South32 Ltd (When-Issued) American Depositary Receipts – Sponsored (Australia) (OTCMKTS:SOUHY) recovered all the losses incurred in the previous trading session and finished the last trading session with a nice gain of 1.90%. The volume of the day at 121,000 was lower than the daily average of 137,000, reflecting the actual corrective nature of the current price action. The chart attached clearly shows the entire range of this week being contained inside the range of the previous week and that implies a collapse of volatility. A sharp movement can be expected by the next week and considering the lack of bearish momentum, an upside breakout can’t be ruled out.
South32 Ltd (OTCMKTS:SOUHY) reported that underlying EBIT for FY2015 jumped 56% to $1 billion. The senior management said that they are delighted as the company recorded strong numbers in fiscal 2015. They expect the numbers to improve in the coming quarters.
Graham Kerr, the CEO mentioned that cost saving plans and regional operating model are the two major factors that led to strong financial performance. The company wants to reduce its controllable cost by as much as $350 million in the coming three years. Kerr highlighted the company’s production plans and stated that everything is going as planned to touch the next level of performance.
The CEO of South32 said that they have recorded a robust financial growth but they need to take more initiatives so as to enhance safety performance and eliminate fatalities occurrence in the operations. South32 tragically lost two of its colleagues in fiscal 2015 and another in July. It is certainly not acceptable and the management needs to do more in order to attain employees’ safety.
South32’s strong financial performance came on the back of its four assets. The CEO said that they have started well as an independent, stand-alone firm and the regional operating model is in place. Their team is right-sizing processes and systems, and leading the cultural improvement across the group.
The balance sheet
Brendan Harris, the Chief Financial Officer, stated that the strong balance sheet and cash generating capacity of South32’s asset portfolio marked a powerful combination. The company boasts a strong balance sheet and well-designed capital management structure. They plan to distribute at least 40% of underlying profits as dividends to company’s shareholders twice a year.
This dividend payout will protect South32 balance sheet as and when margins contracts and rewards shareholders as strength in company returns. As of June 30, 2015, the company posted net debt of $402 million.