In the young company’s first results since being spun out to a hostile market where prices for its products have been falling sharply, South32 said it planned to cut “controllable costs” by $US350 million over the next three years.
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South32 said it would reduce controllable costs by at least $350m (£223m, €307m) per annum by the end of financial year 2018.
Underlying earnings were $575 million in the year ended June 30, compared to a proforma $407 million a year earlier, the Perth-based miner said Monday in a statement.
Profit gains were driven by $282 million in cost cuts, mostly in labour and contractor costs.
“We have hit the ground running since becoming an independent, stand-alone company. Our regional operating model and teams are in place, we are right-sizing our systems and processes, and driving the necessary cultural change across the group”, he added. Analysts see the miner posting a near $50% drop in underlying net income to $6.6bn, as a collapse in China has hurt demand for key raw materials and sent commodity prices lower. Pro forma underlying earnings before interest and tax (EBIT) increased 56% to $1.0 billion, in line with analysts’ estimates.
The company was cast out of BHP with a suite of unloved coal, aluminium, manganese, and silver assets mostly in Australia and South Africa but with a strong balance sheet, positioning it to weather tough conditions and snap up assets.
Kerr says “by optimising the performance of our existing assets, converting high value brownfield resources into reserves, and identifying new opportunities we will maximise return on invested capital and deliver sector-leading total shareholder returns”. In addition, it plans to cut sustaining capital expenditure by 9% to $650m in financial year 2016.
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Will probably be the primary set of full-year financials that BHP Billiton has posted because the spin off of its non-core belongings into South 32 earlier this yr. If the current environment persists, these factors would provide a significant additional net benefit to costs.
