South32 Ltd (When-Issued) American Depositary Receipts – Sponsored (Australia) (OTCMKTS:SOUHY) was a notable decliner during the overnight trading session. The stock plunged by close to 3% on the back of high volumes, considered to be a bearish signal. The stock has been forming lower lows and lower highs, which is indicative of the bears being in control at the moment. The momentum indicator for the stock has given a fresh sell signal. The relative strength index has given a sell signal indicative of the lack of inherent strength. Traders on the street believe that the stock could head to levels of $4.62 in the near term.
South32 Ltd (OTCMKTS:SOUHY) has announced financial results for FY15. As per the reports, the financial performance of the company was hit by adverse market conditions. Graham Ker, CEO, South32, said that despite the market conditions, the prime objective of the company would continue to be reducing controllable costs by $350 million per annum.
Financial Highlights
South32 demerged from BHP Billiton successfully in May 2015 to start a new journey. Although its financial results suffered a little, but the situation didn’t go out of control. Reports claim that Pro-forma FY15 PAT was $28 million, compared to $64 million in the previous year. Regardless of a slight dip in PAT, underlying earnings of the company increased to $575 million from $407 million in FY14.
Underlying EBIT in FY15 accounted for $1 billion compared to $642 million in FY14. The EBITDA margin for the year increased to 26% from last year’s 20 percent. Free cash flow before paying interest and tax for the year was $1.68 billion as compared to previous year’s $974 million. It was a year of mixed results. The return on invested capital in FY14 was 4%, while increased a bit and touched 6.2% level in FY15.
Future Outlook
Based on these financial results, South32 looks forward to redesigning the way it works by fast-tracking the implementation procedure of its regional operating model. It also seeks to bring down the controllable cost by $350 million or more yearly latest by the end of FY2018. South32 wants to reduce its sustainable capital expenditure to $650 million,9% lesser than the current year’s total.
It seeks to build up the confidence of all the shareholders; therefore, intends to distribute 40% overall underlying earnings as earnings every six months. There are numerous long-term assets that are underperforming at present. South32 is working on a strategy through which the performance of these assets can be improved in the long term.
