Cost cutting aids South32 earnings

South32’s interim dividend has lifted by 27 per cent despite revenue and profit declining markedly in the six months to December.

Investors in the BHP spin-out were told at today’s briefing that revenue had declined to $2.9 billion in the first half of the financial year, down 8 per cent on the year prior, while profit dropped to $53 million, down 46 per cent.

Underlying earnings increased, however, rising 4 per cent to $136 million.

Declining revenue was largely attributed to weaker prices for commodities overall, with the business’s operating margin for manganese ore and metallurgical coal dampened by ongoing trade disputes between China and the US.

These costs, among others, were totalled at $207 million.

Still, the company has agreed to pay a dividend of 1.4 cents, with lower inventory, production and marketing costs offsetting declining revenue elsewhere for the business.

Shareholder returns overall were tallied at $160 million, with $48 million returned in dividends and another $112 million in on-market share buy-backs.

Chief executive Graham Kerr said the company has focused on what it can control in an uncertain environment.

“Looking ahead, we have increased production guidance at Cannington, Illawarra Metallurgical Coal and Cerro Matoso,” he said.

“Additional volumes and other cost efficiencies across our operations will help offset weaker US dollar headwinds.”

Shares in South32 were trading at $2.72 at 2pm AEDT.