South32 raised its manganese and aluminium production in South Africa during the full year to the end of June 2024, despite lower prices and higher costs related to the use of trucks, with the company exploring low-carbon energy solutions.
Shares in South32 inched up by 0.9% to R37.09 per share in afternoon trade on the JSE yesterday, extending the stock’s 2.68% strengthening in the past seven days on the same bourse.
Graham Kerr, the chief executive of South32, flagged congestion at Port Elizabeth where “challenges about actually getting the throughput that you would normally expect to get on the rail line” are persisting.
“I do believe there’s an opportunity for us to get more volume on the actual rail, but until they sort out the congestion at Port Elizabeth, we’re not banking that into our base numbers,” Kerr said during an analysts briefing yesterday.
South32’s manganese production from South Africa surged by 3% to 2.2 million wet metric tons in the full year to June 2024, as the company lifted output of secondary products to capitalise on stronger manganese prices in the last quarter of the period under review.
Underlying earnings before interest, tax, depreciation and amortisation (Ebitda) for the South African manganese operations, however, sagged 2% to $65 million as higher sales volumes were offset by lower realised manganese prices in the first half of the year.
South32 is now expecting its South African manganese production to be around two million wet metric tons for the 2025 and 2026 full years. The decline from this year’s output has been attributed to the continued use of “higher cost trucking to optimise sales volumes” and margins.
South32 expects unit operating costs for its South African manganese to increase by 12% due to higher price-linked royalties and in-land logistics costs.
The company’s Hillside operation in South Africa saw its saleable production of aluminium increase by 1 000 tons during the year under review to 720 000 tons as its smelter continued to test its maximum technical capacity. This was “despite the impact” of load shedding, mostly earlier in the year under review.
South32 expects to sustain production from Hillside, which has the largest aluminium smelter in the southern hemisphere, at the same levels over the full year 2025 and 2026 years.
Operating unit costs for Hillside Aluminium dropped by 3% to $2 115 per ton as the smelter continued its strong operating performance and benefited from lower prices for smelter raw material inputs.
“The cost profile of the smelter will continue to be heavily influenced by the price of smelter raw material inputs, including alumina supplied by our Worsley Alumina refinery, and other external factors including the South African rand and inflation-linked energy costs,” said the company.
South32 continues to engage Eskom and other players in the South African energy sector on pathways to secure lower-carbon electricity supply.
With net debt having declined by $329m to $762m in the year to June, revenues in South32 fell 3% to $5.4 billion. The company’s overall underlying Ebitda declined by 29% to $1.8bn, resulting in a net loss post tax of $203m.
The post tax loss was a consequence of an impairment charge of $388m in respect of Worsley Alumina in Western Australia and a further impairment of $248m for the Cerro Matoso operation in Colombia.
These were, however, offset by a $139m impairment reversal for the now disposed Illawarra Coal business.
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