South32 is cutting costs deeper to meet falling commodity prices

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South32, the BHP spinoff, today announced write downs of $594 million and plans to cut operating costs and capital expenditure further as it deals with volatile commodity prices.

The company today posted a a 56% fall in full year statutory after tax profit to $US28 million compared with $US64 million in 2014.

Revenue was down 7% to $US7.743 billion.

Lower coal prices reduced underlying EBIT by $US273 million. Significantly weaker manganese alloy and ore prices reduced earnings by another $US166 million.

However, stronger average prices for alumina increased them by $US278 million.

Over the next three years, the company aims to reduce costs by at least $US350 million annually. Capital expenditure will be cut by $US650 million in 2016.

And the company plans to distribute a minimum 40% of underlying earnings as six monthly dividends but no payout for the year to June 30.

Impairments for 2015 include a $US551 million adjustment to the value of the Wolvekrans Middelburg Complex at South Africa Energy Coal and the write-off of the Metallic Nickel Recovery project at Cerro Matoso of $US41 million.

South32’s asset portfolio is spread across five countries and includes alumina, aluminium, coal, nickel, manganese, silver, lead and zinc.

The results in detail:

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