Markets News

UPDATE 2-Australia's South32 profit plunges, defers share buyback decision

* Results broadly in line with analyst expectations

* Miner to delay share buyback decision to Sept 2021

* Analysts see scope for recovery as commodity prices recover

* Shares fall by 1.6% (Adds chief executive, analyst comment, share price movement)

MELBOURNE - Aug 20 (Reuters) - Australian miner South32 Ltd on Thursday reported an 80.5% slump in full-year underlying profit on low prices for its key commodities and delayed a share buyback decision given uncertainty in global growth due to the COVID-19 pandemic.

Prices of South32’s top three commodities — metallurgical coal, aluminium and manganese — slumped in 2019 amid a trade dispute between China and the United States and remained weak as the pandemic disrupted businesses and hit production this year.

That crunched underlying net profit to $193 million for the year ended June 30, in line with analyst expectations, compared with $992 million a year earlier.

“It’s hard not to note that volatile markets and weak prices had an impact on our underlying profitability,” Chief Executive Graham Kerr told a media briefing.

As a result, the world’s biggest manganese miner has pushed back its decision around a share buyback by 12 months to September 2021, after it announced the suspension in March, and posted a final dividend of 1 cent per share, down from 2.8 cents last year.

Shares fell by 1.6% to A$2.11 by 0221 GMT against a 0.9% drop in the broader Australian market.

“We are very conscious of making sure that we have a strong balance sheet... As soon as we start building excess cash on the balance sheet again, we will return that to shareholders,” Kerr said.

Cost cutting and a nascent recovery in some commodity prices suggest the miner is well positioned to recover from here, analysts said.

“Given signs of life are emerging in several of the key business units, S32’s post-COVID trajectory looks interesting,” said Peter O’Connor of broker Shaw and Partners in a note.

The company said it expects to increase production at most of its operations next year and forecast broadly lower operating costs, as it reins in expenses.

The company, spun off from global mining giant BHP Group in 2015, posted annual revenue of $6.08 billion, down from $7.27 billion a year earlier. (Reporting by Melanie Burton in Melbourne, Shashwat Awasthi and Shruti Sonal in Bengaluru; Editing by Devika Syamnath, Shounak Dasgupta and Shailesh Kuber)