The South32 Ltd (ASX: S32) share price has fallen 3% today as the miner revealed its profit report for the six-month period ending December 31 2016. Below is a summary of the result.
- Underlying earnings of US$479 million, up 1,742%
- Revenue from continuing operations of US$3.221 billion, up 8%
- Net tangible assets per share of US$1.83
- Interim dividend of US3.6 cents per share
- Proposed US$200 million acquisition of coal business Metropolitan Colliery
South32 shares have more than doubled in value over just the past year as the price of commodities it produces such as coal, bauxite, manganese, nickel and silver all lifted over the period.
It also reduced costs over the period by US$239 million to help produce the bumper earnings result.
As at 31 December 2016 the group's net cash position lifted to US$859 million, which means it was able to declare its first dividend since being spun off from BHP Billiton Limited (ASX: BHP). The group has a policy to payout 40% of underlying earnings and the dividends are an added bonus for investors who have likely enjoyed bulging capital gains to boot.
The strong cash position means it looks well funded to complete the announced US$200 million acquisition of the Metropolitan Colliery in New South Wales in what looks like management betting on the resurgence of coal prices being sustainable. South32 also reconfirmed full year production guidance, capital and exploration expenditure is unchanged.
Of course for investors the direction of South32's earnings and share price is dependent on the prices it receives for the commodities it sells. As has been demonstrated over the past two years commodity prices can be volatile and are likely to remain so in the 12-18 months ahead. Anyone taking a punt on this stock therefore must be optimistic about the recent run in commodity prices being sustainable.
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