South32 to Slash 1,750 Jobs as First-Half Profit Slumps 94%

  • Producer booked $1.7 billion writedown on lower prices
  • Total workforce to fall 17% compared to level in fiscal 2015

South32 CEO on Earnings, Restructuring, Commodities

South32 Ltd., the world’s biggest manganese producer, will cut its global workforce by at least 1,750 and reported a 94 percent drop in first-half earnings after the collapse in commodity prices.

Underlying earnings were $26 million in the six months ended Dec. 31, from a pro forma $460 million a year earlier, the Perth-based miner said Thursday in a statement. The producer had a net loss of $1.75 billion.

Restructuring at South32’s alumina, metallurgical coal and manganese units in Australia and nickel operations in Colombia follows a review. Supply gluts and faltering growth in demand from China has prompted miners, including BHP Billiton Ltd. and Glencore Plc, to cut dividend payments, lower spending and curtail output.

“The continued optimization of our high-quality operations will strengthen underlying cash flow in what remains a challenging environment,” Chief Executive Officer Graham Kerr said in a separate statement.

South32 rose 0.2 percent to A$1.1325 at 11:16 a.m. in Sydney. It’s gained 6.1 percent this year.

Most job cuts will be complete by July, while South32’s total workforce will have fallen by 17 percent to 22,500 at the end of June 2017 compared to fiscal 2015, the producer said. The company took a $1.7 billion asset writedown on lower prices after flagging the charge earlier this month

The company had previously announced it would cut 620 jobs at its manganese joint venture in South Africa, part of the 1,750 total, and curb some output. South32 won’t “hesitate to adjust volumes,” at other operations if production cuts can help boost cash flows, it said in the statement

Capital expenditure in the year to June 30 is forecast at $550 million, down from a previous estimate of $700 million and $768 million a year earlier, South32 said. Net debt was cut to $116 million from $402 a year earlier, it said.

South32, created after BHP shed a collection of unwanted assets to focus on a smaller number of materials, is considering a possible acquisition of Anglo American Plc’s stake in their manganese joint venture, it said this month. Anglo flagged it would sell its holding as it exits commodities tied to steel and heavy industry.

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