[miningmx.com] – South32 shares traded up to 6% higher at around R15 on the JSE on Thursday after the release of September quarter results which went down well with investors with the drop in the group’s debt levels being particularly well received.
Net debt dropped by US$206m to $196m during the quarter which UK institution Numis highlighted in its morning report as a significant reduction which left “the balance sheet in decent shape’.
South32 CEO Graham Kerr also highlighted the group’s on-going commitment to meet forecast cost reductions commenting that, “consistent with our commitment to reduce controllable costs by at least $350m by the end of FY2016 we expect to deliver a 25% reduction in group and unallocated costs in FY2016. “
The report stressed the cutbacks being made at the group’s South African manganese operations to improve financial performance with production cuts also being made at the Hillside Aluminium smelter during the quarter.
According to Kerr, ” We continue to take decisive action to maximise financial performance rather than volume. The actions we have initiated at South African Manganese and South African Aluminium reflect this philosophy and will further strengthen the cash generating capacity of the group.’
Kerr said the review of the South African manganese operations announced on August 24 was expected to be completed before the end of December 2015.
He added the previously announced delay in restarting three high-carbon ferromanganese furnaces at Metalloys would continue ” indefinitely’ and a decision on the future of the fourth furnace would be made on conclusion of the review.
Turning to aluminium output Ker said South Africa aluminium saleable production had increased 2% in the September quarter but 22 pots – equivalent to 3% of total capacity – had been temporarily suspended during September “in response to the recent deterioration in market conditions.’
He commented, “this decision will deliver an incremental improvement in cash flow as planned pot relining activity is deferred. A production loss of 18,000 tons is anticipated should the 22 pots remain offline for the remainder of FY 2016.
“Production at South African Aluminium is now expected to decline marginally in FY 2016 should the current market conditions prevail. “
