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Result Coverage : South 32 + Bluescope Steel

September 01, 2015 | Team Kalkine
Result Coverage : South 32 + Bluescope Steel

South32 Ltd
 
  • Graham Kerr, the company CEO, while announcing the financial results said that the implementation of the regional operating model and the broader cost-saving initiatives are already producing strong results and over the next three years, the company is seeking to reduce controllable costs by at least USD 350 million. The company was successfully demerged from BHP Billiton on 25th May 2015. The pro forma FY 2015 profit after taxation was USD $28 million compared to $ 64 million in the previous year and underlying earnings were USD $ 575 million compared to USD $ 407 million. The pro formaunderlying EBIT was USD $ 1.008 billion compared to $ 642 million with an underlyingEBITDA margin of 26% compared to 20%. Free cash flow before interest and tax for pro forma FY 2015 was USD $ 1.68 billion compared to $ 974 million. Pro forma production led cost efficiencies came to USD $ 282 million reflected in FY 2015 and the closing net debt of $ 402 million supports the BBB +/Baa1 credit ratings and the pro forma FY 2015 underlying return on invested capital was 6.2% compared to 4.4% in the previous year. Pro forma revenue from continuing operations was down 7% to $ 7.74 billion while statutory revenue from continuing operations was $ 3.84 billion. Net tangible assets per ordinary share were USD 2.02 compared to USD 2.47 and the company does not intend to pay a dividend for the year ended 30 June 2015.
     
     S32 Daily Chart (Source - Company Reports)

  • The profit from continuing operations was USD $ 519 million (USD $ 319 million) and after adding back non-cash items, profit or loss from equity accounted investments and change in working capital, cash generated from continuing operations was $ 1.83 billion compared to $ 1.35 billion in the previous year. Dividends received from equity accounted investments was USD $ 472 million compared to USD $ 206 million, capital expenditure was (USD $ 629 million) compared to (USD $ 590 million) making operating cash flows from continuing activity of $ 1.68 billion compared to $ 974 million.
     
      S32 Underlying Earnings (Source - company Reports)

  • The outlook includes fast tracking the implementation of the regional operating model and redesigning the way the company works. It is seeking a reduction in controllable costs by a further USD 350 million every year including equity accounted investments for more by the end of FY 2018. It is reducing sustainable capital expenditure by 9% to USD $ 650 million including equity accounted investments in FY 2016. It intends to distribute 40% of underlying earnings as dividends in each six-month reporting period. It will continue to focus on a simple strategy to realise the potential of its assets and deliver long-term growth in return on invested capital.

  • The asset base is well capitalised having received substantial investments over a long period and the strategy envisages a deliberate focus on existing assets for optimum performance. The majority of assets are at the top end of the respective industry, cost or margin curves and the focus will be to maximise production consonant with safety and sustainability. In contrast, operations in cash flow negative downstream processing capacity such as South African manganese and Brazil aluminium will be suspended.

 
BlueScope Steel Ltd
 
  • The company has reported its results for the 12 months ended 30 June 2015. Total revenues were up 7% to $ 8.57 billion andunderlying EBITDA by 9% to $ 644.8 million. Reported EBIT was up by 190% to $ 296.6 million and underlying EBIT by 14% to $ 301.8 million. The reported NPAT attributable to holders was 265% to $ 136.3 million and the underlying NPAT by 9% to $ 134.1 million. EPS was up 264% to 24.3 cents per share and the interim dividend was 3 cents per share compared to nil. The return on invested capital was up 40 basis points to 5.9% and the net debt increased by 5% to $ 275.2 million. Gearing state at the same level as the previous year at 5.5% and net tangible assets per share amounted to $ 6.95 compared to $ 6.17 in the previous year.
       
       BSL Daily Chart (Source - Company Reports)
  • There were several key points to note. Sales revenue was higher than the previous year mainly because of higher export volumes in Australian Steel Products and higher domestic volumes In Buildings North America and the contribution from the recently acquired businesses though this was offset by lower volumes in China and Thailand and lower prices and volumes in the New Zealand operations. Reported NPAT of $ 136.3 million increased by $ 218.7 million over the previous year because of the improved underlying profitability, the absence of impairment charges and lower redundancy and restructuring costs. New Zealand and Pacific Steel reported an underlying EBIT loss of $ 33.2 million which was $ 107.9 million lower than the previous year because of weaker prices for iron sand and steel and lower iron sand volumes partly offset by improved product mix and contribution from the acquisition of Pacific Steel. Global Building Solutions segment reported an underlying EBIT of $ 43.7 million $ 16.8 million more than the previous year because of strong Buildings North America performance and the de risking of pension fund obligations by $ 11 million. The EBIT from the Building Products Segment was $ 98.3 million, a $ 9.4 million increase over the previous year, because of better performance in Indonesia and India offset by lower margins and volumes in Thailand, Malaysia and North America. Net debt as at 30 June 2015 was $ 275.2 million (of which $ 25 million attributable to non controlling interests) and liquidity remains strong with undrawn debt plus cash totalling $ 1.59 billion.
     
      
        Result Highlights (Source - Company Repeorts)

  • The group outlook is that first half FY 2016 will be similar to the second half FY 2015 based on several assumptions of average spot east Asian HRC prices of around USD 325/tonne, 62% Fe CFR iron ore price of USD 50/tonne and hard coking coal prices of USD 90/tonne. First half FY 2016 should see net finance costs and underlying tax rates similar to second-half 2015 though profit attributable to non controlling interests is expected to be higher.
     
 

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