BHP spin-off South32 will slash more than 770 jobs at its Australian operations as it braces for an extended downturn in the commodities sector.
The diversified miner has announced a half year net loss of $US1.75 billion ($A2.43 billion), hurt by large writedowns at its manganese business in Australia and energy coal operations in South Africa.
“The majority of our commodities have suffered a slump in prices,” chief executive Graham Kerr said, warning the company did not see a respite anytime soon.
“We don’t see prices rebounding in a dramatic way for the next 12 to 18 months,” he told an analysts’ call.
The company had flagged writedowns of $US1.7 billion earlier in February after revising down its commodity price forecasts. It had also announced the loss of 620 jobs at its troubled South African manganese business after slashing production there.
Another 772 jobs at its Australian operations, reducing employee and contractor numbers at the Worsley Alumina facility in Western Australia, Illawarra Metallurgical Coal operations in NSW and GEMCO manganese mining operation in the Northern Territory.
It will cut another 350 jobs at the Cerro Matoso nickel mine and smelter in Colombia.
The reductions, to be completed by June-end, are part of the company’s efforts to reduce its per unit costs amid tough market conditions.
The restructuring will result in savings of $US160 million in FY17, and cut capital expenditure by $US275 million, it said.
Shares in the company jumped on the news. By 1400 AEDT, the stock was up 5.3 per cent at $1.19 each.
“The market has been waiting to see what they do to counter the collapse in prices. We have finally seen some action on costs,” IG market strategist Evan Lucas said.
South32, which listed in 2015 after demerging from mining giant BHP Billiton, is the world’s largest producer of manganese ore and a global producer of manganese alloy, used in making steel and aluminium products.
It also has significant interests in alumina, silver, nickel and coal.
The company has slashed its debt and cut production at several high-cost mines and smelters, after announcing in August it would strip out $US350 million in costs by the end of its 2018 financial year.
It now expects to significantly exceed that target.
The company has also cut capital expenditure forecast for the current financial year by another $US150 million, to $550 million. It has, however, maintained its production guidance for the full year.
South32 had reported a net profit of $US339 million for the year ago period.
Underlying earnings, excluding non-cash impairments and the impact of foreign exchange, slumped 94 per cent to $US26 million.
SOUTH32 SWINGS TO HALF YEAR LOSS
- Net loss of $US1.75b vs profit of $US339m
- Revenue down 27 pct to $US2.98b
- No interim dividend