Diversified S32 rallied +4.1% on Thursday following impressive headline numbers, including underlying profit that beat estimates. However, unlike the high-flying stocks mentioned earlier, OK will probably be good enough on the reporting front for the miners; hence, the gain—the markets are underweight.
- Underling revenue of $3.85bn, down -0.8% YoY.
- Underlying earnings (Ebitda) of $1.02 billion up +44% yoy, inline with expectations.
- Profit of $375 million ahead of the $335.8 million expected.
- Interim dividend per share 3.4c.
- They retained FY25 production guidance released a few weeks ago.
S32 is a diversified mining and metals company with a portfolio that includes alumina, aluminium, copper, manganese, metallurgical coal, lead, nickel, silver, and zinc. However, the company specifically attributed its improved result to a 5% lift in aluminium production and a 16% increase in copper production during the half year. Not surprisingly, in the new Trump environment, aluminium was a hot topic on the call:
- South32 believes aluminium made in Canada will continue to flow to the US; given its reliance on the supply, the buyers will pay the difference—56% of US aluminium imports come from Canada.
- S32 makes aluminium in South Africa, Mozambique, and Brazil; hence, tariffs could help S32, but it’s a very fluid situation. The tariffs could be gone by Monday!
Aluminium prices on the London Metals Exchange (LME) have fallen this week, but regional premiums have started to reflect the risks around tighter supply—as bad for the US as Canada! We believe tariffs on aluminium probably will not last until Christmas; hence, they won’t have a meaningful long-term impact on S32.
MM is cautiously bullish on S32.
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