South32 archives $173 million net loss in FY23 as revenue plunges; 12% growth in aluminium production

South32, with its heterogeneous mining portfolio, has recorded a 20% revenue plunge in FY 2023 ending in June, with the company incurring a loss of $173 million preceded by a non-cash impairment of $1.3 billion for its Taylor deposit at the Hermosa project.

The revenue for FY 2023 plummeted from $9.2 billion to $7.4 billion. In 2022, an estimated profit after tax deduction was $2.6 billion, which altered vehemently this year, marking a loss of $173 million.

In light of confirmed independent development potential for both the Taylor zinc/silver/lead deposit and the Clark battery-grade manganese deposits, South32 had previously announced non-cash impairment expense related to the Taylor deposit. To comply with accounting regulations, the company assessed each deposit and regional exploration land package separately, leading to a non-cash impairment of approximately $1.3 billion being included in the group's financial statements for 2023. This impairment expense was necessary for accurate financial reporting.

The underlying earnings before depreciation and amortisation (EBITDA), tax and interest also suffered a huge drop of 47%, from $4.7 billion to $2.5 billion. South32 informed its shareholders that in spite of the dampening commodity prices and the untamed cost effects on the economy, this year's EBITDA was one of the largest ever experienced in the company's archive.

South32 announced in an official statement: "Our investments in Sierra Gorda and increased ownership in Mozal Aluminium contributed to Underlying EBITDA of $ 240 million at an operating margin of 38%. Free cash flow from operations, including equity accounted investment (EAI) distributions, was $ 244 million, impacted by a build in inventories and one-off cash tax payments in relation to our Sierra Gorda acquisition and non-core royalty sale."

South32 experienced a notable increase in its supply of commodities that are crucial for a low-carbon future. Specifically, the company achieved a 14% growth in aluminium production, a 17% growth in base metals production, and a 4% growth in manganese production. These impressive results were attributed to revised management implementations, which enabled South32 to set annual production records at Hillside Aluminium, Australia Manganese, and South Africa Manganese.

Graham Kerr, the CEO of South32, commented: "During the year, we delivered strong production growth in commodities that are critical for a low-carbon future. We set three annual production records and realised the benefit of our recent portfolio improvements, increasing aluminium production by 14%, base metals by 17% and manganese by 4%."

"This growth, coupled with our continued focus on cost efficiencies, underpinned one of our largest underlying financial results, with Underlying EBITDA of $ 2.5 billion. This was achieved despite lower commodity prices and industry-wide inflationary pressures," Kerr asserted.

"A record $1.2 billion was returned to shareholders during the 2023 financial year, and the board has today resolved to pay a fully-franked ordinary dividend of 3.2c per share or $145 million in respect of the June 2023 half year," he added.

"Reflecting our disciplined approach to capital management, the board has also resolved to further expand our capital management programme by $ 50 million to $ 2.4 billion, leaving $ 133 million to be returned by March 1, 2024," Kerr concluded.

South32's capital expenditure for FY 2023 has augmented by $335 million to $894 million. The company has invested in productivity, improvements and growth activities across its portfolio. According to Kerr, this investment has been made to increase the company's future production of critical commodities.

The Hermosa project in Arizona, the first mining project added to the FAST-41 process, has achieved significant milestones. South32's portfolio improvement is expected to underpin production growth in aluminium and copper, which is expected to be 4% higher in FY 2024 and 3% higher by 2025.

For FY 2024, South32 is targeting capital expenditure of approximately $860 million. Growth capital expenditure at Hermosa is expected to be around $170 million in the first half of the year. Additionally, South32 has announced the first mineral resource estimate for Sierra Gorda, in which it holds a 45% interest. The company is also analysing choices to realise value from its surface stockpiled oxide material.