South32 flags $US1.7bn in charges, to slash staff
BHP Billiton spin-off South32 will slash jobs and has flagged a string of writedowns as part of a major restructuring.
BHP Billiton spin-off South32 has outlined major restructuring plans as it prepares to slash job numbers across the business, including at Australian projects, and has flagged a string of writedowns in the wake of downgrades to commodity forecasts.
South32 shares jumped 13.1 per cent to $1.07 at 1.15pm (AEDT).
South32 (S32) said it expects to book a pre-tax, non-cash impairment charge of around $US1.7 billion in its half-year accounts.
Meanwhile, after shuttering its South African manganese mines in November last year, the miner said it will restart the projects with immediate effect, but at a “substantially reduced rate and with greater flexibility”.
“The completion of the South Africa manganese strategic review is important for our company as it will allow us to re-base manganese ore production at a significantly lower level while reducing rand denominated mine gate costs by a commensurate amount,” South32 chief executive Graham Kerr said.
The miner will shed 620 staff at the manganese joint venture and said it expected restructuring costs of around $US10m at the project.
Manganese is a key steelmaking ingredient, but the commodity has fallen to its weakest price since 2011 amid a global rout in iron ore and steel, which have also plunged to their lowest prices in years.
South32 said it was finalising plans to slash costs at its Illawarra Metallurgical Coal, Cerro Matoso, Worsley Alumina and Australia Manganese projects.
“These initiatives are expected to result in a substantial reduction in employee numbers” during the remainder of the financial year, the miner said.
“This strategy to maximise value rather than volume, our high quality operations and well-defined financial policies underpin our resilience at current commodity prices and we remain exceptionally well positioned for any improvement in industry fundamentals,” Mr Kerr said.
Fat Prophets resources analyst David Lennox said big writedowns had been expected and major job losses were looming in Australia. “We’ve seen several hundred jobs coming out of a number of companies so it could be substantial because the commodity prices they’re selling into have collapsed,” Mr Lennox said.
“I would imagine that any part-timers are gone and any contractors are in danger.”
Mr Lennox added: “We are not in unfamiliar territory.
“It’s going to be a terrible reporting season for resources companies across the globe... certainly net profits are going to be well and truly knocked around, revenue will be well and truly knocked around,” he said.
South32 recently managed to reduce its net debt by nearly $US300 million in the second half of last year despite the prolonged weakness in commodity prices, seeking to maximise short-term cash flow by suspending operations.
The miner, like the rest of the industry, is operating in a challenging global environment and responding through a program of reducing operational and capital expenditure.
The Perth-headquartered South32, which operates assets including aluminium, coal, nickel, manganese, silver, lead and zinc after it was hived off from BHP into an independent firm last year, is due to report earnings on February 25.
Business Spectator