt) 53 69
===================================================================== ====== ======
Manganese ore sales (kwmt) 1,865 2,113
===================================================================== ====== ======
External customers 1,772 1,990
===================================================================== ====== ======
Metalloys 93 123
===================================================================== ====== ======
Manganese alloy sales (kt) 55 73
===================================================================== ====== ======
Realised external manganese ore sales price (US$/dmtu, FOB)(37)(38) 3.76 5.57
===================================================================== ====== ======
Realised manganese alloy sales price (US$/t)(37) 909 1,068 ===================================================================== ====== ====== Ore operating unit cost (US$/dmtu)(38)(39) 2.25 2.69 ===================================================================== ====== ====== Alloy operating unit cost (US$/t)(39) 1,364 1,178 ===================================================================== ====== ====== South32 share (US$M) FY20 FY19 Revenue(40) 342 553 ================================ ===== ===== Manganese ore (41) 305 488 ================================ ===== ===== Manganese alloy 50 78 ================================ ===== ===== Intra-segment elimination (13) (13) ================================ ===== ===== Underlying EBITDA 81 215 ================================ ===== ===== Manganese ore (41) 106 223 ================================ ===== ===== Manganese alloy (25) (8) ================================ ===== ===== Underlying EBIT 54 188 ================================ ===== ===== Manganese ore (41) 88 205 ================================ ===== ===== Manganese alloy (34) (17) ================================ ===== ===== Net operating assets 237 312 ================================ ===== ===== Manganese ore (41) 281 253 ================================ ===== ===== Manganese alloy (44) 59 ================================ ===== ===== Sustaining capital expenditure 23 30 ================================ ===== ===== Exploration expenditure 1 - ================================ ===== ===== Exploration expensed 1 - ================================ ===== =====
Cerro Matoso (99.9% share)
Volumes
Cerro Matoso payable nickel production decreased by 1% (or 0.5kt) to 40.6kt in FY20 as the operation achieved a higher rate of plant utilisation and throughput, partially offsetting planned lower ore feed grades.
FY21 production is expected to decline 17% to 33.5kt, before increasing by 15% to 38.6kt in FY22 as the operation undertakes a planned major furnace refurbishment in the December 2020 quarter. The refurbishment is expected to broaden the operating window of the furnace, resulting in higher ore to kiln volumes.
Operating costs
Operating unit costs decreased by 8% in FY20 to US$3.69/lb as a result of a weaker Colombian peso and the realisation of ongoing benefits from our energy procurement and utilisation approach.
We expect FY21 Operating unit costs to increase 8% to US$ 3.97 /lb with the impact to volumes from the furnace refurbishment, partially offset by a weaker Colombian peso, lower price-linked royalties and the continued benefit of our energy optimisation strategy. Exchange rate and price assumptions for FY21 Operating unit cost guidance are detailed on page 26, footnote 24.
Financial performance
Underlying EBIT increased by US$67M in FY20 to US$107M with an 8% rise in the average realised nickel price (+US$38M), a weaker Colombian peso (+$27M) and lower electricity costs (+US$9M) partially offset by lower sales volumes (-US$8M).
Capital expenditure
Sustaining capital expenditure increased by US$7M in FY20 to US$39M as long lead items were purchased for the furnace refurbishment. A modest decrease to US $36M is expected in FY21 with the refurbishment scheduled for completion in the December 2020 quarter.
FY20 FY19
South32 share
Ore mined (kwmt) 2,839 2,278
========================================== ====== ======
Ore processed (kdmt) 2,761 2,738
========================================== ====== ======
Ore grade processed (%, Ni) 1.65 1.66
========================================== ====== ======
Payable nickel production (kt) 40.6 41.1
========================================== ====== ======
Payable nickel sales (kt) 40.6 41.2
========================================== ====== ======
Realised nickel sales price (US$/lb)(42) 5.80 5.38
========================================== ====== ======
Operating unit cost (US$/lb) 3.69 3.99
------------------------------------------ ------ ------
Operating unit cost (US$/t)(43 () 120 132
========================================== ====== ======
South32 share (US$M) FY20 FY19
Revenue 519 489
================================ ===== =====
Underlying EBITDA 189 127
================================ ===== =====
Underlying EBIT 107 40
================================ ===== =====
Net operating assets 425 479
================================ ===== =====
Sustaining capital expenditure 39 32
================================ ===== =====
Exploration expenditure 4 10
================================ ===== =====
Exploration expensed 2 8
================================ ===== =====
Cannington (100% share)
Volumes
Cannington payable zinc equivalent production(44) increased by 9% (or 19.8kt) to 238.0kt in FY20 as planned higher zinc grades more than offset lower silver and lead grades, and the operation drew down run of mine stocks to a normalised level following the Queensland flood event in FY19. The drawdown and further improvement in underground mine performance supported the realisation of efficiencies in mill throughput, resulting in a 14% lift in ore processed during FY20.
We have increased our payable zinc equivalent production(23) guidance for Cannington by 10% in FY21 ( 11.8 Moz for silver, 113.9 kt for lead and 60.7 kt for zinc) as mill throughput continues to benefit from improved performance in the underground mine and higher planned grades. Production is then expected to decline by 9 % in FY22 ( 10.5 Moz for silver, 103.0 kt for lead and 58.8 kt for zinc) as grade varies in accordance with the mine plan.
Operating costs
Operating unit costs decreased by 8% to US$113/t in FY20 as the benefits of a weaker Australian dollar, increased mill throughput and savings from the insourcing of activity more than offset inventory movements.
We expect FY21 Operating unit costs to decrease by 2 % to US$ 111 /t as the insourcing of activity and continued benefit of lower renegotiated energy costs are partially offset by a stronger Australian dollar and lower mill throughput. Exchange rate and price assumptions for FY21 Operating unit cost guidance are detailed on page 26, footnote 24.
Financial performance
Underlying EBIT increased by 1% (or US$1M) in FY20 to US$105M as higher sales volumes (+US$45M), a weaker Australian dollar (+US$16M), lower freight expenditure (+US$5M) and a reduction in contractor costs (+US$5M) offset lower average realised prices (-US$36M) and inventory movements from higher sales and the drawdown of run of mine stocks (-US$43M).
Capital expenditure
Sustaining capital expenditure decreased by US$3M in FY20 to US$52M and is expected to decrease to US$39M in FY21 as we lower our rate of investment in underground development and additional tailings storage capacity.
South32 share FY20 FY19 Ore mined (kwmt) 2,792 2,725 ============================================= ======= ======== Ore processed (kdmt) 2,839 2,495 ============================================= ======= ======== Ore grade processed (g/t, Ag) 156 184 ============================================= ======= ======== Ore grade processed (%, Pb) 4.7 5.0 ============================================= ======= ======== Ore grade processed (%, Zn) 3.3 3.0 ============================================= ======= ======== Payable zinc equivalent production (kt)(44) 238.0 218.2 ============================================= ======= ======== Payable silver production (koz) 11,792 12,201 ============================================= ======= ======== Payable lead production (kt) 110.4 101.4 ============================================= ======= ======== Payable zinc production (kt) 66.7 51.6 ============================================= ======= ======== Payable silver sales (koz) 12,109 13,034 ============================================= ======= ======== Payable lead sales (kt) 108.1 101.5 ============================================= ======= ======== Payable zinc sales (kt) 68.7 47.6 ============================================= ======= ======== Realised silver sales price (US$/oz) 16.5 14.4 ============================================= ======= ======== Realised lead sales price (US$/t) 1,648 1,754 ============================================= ======= ======== Realised zinc sales price (US$/t) 1,416 2,122 ============================================= ======= ======== Operating unit cost (US$/t ore processed)(45) 113 123 ============================================= ======= ======== South32 share (US$M) FY20 FY19 Revenue 476 467 ================================ ===== ===== Underlying EBITDA 155 161
================================ ===== ===== Underlying EBIT 105 104 ================================ ===== ===== Net operating assets 214 243 ================================ ===== ===== Sustaining capital expenditure 52 55 ================================ ===== ===== Exploration expenditure 4 4 ================================ ===== ===== Exploration expensed 4 3 ================================ ===== =====
Notes
(1) Net tangible assets as at 30 June 2020 includes right-of-use assets, in accordance with AASB 16 Leases, with a net book value of US$702M
(30 June 2019: Net tangible assets includes assets held under finance leases, in accordance with the former AASB 117 Leases, with a net book value of US$612M).
(2) Revenue includes revenue from third party products and services.
(3) FY20 basic earnings per share is calculated as Profit/(loss) after tax divided by the weighted average number of shares for FY20 ( 4,892 million).
FY20 basic Underlying earnings per share is calculated as Underlying earnings divided by the weighted average number of shares for FY20.
FY19 basic earnings per share is calculated as Profit/(loss) after tax divided by the weighted average number of shares for FY19 (5,048 million).
FY19 basic Underlying earnings per share is calculated as Underlying earnings divided by the weighted average number of shares for FY19.
(4) FY20 ordinary dividends per share is calculated as H1 FY20 ordinary dividend announced (US$54M) divided by the number of shares on issue at 31 December 2019 (4,900 million) plus H2 FY20 ordinary dividend announced (US$48M) divided by the number of shares on issue at 30 June 2020 (4,846 million).
(5) FY20 special dividends per share is calculated as H1 FY20 special dividend announced (US$54M) divided by the number of shares on issue at 31 December 2019 (4,900 million).
(6) Underlying EBIT is profit before net finance costs, tax and any earnings adjustment items, including impairments. Underlying EBIT is reported inclusive of South32's share of net finance costs and tax of equity accounted investments. Underlying EBITDA is Underlying EBIT, before depreciation and amortisation. Underlying earnings is Profit/(loss) after tax and earnings adjustment items. Underlying earnings is the key measure that South32 uses to assess the performance of the South32 Group, make decisions on the allocation of resources and assess senior management's performance. In addition, the performance of each of the South32 operations and operational management is assessed based on Underlying EBIT. In order to calculate Underlying earnings, Underlying EBIT and Underlying EBITDA, the following items are adjusted as applicable each period, irrespective of materiality:
-- Exchange rate (gains)/losses on restatement of monetary items; -- Impairment losses/(reversals); -- Net (gains)/losses on disposal and consolidation of interests in businesses;
-- Gains/losses on non-trading derivative instruments and other investments measured at fair value;
-- Major corporate restructures; and -- Earnings adjustments included in profit/(loss) of equity accounted investments.
In addition, items that do not reflect the underlying operations of South32, and are individually, or in combination with other related earnings adjustments, significant to the financial statements, are excluded to determine Underlying earnings. When applicable, significant items are detailed in the Financial Information.
(7) Comprises Underlying EBITDA excluding third party product EBITDA, divided by revenue excluding third party product revenue. Also referred to as operating margin.
(8) Comprises Underlying EBIT excluding third party product EBIT, divided by revenue excluding third party product revenue.
(9) Return on invested capital (ROIC) is a key measure that South32 uses to assess performance. ROIC is calculated as Underlying EBIT less the discount on rehabilitation provisions included in net finance cost, tax effected by the Group's Underlying effective tax rate (ETR) including our manganese equity accounted investments (EAI) on a proportional consolidated basis, divided by the sum of inventories and fixed assets (excluding any rehabilitation asset, the impairment of South Africa Energy Coal and our equity accounted manganese alloy smelters, and unproductive capital associated with Major projects). Our manganese EAI are included in the calculation on a proportional consolidation basis.
(10) To ensure that incident classification definitions are applied uniformly across our workforce, we have adopted the Occupational Safety and Health Administration of the United States Department of Labor (OSHA) guidelines for the recording and reporting of occupational injuries and illnesses.
(11) Total Recordable Injury Frequency (TRIF): The sum of (fatalities + lost-time cases + restricted work cases + medical treatment cases) x 1,000,000
÷ actual hours worked, for employees and contractors. Stated in units of per million hours worked.
(12) Underlying ETR is Underlying income tax expense, excluding royalty related tax, divided by Underlying profit before tax; both the numerator and denominator exclude equity accounted investments.
(13) Refer to the market announcement "Agreement to Divest South Africa Energy Coal" dated 6 November 2019.
(14) Refer to the media release "Agreement to Divest Tasmanian Electro Metallurgical Company" dated 13 August 2020.
(15) Cost base excluding third party product cost.
(16) Sales price variance reflects the revenue impact of changes in commodity prices, based on the current period's sales volume. Price-linked costs variance reflects the change in royalties together with the change in input costs driven by changes in commodity prices or market traded consumables. Foreign exchange reflects the impact of exchange rate movements on local currency denominated costs and sales. Volume variance reflects the revenue impact of sales volume changes, based on the comparative period's sales prices. Controllable costs variance represents the impact from changes in the Group's controllable local currency cost base, including the variable cost impact of production volume changes on expenditure, and period-on-period movements in inventories. The controllable cost variance excludes earnings adjustments including significant items.
(17) Underlying net finance cost and Underlying income tax expense are actual FY20 results, not year-on-year variances.
(18) South32's ownership share of operations are presented as follows: Worsley Alumina (86% share), Hillside Aluminium (100%), Mozal Aluminium (47.1% share), Brazil Alumina (Alumina 36% share, Aluminium 40% share), South Africa Energy Coal (100%), Illawarra Metallurgical Coal (100%), Australia Manganese (60% share), South Africa Manganese (60% share), Cerro Matoso (99.9% share), Cannington (100%), Hermosa (100%) and Eagle Downs Metallurgical Coal (50% share).
(19) Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes. Operating cost is Revenue less Underlying EBITDA excluding third party sales. Additional manganese disclosures are included in footnotes 33 and 38.
(20) The primary corporate tax rates applicable to the Group for FY20 include: Australia 30%, South Africa 28%, Colombia 33%, Mozambique 0% and Brazil 34%. The Colombian corporate tax rate is 32% in CY20 and will decrease on an annual basis by a percent each year, stabilising at 30% from 1 January 2022. The Mozambique operations are subject to a royalty on revenues instead of income tax.
(21) FY20 net distributions from our manganese EAI comprise dividends and capital returns (US$349M) and a net drawdown in shareholder loans (-US$36M).
(22) Total capital expenditure comprises Capital expenditure, evaluation expenditure, the purchase of intangibles and capitalised exploration expenditure. Capital expenditure comprises Sustaining capital expenditure and Major projects capital expenditure. Sustaining capital expenditure comprises Stay-in-business (SIB), Minor discretionary and Deferred stripping (including underground development) capital expenditure.
(23) Payable zinc equivalent (kt) was calculated by aggregating revenues from payable silver, lead and zinc, and dividing the total Revenue by the price of zinc. FY20 realised prices for zinc (US$ 1,416 /t), lead (US$ 1,648 /t) and silver (US$ 16.5 /oz) have been used for FY20, FY21e and FY22e.
(24) FY21 Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY21, including: an alumina price of US$250/t; an average blended coal price of US$103/t for Illawarra Metallurgical Coal; a manganese ore price of US$4.83/dmtu for 44% manganese product; a nickel price of US$5.78/lb; a thermal coal price of US$56/t (API4) for South Africa Energy Coal; a silver price of US$18.20/troy oz; a lead price of US$1,788/t (gross of treatment and refining charges); a zinc price of US$2,102/t (gross of treatment and refining charges); an AUD:USD exchange rate of 0.69; a USD:ZAR exchange rate of 17.68; a USD:COP exchange rate of 3,665; and a reference price for caustic soda; all of which reflected forward markets as at June 2020 or our internal expectations.
(25) FY20 Third party products and services sold comprise US$42M for aluminium, US$14M for alumina, US$276M for coal, US$165M for freight services, US$86M for aluminium raw materials and nil for manganese. Underlying EBIT on third party products and services comprise US$2M for aluminium, (US$4M) for alumina, (US$15M) for coal, (US$2M) for freight services, US$2M for aluminium raw materials and nil for manganese. FY19 Third party products and services sold comprise US$57M for aluminium, US$2M for alumina, US$392M for coal, US$239M for freight services, US$116M for aluminium raw materials and US$9M for manganese. Underlying EBIT on third party products and services comprise nil for aluminium, US$2M for alumina, US$9M for coal, (US$5M) for freight services, (US$1M) for aluminium raw materials and nil for manganese.
(26) The quarterly sales volume weighted average of the Platts Alumina Index (FOB Australia) on the basis of a one month lag to published pricing (Month minus one or "M-1") was US$283/t in FY20.
(27) The information in this report that relates to Mineral Resource estimates for MRN was declared as part of South32's Annual Resource and Reserve declaration in the Annual Report 2019 (www.south32.net) issued on 5 September 2019 and prepared by M A H Monteiro in accordance with the requirements of the JORC Code. South32 confirms that it is not aware of any new information or data that materially affects the information included in the original announcement. All material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. South32 confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.
(28) Presented on a 100% basis. (29) South Africa Energy Coal Revenue includes domestic and export sales Revenue.
(30) Illawarra Metallurgical Coal Revenue includes metallurgical coal and energy coal sales Revenue.
(31) The quarterly sales volume weighted average of the Metal Bulletin 44% manganese lump ore index (CIF Tianjin, China) on the basis of a one month lag to published pricing (Month minus one or "M-1") was US$5.04/dmtu in FY20.
(32) Realised ore prices are calculated as external sales Revenue less freight and marketing costs, divided by external sales volume. Realised alloy prices are calculated as sales Revenue, including sinter Revenue, divided by alloy sales volume. Ore converted to sinter and alloy, and sold externally, is eliminated as an intracompany transaction.
(33) Manganese Australia FY20 average manganese content of external ore sales was 44.6% on a dry basis (FY19: 45.9%). 95% of FY20 external manganese ore sales (FY19: 95%) were completed on a CIF basis. FY20 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of US$46M (FY19: US$47M), consistent with our FOB cost guidance.
(34) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume. Alloy operating unit cost is Revenue less Underlying EBITDA divided by alloy sales volumes and includes costs associated with sinter sold externally.
(35) Revenues associated with sales from GEMCO to TEMCO are eliminated as part of the consolidation.
(36) The quarterly sales volume weighted average of the Metal Bulletin 37% manganese lump ore index (FOB Port Elizabeth, South Africa) on the basis of a one month lag to published pricing (Month minus one or "M-1") was US$3.98/dmtu in FY20.
(37) Volumes and prices do not include any third party trading that may be undertaken independently of equity production. Realised ore prices are calculated as external sales Revenue less freight and marketing costs, divided by external sales volume. Realised alloy prices are calculated as sales Revenue, divided by alloy sales volumes. Ore converted to sinter and alloy, and sold externally, is eliminated as an intracompany transaction. Manganese ore sales are grossed-up to reflect a 60% accounting effective interest.
(38) Manganese South Africa FY20 average manganese content of external ore sales was 40.1% on a dry basis (FY19: 40.5%). 72% of FY20 external manganese ore sales (FY19: 74%) were completed on a CIF basis. FY20 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of US$33M (FY19: US$40M), consistent with our FOB cost guidance.
(39) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume. Alloy operating unit cost is Revenue less Underlying EBITDA divided by alloy sales volumes.
(40) Revenues associated with sales from Hotazel Manganese Mines (HMM) to Metalloys are eliminated as part of the consolidation.
(41) Consistent with the presentation of South32's segment information, South Africa Manganese ore production and sales have been reported at 60%. South32 has a 44.4% ownership interest in HMM. 26% of HMM is owned by a B-BBEE consortium comprising Ntsimbintle Mining (9%), NCAB Resources (7%), Iziko Mining (5%) and HMM Education Trust (5%). The interest owned by NCAB Resources, Iziko Mining and HMM Education Trust were acquired using vendor finance with the loans repayable via distributions attributable to these parties, pro rata to their share in HMM. Until these loans are repaid, South32's interest in HMM is accounted at 54.6%.
(42) Cerro Matoso realised nickel sales price is inclusive of by-products. Realised sales price is calculated as sales Revenue divided by sales volume.
(43) Cerro Matoso Operating unit cost per tonne is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact operating unit costs as related marketing costs may change.
(44) Payable zinc equivalent (kt) was calculated by aggregating Revenue from payable silver, lead and zinc, and dividing the total Revenue by the price of zinc. FY19 realised prices for zinc (US$2,122/t), lead (US$1,754/t) and silver (US$14.4/oz) have been used for FY19 and FY20.
(45) Cannington Operating unit cost is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact operating unit costs as related marketing costs may change.
Figures in Italics indicate that an adjustment has been made since the figures were previously reported. The denotation (e) refers to an estimate or forecast year.
The following abbreviations may be used throughout this report: US$ million (US$M); US$ billion (US$B); financial year (FY20); calendar year (CY); grams per tonne (g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per annum (ktpa); million tonnes (Mt); million tonnes per annum (Mtpa); ounces (oz); thousand ounces (koz); million ounces (Moz); thousand wet metric tonnes (kwmt); million wet metric tonnes (Mwmt); million wet metric tonnes per annum (Mwmt pa); thousand dry metric tonnes (kdmt); dry metric tonne unit (dmtu); pound (lb); megawatt (MW); Australian Securities Exchange (ASX); London Stock Exchange (LSE); Johannesburg Stock Exchange (JSE); equity accounted investments (EAI); and American Depositary Receipts (ADR).
South32 Financial Information
For the year ended 30 June 2020
BASIS OF PREPARATION
The financial information included in this document for the year ended 30 June 2020 is unaudited. The financial information does not constitute the South32 Group's (the Group) full financial statements for the year ended 30 June 2020, which will be approved by the Board, reported on by the auditors, and filed with the Australian Securities and Investments Commission. The Group's full financial statements will be prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.
The financial information set out on pages 29 to 40 for the year ended 30 June 2020 has been prepared on the basis of accounting policies and methods of computation consistent with those applied in the 30 June 2019 financial statements contained within the Annual Report of the Group, except for the adoption of AASB 16 Leases which became effective from 1 July 2019 without restatement of prior years. The impact of adopting AASB 16 has been disclosed in the Group's 31 December 2019 half year financial statements, with transitional adjustments of US$135 million and US$140 million recognised as additional right-of-use assets and lease liabilities respectively on the Consolidated Balance Sheet.
As required, and unless otherwise stated, comparative financial information for the Group has been presented.
All amounts are expressed in US dollars unless otherwise stated. The Group's presentation currency (and the functional currency of the majority of its operations) is US dollars as this is the principal currency of the economic environment in which it operates.
Amounts in this financial information have, unless otherwise indicated, been rounded to the nearest million dollars (US$M or US$ million).
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2020
US$M FY20 FY19
Revenue:
Group production 5,492 6,468
Third party products and services 583 806
------------------------------------------------------------------------------------ -------- --------
6,075 7,274
Other income 198 245
Expenses excluding net finance cost (6,112) (7,099)
Share of profit/(loss) of equity accounted investments 100 467
Profit/(loss) 261 887
------------------------------------------------------------------------------------ -------- --------
Comprising:
Group production 278 882
Third party products and services (17) 5
------------------------------------------------------------------------------------ -------- --------
Profit/(loss) 261 887
------------------------------------------------------------------------------------ -------- --------
Finance expenses (183) (151)
Finance income 44 67
Net finance cost (139) (84)
------------------------------------------------------------------------------------ -------- --------
Profit/(loss) before tax 122 803
Income tax (expense)/benefit (187) (414)
Profit/(loss) after tax (65) 389
------------------------------------------------------------------------------------ -------- --------
Attributable to:
Equity holders of South32 Limited (65) 389
Profit/(loss) for the year attributable to the equity holders of South32 Limited:
Basic earnings per share (cents) (1.3) 7.7
Diluted earnings per share (cents) (1.3) 7.6
------------------------------------------------------------------------------------ -------- --------
The accompanying notes form part of this financial information.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2020
US$M FY20 FY19
Profit/(loss) for the year (65) 389
Other Comprehensive Income
Items that may be reclassified to the Consolidated Income Statement:
Cash flow hedges:
Transfer of net (gains)/losses recognised in equity - (5)
------------------------------------------------------------------------------------------------ ------ ------
Total items that may be reclassified to the Consolidated Income Statement - (5)
------------------------------------------------------------------------------------------------ ------ ------
Items not to be reclassified to the Consolidated Income Statement:
Investments in equity instruments designated as fair value through Other Comprehensive Income
(FVOCI):
Net fair value gains/(losses) (65) (26)
Tax benefit/(expense) 20 10
Equity accounted investments - share of Other Comprehensive Income/(loss), net of tax 21 66
Gains/(losses) on pension and medical schemes 2 (3)
Tax benefit/(expense) recognised within Other Comprehensive Income - 1
------------------------------------------------------------------------------------------------ ------ ------
Total items not to be reclassified to the Consolidated Income Statement (22) 48
------------------------------------------------------------------------------------------------ ------ ------
Total Other Comprehensive Income/(loss) (22) 43
------------------------------------------------------------------------------------------------ ------ ------
Total Comprehensive Income/(loss) (87) 432
------------------------------------------------------------------------------------------------ ------ ------
Attributable to:
Equity holders of South32 Limited (87) 432
------------------------------------------------------------------------------------------------ ------ ------
The accompanying notes form part of this financial information.
CONSOLIDATED BALANCE SHEET
as at 30 June 2020
FY20 FY19
ASSETS
Current assets
Cash and cash equivalents 1,315 1,408
Trade and other receivables 531 888
Other financial assets 19 108
Inventories 735 952
Current tax assets 27 7
Other 36 38
---------------------------------------------- -------- --------
Total current assets 2,663 3,401
---------------------------------------------- -------- --------
Non-current assets
Trade and other receivables 303 290
Other financial assets 172 272
Inventories 77 68
Property, plant and equipment 9,680 9,596
Intangible assets 248 233
Equity accounted investments 460 688
Deferred tax assets 123 155
Other 11 12
---------------------------------------------- -------- --------
Total non-current assets 11,074 11,314
---------------------------------------------- -------- --------
Total assets 13,737 14,715
---------------------------------------------- -------- --------
LIABILITIES
Current liabilities
Trade and other payables 627 880
Interest bearing liabilities 355 313
Other financial liabilities 1 -
Current tax payables 9 179
Provisions 274 312
Deferred income 5 4
---------------------------------------------- -------- --------
Total current liabilities 1,271 1,688
---------------------------------------------- -------- --------
Non-current liabilities
Trade and other payables 3 1
Interest bearing liabilities 662 591
Deferred tax liabilities 339 334
Provisions 1,899 1,925
Deferred income 1 8
Total non-current liabilities 2,904 2,859
---------------------------------------------- -------- --------
Total liabilities 4,175 4,547
---------------------------------------------- -------- --------
Net assets 9,562 10,168
---------------------------------------------- -------- --------
EQUITY
Share capital 13,943 14,212
Treasury shares (49) (105)
Reserves (3,566) (3,490)
Retained earnings/(accumulated losses) (765) (448)
---------------------------------------------- -------- --------
Total equity attributable to equity holders
of South32 Limited 9,563 10,169
Non-controlling interests (1) (1)
---------------------------------------------- -------- --------
Total equity 9,562 10,168
---------------------------------------------- -------- --------
The accompanying notes form part of this financial information.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2020
US$M FY20 FY19
Operating activities
Profit/(loss) before tax 122 803
Adjustments for:
Depreciation and amortisation expense 739 757
Impairments of property, plant and equipment - 504
Employee share awards expense 29 38
Net finance cost 139 84
Share of (profit)/loss of equity accounted
investments (100) (467)
(Gains)/losses on derivative instruments
and other investments measured at fair value 152 35
Other non-cash or non-operating items 7 1
Changes in assets and liabilities:
Trade and other receivables 367 6
Inventories 208 (58)
Trade and other payables (184) (13)
Provisions and other liabilities (104) (64)
------------------------------------------------------- -------- --------
Cash generated from operations 1,375 1,626
Interest received 44 71
Interest paid (69) (70)
Income tax (paid)/received (335) (346)
Dividends received 1 -
Dividends received from equity accounted investments 349 536
Net cash flows from operating activities 1,365 1,817
Investing activities
Purchases of property, plant and equipment (676) (652)
Exploration expenditure (61) (74)
Exploration expenditure expensed and included
in operating cash flows 28 46
Purchase of intangibles (36) (30)
Investment in financial assets (259) (411)
Acquisition of interest previously held by (3) -
non-controlling interests
Acquisition of subsidiaries and jointly controlled
entities, net of their cash (73) (1,507)
Cash outflows from investing activities (1,080) (2,628)
Proceeds from sale of property, plant and
equipment and intangibles 1 5
Proceeds from financial assets 206 305
Distribution from equity accounted investments - 6
Net cash flows from investing activities (873) (2,312)
Financing activities
Proceeds from interest bearing liabilities 31 3
Repayment of interest bearing liabilities (55) (37)
Purchase of shares by South32 Limited Employee
Incentive Plan Trusts (ESOP Trusts) (23) (99)
Share buy-back (269) (281)
Dividends paid (246) (657)
------------------------------------------------------- -------- --------
Net cash flows from financing activities (562) (1,071)
Net increase/(decrease) in cash and cash equivalents (70) (1,566)
Cash and cash equivalents, net of overdrafts,
at the beginning of the financial year 1,406 2,970
Foreign currency exchange rate changes on
cash and cash equivalents (21) 2
Cash and cash equivalents, net of overdrafts,
at the end of the financial year 1,315 1,406
------------------------------------------------------- -------- --------
The accompanying notes form part of this financial information.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2020
Attributable to equity holders of South32 Limited
US$M Employee Retained
Financial share earnings/
Share Treasury assets awards Other (accumulated Non-controlling Total
capital shares reserve(1) reserve(2) reserves(3) losses) Total interests equity
Balance as at 1
July 2019 14,212 (105) (9) 109 (3,590) (448) 10,169 (1) 10,168
Profit/(loss)
for the year - - - - - (65) (65) - (65)
Other
Comprehensive
Income/(loss) - - (45) - - 23 (22) - (22)
----------------- -------- --------- ----------- ----------- ------------ ------------- ------- ---------------- ---------
Total
Comprehensive
Income/(loss) - - (45) - - (42) (87) - (87)
----------------- -------- --------- ----------- ----------- ------------ ------------- ------- ---------------- ---------
Transactions
with owners:
Acquisition of
interest
previously
held by
non-controlling
interests - - - - (3) - (3) - (3)
Dividends - - - - - (246) (246) - (246)
Shares bought
back and
cancelled (269) - - - - - (269) - (269)
Accrued employee
entitlements
for unvested
awards, net of
tax - - - 21 - - 21 - 21
Employee share
awards
forfeited,
net of tax - - - (10) - - (10) - (10)
Purchase of
shares by ESOP
Trusts - (23) - - - - (23) - (23)
Employee share
awards vested
and waived - 79 - (39) - (42) (2) - (2)
Tax recognised
for employee
awards vested - - - - - 13 13 - 13
Balance as at 30
June 2020 13,943 (49) (54) 81 (3,593) (765) 9,563 (1) 9,562
----------------- -------- --------- ----------- ----------- ------------ ------------- ------- ---------------- ---------
Balance as at 1
July 2018 14,493 (83) 164 88 (3,585) (367) 10,710 (1) 10,709
----------------- -------- --------- ----------- ----------- ------------ ------------- ------- ---------------- ---------
Adjustments for
transition
to new
accounting
standards - - (12) - - 10 (2) - (2)
Restated balance
as at 1 July
2018 14,493 (83) 152 88 (3,585) (357) 10,708 (1) 10,707
Profit/(loss)
for the year - - - - - 389 389 - 389
Other
Comprehensive
Income/(loss) - - (16) - (5) 64 43 - 43
----------------- -------- --------- ----------- ----------- ------------ ------------- ------- ---------------- ---------
Total
Comprehensive
Income/(loss) - - (16) - (5) 453 432 - 432
----------------- -------- --------- ----------- ----------- ------------ ------------- ------- ---------------- ---------
Transactions
with owners:
Dividends - - - - - (657) (657) - (657)
Shares bought
back and
cancelled (281) - - - - - (281) - (281)
Accrued employee
entitlements
for unvested
awards, net of
tax - - - 49 - - 49 - 49
Purchase of
shares by ESOP
Trusts - (99) - - - - (99) - (99)
Employee share
awards vested - 77 - (28) - (49) - - -
Tax recognised
for employee
awards vested - - - - - 17 17 - 17
Transfer of
cumulative fair
value gain on
equity
instruments
designated as
FVOCI - - (145) - - 145 - - -
Balance as at 30
June 2019 14,212 (105) (9) 109 (3,590) (448) 10,169 (1) 10,168
----------------- -------- --------- ----------- ----------- ------------ ------------- ------- ---------------- --------- (1) Represents the fair value movement in financial assets designated as FVOCI. (2) Represents the accrued employee entitlements to share awards that have not yet vested.
(3) Primarily consists of the common control transaction reserve of US$3,569 million, which reflects the difference between consideration paid and the carrying value of assets and liabilities acquired, as well as the gains/losses on disposal of entities as part of the demerger of the Group in 2015.
The accompanying notes form part of this financial information.
SEGMENT INFORMATION
(a) Description of segments
The operating segments (also referred to as operations) are organised and managed separately according to the nature of products produced.
Certain members of the Lead Team (the chief operating decision makers) and the Board of Directors monitor the segment results regularly for the purpose of making decisions about resource allocation and performance assessment. The segment information for the manganese operations is presented on a proportional consolidation basis, which is the measure used by the Group's management to assess their performance.
The principal activities of each operating segment as the Group is currently structured are summarised as follows:
Operating segment Principal activities
Worsley Alumina Integrated bauxite mine and alumina refinery in Western Australia, Australia
Hillside Aluminium Aluminium smelter in South Africa
Mozal Aluminium Aluminium smelter in Mozambique
Brazil Alumina Alumina refinery in Brazil
South Africa Energy Coal Open-cut and underground energy coal mines and processing operations in South Africa
Illawarra Metallurgical Coal Underground metallurgical coal mines in New South Wales, Australia
Eagle Downs Metallurgical Coal Exploration and development of metallurgical coal deposit in Queensland, Australia
Australia Manganese Integrated producer of manganese ore in the Northern Territory and alloy(1) in
Tasmania, Australia
South Africa Manganese Integrated producer of manganese ore and alloy(2) in South Africa
Cerro Matoso Integrated laterite ferronickel mining and smelting complex in Colombia
Cannington Silver, lead and zinc mine in Queensland, Australia
Hermosa Base metals exploration and development option in Arizona, United States
------------------------------- -------------------------------------------------------------------------------------
(1) On 13 August 2020, the Group announced that Groote Eylandt Mining Company Pty Ltd (GEMCO) had entered into a binding agreement for the sale of its shareholding in the Tasmanian Electro Metallurgical Company Pty Ltd (TEMCO) to an entity within GFG Alliance (GFG).
(2) After consideration of its future economic viability, the Group made the decision with its joint venture partner to place the Metalloys manganese smelter on care and maintenance.
All operations are operated by the Group except Brazil Alumina, which is operated by Alcoa.
(b) Segment results
Segment performance is measured by Underlying EBIT and Underlying EBITDA. Underlying EBIT is profit before net finance cost, tax and other earnings adjustment items including impairments. Underlying EBITDA is Underlying EBIT, before depreciation and amortisation. A reconciliation of Underlying EBIT, Underlying EBITDA and the Group's consolidated profit after tax is set out on the following pages. Segment revenue is measured on the same basis as in the Consolidated Income Statement.
The Group separately discloses sales of group production from sales of third party products and services because of the significant difference in profit margin earned on these sales.
It is the Group's policy that inter-segment transactions are made on a commercial basis.
Group and unallocated items/eliminations represent group centre functions and consolidation adjustments. Group financing (including finance expense and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments.
Total assets and liabilities for each operating segment represent operating assets and liabilities which predominantly exclude the carrying amount of equity accounted investments, cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities. The carrying amount of investments accounted for using the equity method represents the balance of the Group's investment in equity accounted investments, with no adjustment for cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities of the equity accounted investment.
FY20 SEGMENT INFORMATION
30 June 2020
South Group and
Africa Illawarra Eagle Downs unallocated
Worsley Hillside Mozal Brazil Energy Metallurgical Metallurgical Australia South Africa Cerro items/ Statutory
US$M Alumina Aluminium Aluminium Alumina Coal Coal Coal Manganese(1) Manganese(1) Matoso Cannington Hermosa elimination adjustment(1) Group
Revenue from
customers 1,119 1,276 507 399 829 937 - 785 346 516 497 - 36 (1,131) 6,116
Other(2) (1) - 1 - (7) (13) - (22) (4) 3 (21) - (3) 26 (41)
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Total revenue 1,118 1,276 508 399 822 924 - 763 342 519 476 - 33 (1,105) 6,075
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Group production 568 1,276 508 399 822 924 - 763 342 519 476 - - (1,105) 5,492
Third party
products and
services(3) - - - - - - - - - - - - 583 - 583
Inter-segment
revenue 550 - - - - - - - - - - - (550) - -
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Total revenue 1,118 1,276 508 399 822 924 - 763 342 519 476 - 33 (1,105) 6,075
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Underlying EBITDA 322 169 10 50 (108) 243 - 400 81 189 155 ( 5) (38) (283) 1,185
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Depreciation and
amortisation (162) (66) (34) (65) (47) (191) - (72) (27) (82) (50) - (42) 99 (739)
Underlying EBIT 160 103 (24) (15) (155) 52 - 328 54 107 105 ( 5) (80) (184) 446
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Comprising:
Group production
excluding
exploration
expensed 160 103 (24) (15) (162) 59 - 329 55 109 109 (5) (48) (387) 283
Exploration
expensed - - - - - (7) - (1) (1) (2) (4) - (15) 2 (28)
Third party
products and
services(3) - - - - - - - - - - - - (17) - (17)
Share of
profit/(loss)
of equity
accounted
investments(4) - - - - 7 - - - - - - - - 201 208
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Underlying EBIT 160 103 (24) (15) (155) 52 - 328 54 107 105 (5) (80) (184) 446
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Net finance cost (145)
Income tax
(expense)/benefit (108)
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Underlying
earnings 193
Earnings
adjustments(5) (258)
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Profit/(loss)
after tax (65)
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Exploration
expenditure - - - - - 16 2 2 1 4 4 19 16 (3) 61
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Capital
expenditure(6) 48 13 11 34 164 199 11 67 23 39 52 104 1 (90) 676
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Equity accounted
investments - - - - 21 3 - - - - - - - 436 460
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Total assets(7) 3,379 1,058 531 663 655 1,617 184 608 438 623 457 1,894 2,430 (800) 13,737
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Total
liabilities(7) 590 264 95 95 1,020 261 10 366 201 198 243 36 1,559 (763) 4,175
------------------- -------- ---------- ---------- -------- ------- -------------- --------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
(1) The segment information reflects the Group's interest in the manganese operations and is presented on a proportional consolidation basis, which is the measure used by the Group's management to assess their performance. The manganese operations are equity accounted in the consolidated financial statements. The statutory adjustment column reconciles the proportional consolidation to the equity accounting position.
(2) Other revenue predominantly relates to fair value movements on provisionally priced contracts.
(3) Revenue on third party products and services sold comprise of US$42 million for aluminium, US$14 million for alumina, US$276 million for coal, US$165 million for freight services and US$86 million for aluminium raw materials. Underlying EBIT on third party products and services sold comprise of US$2 million for aluminium, (US $ 4) million for alumina, (US$15) million for coal, (US$2) million for freight services and US$2 million for aluminium raw materials.
(4) Share of profit/(loss) of equity accounted investments includes the impacts of earnings adjustments to Underlying EBIT.
(5) Refer to Earnings adjustments.
(6) Capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(7) Total assets and liabilities for each operating segment represent operating assets and liabilities which predominantly exclude the carrying amount of equity accounted investments, cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities.
FY20 SEGMENT INFORMATION
30 June 2019
South Group and
Africa Illawarra Eagle Downs unallocated
Worsley Hillside Mozal Brazil Energy Metallurgical Metallurgical Australia South Africa Cerro items/ Statutory
US$M Alumina Aluminium Aluminium Alumina Coal Coal Coal Manganese(1) Manganese(1) Matoso Cannington Hermosa elimination adjustment(1) Group
Revenue from
customers 1,619 1,443 558 565 1,043 1,139 - 1,102 556 498 478 - (39) (1,650) 7,312
Other(2) - (4) (2) 1 (6) (4) - (7) (3) (9) (11) - (3) 10 (38)
------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Total revenue 1,619 1,439 556 566 1,037 1,135 - 1,095 553 489 467 - (42) (1,640) 7,274
------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Group production 797 1,439 556 548 1,037 1,135 - 1,095 536 489 467 - - (1,631) 6,468
Third party
products and
services(3) - - - - - - - - - - - - 815 (9) 806
Inter-segment
revenue 822 - - 18 - - - - 17 - - - (857) - -
------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Total revenue 1,619 1,439 556 566 1,037 1,135 - 1,095 553 489 467 - (42) (1,640) 7,274
------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Underlying EBITDA 702 (7) 13 219 42 542 - 698 215 127 161 - (53) (462) 2,197
------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
Depreciation and
amortisation (161) (68) (34) (59) (88) (183) - (60) (27) (87) (57) - (20) 87 (757)
------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Underlying EBIT 541 (75) (21) 160 (46) 359 - 638 188 40 104 - (73) (375) 1,440 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Comprising: Group production excluding exploration expensed 542 (75) (21) 160 (47) 360 - 639 188 48 107 - (47) (823) 1,031 Exploration expensed (1) - - - - (3) - (1) - (8) (3) - (31) 1 (46) Third party products and services(3) - - - - - - - - - - - - 5 - 5 Share of profit/(loss) of equity accounted investments(4) - - - - 1 2 - - - - - - - 447 450 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Underlying EBIT 541 (75) (21) 160 (46) 359 - 638 188 40 104 - (73) (375) 1,440 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Net finance cost (118) Income tax (expense)/benefit (330) ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Underlying earnings 992 Earnings adjustments(5) (603) ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Profit/(loss) after tax 389 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Exploration expenditure 1 - - - - 9 1 2 - 10 4 18 31 (2) 74 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Capital expenditure(6) 57 19 19 26 213 138 6 65 30 32 55 85 2 (95) 652 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Equity accounted investments - - - - 14 3 - - - - - - - 671 688 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Total assets(7) 3,468 1,304 644 795 736 1,710 172 679 524 697 493 1,777 2,498 (782) 14,715 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- ------- Total liabilities(7) 637 277 110 108 1,109 300 9 363 212 218 250 39 1,656 (741) 4,547 ------------------- -------- ---------- ---------- -------- ------- -------------- -------------- ------------- ------------- ------- ----------- -------- ------------ -------------- -------
(1) The segment information reflects the Group's interest in the manganese operations and is presented on a proportional consolidation basis, which is the measure used by the Group's management to assess their performance. The manganese operations are equity accounted in the consolidated financial statements. The statutory adjustment column reconciles the proportional consolidation to the equity accounting position.
(2) Other revenue predominantly relates to fair value movements on provisionally priced contracts.
(3) Revenue on third party products and services sold comprise of US$ 57 million for aluminium, US$ 2 million for alumina, US$ 392 million for coal, US$ 239 million for freight services and US$ 116 million for aluminium raw materials. Underlying EBIT on third party products and services sold comprise of nil for aluminium, US $2 million for alumina, US$9 million for coal, (US$ 5) million for freight services and (US$ 1) million for aluminium raw materials.
(4) Share of profit/(loss) of equity accounted investments includes the impacts of earnings adjustments to Underlying EBIT.
(5) Refer to Earnings adjustments.
(6) Capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(7) Total assets and liabilities for each operating segment represent operating assets and liabilities which predominantly exclude the carrying amount of equity accounted investments, cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities.
EARNINGS ADJUSTMENTS
The following table shows earnings adjustments in determining Underlying earnings:
US$M FY20 FY19 Adjustments to Underlying EBIT Exchange rate (gains)/losses on restatement of monetary items(1) (72) 3 Impairment losses(1)(2) - 504 (Gains)/losses on non-trading derivative instruments and other investments measured at fair value(1)(3) 149 35 Major corporate restructures(1) - 28 Earnings adjustments included in (profit)/loss of equity accounted investments(4)(5) 108 (17) --------------------------------------------------------------------------------------------- Total adjustments to Underlying EBIT 185 553 --------------------------------------------------------------------------------------------- ----- ----- Adjustments to net finance cost Exchange rate variations on net debt (6) (34) Total adjustments to net finance cost (6) (34) --------------------------------------------------------------------------------------------- ----- ----- Adjustments to income tax expense Tax effect of earnings adjustments to Underlying EBIT (18) 56 Tax effect of earnings adjustments to net finance cost (2) 10 Exchange rate variations on tax balances 99 18 --------------------------------------------------------------------------------------------- Total adjustments to income tax expense 79 84 --------------------------------------------------------------------------------------------- ----- ----- Total earnings adjustments 258 603 --------------------------------------------------------------------------------------------- ----- ----- (1) Recognised in expenses excluding net finance cost in the Consolidated Income Statement.
(2) Recognised impairments of property, plant and equipment for the separately identifiable cash generating units (CGUs) within the South Africa Energy Coal (SAEC) segment in FY19. The Group received external indicative offers for SAEC which, in combination with the market outlook for thermal coal demand and prices, informed the Group's assessment of the recoverable amount for SAEC as a collective group of CGUs.
(3) Primarily relates to US$105 million (FY19: US$30 million) included in the Hillside Aluminium segment and US$36 million (FY19: US$5 million) included in the South Africa Energy Coal segment.
(4) Recognised in share of profit/(loss) of equity accounted investments in the Consolidated Income Statement.
(5) Relates to US$51 million (FY19: (US$17) million) included in the Australia Manganese segment and US$57 million (FY19: nil) included in the South Africa Manganese segment. Of the US$108 million, impairment losses of US$40 million were recorded in the Australia Manganese segment after GEMCO entered into a binding agreement for the sale of its shareholding in TEMCO, and US$49 million in the South Africa Manganese segment following the decision to place the Metalloys manganese smelter on care and maintenance .
INCOME TAX EXPENSE
US$M FY20 FY19 Current income tax (expense)/benefit (130) (313) Deferred income tax (expense)/benefit (57) (101) ---------------------------------------- ------ ------ Total income tax (expense)/benefit (187) (414) ---------------------------------------- ------ ------
NET FINANCE COST
US$M FY20 FY19
Finance expenses
Interest on borrowings (18) (23)
Finance lease interest - (47)
Interest on lease liabilities(1) (51) -
Discounting on provisions and other liabilities (102) (103)
Net interest expense on post-retirement employee
benefits (8) (9)
Fair value change on financial assets (10) (3)
Exchange rate variations on net debt 6 34
-------------------------------------------------- ------ ------
(183) (151)
-------------------------------------------------- ------ ------
Finance income
Interest income 44 67
-------------------------------------------------- ------ ------
Net finance cost (139) (84)
-------------------------------------------------- ------ ------
(1) Lease liabilities include leases previously recognised as finance leases under AASB 117 Leases.
EQUITY ACCOUNTED INVESTMENTS
The Group's interest in equity accounted investments with the most significant contribution to the Group's net profit/(loss) or net assets, are as follows:
Significant Country of Principal activity Reporting Acquisition Ownership interest
joint ventures incorporation/ date date %
principal
place of
business
FY20 FY19
Integrated producer
Australia of manganese ore 30 June
Manganese(1)(2) Australia and alloy(3) 2020 8 May 2015 60 60
Integrated producer
South Africa of manganese ore 30 June 3 February
Manganese(1)(4) South Africa and alloy(5) 2020 2015 60 60
------------------ ----------------- --------------------- ----------- ------------- ---------- ---------
(1) While the Group holds a greater than 50 per cent interest in the joint ventures, joint control is contractually achieved as joint venture parties unanimously consent on decisions over the joint venture's relevant activities.
(2) Australia Manganese consists of an investment in GEMCO.
(3) On 13 August 2020, the Group announced that GEMCO had entered into a binding agreement for the sale of its shareholding in TEMCO.
(4) South Africa Manganese consists of an investment in Samancor Holdings (Pty) Ltd.
(5) After consideration of its future economic viability, the Group made the decision with its joint venture partner to place the Metalloys manganese smelter on care and maintenance.
Share of profit/(loss) of equity accounted investments US$M FY20 FY19 Australia Manganese and South Africa Manganese 8 8 448 Individually immaterial(1) 1 2 19 -------------------------------------------------------- ----- ----- Total(2) 1 00 467 -------------------------------------------------------- ----- -----
(1) Individually immaterial consists of investments in Samancor Marketing Pte Ltd (60 per cent), Richards Bay Coal Terminal Proprietary Limited
(21.1 per cent) and Port Kembla Coal Terminal Limited (16.7 per cent).
(2) Includes earnings adjustments of US$108 million (FY19: (US$17) million). Refer to Earnings adjustments.
INTERESTS IN JOINT OPERATIONS
Significant joint operations of the Group, which are those with the most significant contribution to the Group's net profit/(loss) or net assets, are as follows:
Significant joint Country of operation Principal activity Acquisition date Effective interest %
operations
FY20 FY19
Ambler Metals(1)(2) United States Development studies, 11 February 2020 50 -
resource drilling and
regional exploration
Brazil Alumina Brazil Alumina refining 3 July 2014 36 36
Metallurgical coal
Eagle Downs exploration and
Metallurgical Coal Australia development 14 September 2018 50 50
Mozal Aluminium
SARL(2) Mozambique Aluminium smelting 27 March 2015 47.1 47.1
Bauxite mining and
Worsley Alumina(3) Australia alumina refining 8 May 2015 86 86
----------------------- ---------------------- ----------------------- ------------------- ----------- ----------
(1) Refer to Acquisition of subsidiaries and jointly controlled operations.
(2) This joint arrangement is an incorporated entity. It is classified as a joint operation as the participants are entitled to receive output, not dividends, from the arrangement.
(3) While the Group holds a greater than 50 per cent interest in Worsley Alumina, participants jointly approve certain matters and are entitled to receive their share of output from the arrangement.
ACQUISITION OF SUBSIDIARIES AND JOINTLY CONTROLLED OPERATIONS
Acquisition of Upper Kobuk Mineral Projects
On 11 February 2020, the Group completed the formation of the Ambler Metals Joint Venture (Ambler Metals JV) with Trilogy Metals Inc. (TSX, NYSE American: TMQ). Trilogy Metals Inc. contributed all of its assets associated with the Upper Kobuk Mineral Projects (UKMP) and the Group contributed a US$145 million subscription payment to the Ambler Metals JV for an equal share of its assets, liabilities, income and expenses. The transaction was treated as an acquisition of assets including mineral rights and exploration licences. The joint arrangement is classified as a joint operation as the activities are primarily designed for the future provision of output to the parties of the arrangement. The Ambler Metals JV loaned US$57.5 million of the subscription payment to the Group with the balance retained to fund its activities and exploration programs.
US$M FY20 Cash outflow on acquisition Net cash acquired 72.5 Direct costs relating to the acquisition(1) (145) ---------------------------------------------- ------- Net consolidated cash outflow (72.5) ---------------------------------------------- ------- Net assets Cash and cash equivalents 72.5 Property, plant and equipment (2) 72.5 Net assets 145 ---------------------------------------------- ------- (1) Inclusive of acquisition related transaction costs and other directly attributable costs. (2) Includes mineral rights of US$72.5 million.
SUBSEQUENT EVENTS
On 14 July 2020, the Group extended the expiry date of the undrawn revolving credit facility by one year to February 2023, providing the Group with access to US$1.45 billion in liquidity.
On 13 August 2020, the Group announced that Groote Eylandt Mining Company Pty Ltd had entered into a binding agreement for the sale of its shareholding in the Tasmanian Electro Metallurgical Company Pty Ltd to an entity within GFG Alliance. Completion of the transaction is subject to approval from Australia's Foreign Investment Review Board.
On 20 August 2020, the Directors resolved to pay a fully franked final dividend of US 1 cent per share (US$48 million) in respect of the 2020 financial year. The dividend will be paid on 8 October 2020. The dividend has not been provided for in the consolidated financial statements and will be recognised in the 2021 financial year.
Following the decision to suspend the on-market share buy-back program on 27 March 2020, the Group announced, on 20 August 2020, a 12-month extension to the program's execution window to 3 September 2021.
No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations, results of operations or state of affairs of the Group in subsequent accounting periods.
Disclaimer
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements, including statements about trends in commodity prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies and objectives of management; capital costs and scheduling; operating costs; anticipated productive lives of projects, mines and facilities; and provisions and contingent liabilities. These forward-looking statements reflect expectations at the date of this release, however they are not guarantees or predictions of future performance. They involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. Readers are cautioned not to put undue reliance on forward-looking statements. Except as required by applicable laws or regulations, the South32 Group does not undertake to publicly update or review any forward-looking statements, whether as a result of new information or future events. Past performance cannot be relied on as a guide to future performance. South32 cautions against reliance on any forward-looking statements or guidance, particularly in light of the current economic climate and the significant volatility, uncertainty and disruption arising in connection with COVID-19.
NON-IFRS FINANCIAL INFORMATION
This release includes certain non-IFRS financial measures, including Underlying earnings, Underlying EBIT and Underlying EBITDA, Basic Underlying earnings per share, Underlying effective tax rate, Underlying EBIT margin, Underlying EBITDA margin, Underlying return on capital, Free cash flow, net debt, net operating assets and ROIC. These measures are used internally by management to assess the performance of our business, make decisions on the allocation of our resources and assess operational management. Non-IFRS measures have not been subject to audit or review and should not be considered as an indication of or alternative to an IFRS measure of profitability, financial performance or liquidity.
NO OFFER OF SECURITIES
Nothing in this release should be read or understood as an offer or recommendation to buy or sell South32 securities, or be treated or relied upon as a recommendation or advice by South32.
NO FINANCIAL OR INVESTMENT ADVICE - SOUTH AFRICA
South32 does not provide any financial or investment 'advice' as that term is defined in the South African Financial Advisory and Intermediary Services Act, 37 of 2002, and we strongly recommend that you seek professional advice.
Further information
Investor Relations Media Relations Media Relations Alex Volante James Clothier Jenny White T +61 8 9324 9029 T +61 8 9324 9697 T +44 20 7798 1773 M +61 403 328 408 M +61 413 391 031 M +44 7900 046 758 E Alex.Volante@south32.net E James.Clothier@south32.net E Jenny.White@south32.net
Further information on South32 can be found at www.south32.net .
South32 Limited (ABN 84 093 732 597)
Registered in Australia
(Incorporated in Australia under the Corporations Act 2001)
Registered Office: Level 35, 108 St Georges Terrace
Perth Western Australia 6000 Australia
ISIN: AU000000S320
JSE Sponsor: UBS South Africa (Pty) Ltd
20 August 2020
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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August 20, 2020 02:09 ET (06:09 GMT)
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