South32 said on Friday that the global economy had seen two successive major shocks in a short span of three years, and despite this, it set annual production records at three of its operations.
In its annual report, South32 chairperson Karen Wood said while the world had reopened since the Covid-19 pandemic, geopolitical tensions remained heightened throughout the 2023 financial year, including the ongoing tragic war in Ukraine and strained ties between the major economic centres.
“This has contributed to market fragmentation and volatility in a landscape where policymakers and companies are already grappling with structural risks including climate change, higher sovereign debt levels, ageing demographics, and rising income inequalities.
“Against this volatile and uncertain backdrop, we set annual production records at three of our operations and delivered one of our largest underlying profit results to date, with underlying earnings before interest, tax, depreciation, and amortisation of $2.5 billion (R48bn). This was achieved despite lower commodity prices and industry-wide inflationary pressures,” she said.
South32 is a diverse miner, which produces commodities including bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical coal, and manganese from its operations in Australia, southern Africa, and South America.
South32 CEO Graham Kerr said the macroeconomic environment remained volatile throughout the 2023 financial year.
“Inflationary pressures persisted in many jurisdictions which led to an unprecedented pace of interest rate rises by major central banks which impacted demand, particularly industrial activity.
“Although China reopened from its zero Covid-19 policy in the second half of the year, economic growth did not meet initial expectations,” he said.
Kerr said despite the challenging operating environment, the group achieved record annual production at Hillside Aluminium, Australia Manganese, and South Africa Manganese, and had a strong finish to the year with Brazil Alumina, Cannington, and Illawarra Metallurgical Coal returning to stable operations following adverse weather and other temporary impacts.
“Underlying earnings decreased as the combination of a decline in commodity prices from record levels in many markets in the prior period, and higher inflation and uncontrollable costs, more than offset higher production volumes,” he said.
Kerr said the group's strategy of optimising the performance of its operations, unlocking their potential, and identifying new opportunities to create value for its stakeholders had helped it navigate economic cycles over the last eight years.
“Recent portfolio improvements have helped us deliver strong production growth, with aluminium production increasing by 14%, base metals by 17%, and manganese by 4% in the 2023 financial year.
Looking ahead, the group said its recent portfolio improvements delivered strong growth in aluminium and base metals in the 2023 financial year.
“Looking forward, these investments are expected to underpin production growth in aluminium and copper of 4% in the 2024 financial year and a further 3% in the 2025 financial year,” it said.
South 32 said South African manganese was expected to continue to use higher-cost trucking to optimise sales volumes.
BUSINESS REPORT