Slide 1: Hitting the Ground Running: FY15 Financial Results and Outlook
For personal use only HITTING THE GROUND RUNNING • FY15 FINANCIAL RESULTS AND OUTLOOK • AUGUST 2015
Slide 2: Important Notices
• IMPORTANT NOTICES • THIS PRESENTATION SHOULD BE READ IN CONJUNCTION WITH THE “FINANCIAL RESULTS AND OUTLOOK - YEAR ENDED 30 JUNE 2015” ANNOUNCEMENT RELEASED ON 24 AUGUST 2015, WHICH IS AVAILABLE ON SOUTH32’S WEBSITE (WWW.SOUTH32.NET). For personal use only • FINANCIAL INFORMATION • To assist share
Slide 3: Hitting the Ground Running
For personal use only HITTING THE GROUND RUNNING • GRAHAM KERR • CEO
Slide 4: Key Highlights
For personal use only • KEY HIGHLIGHTS Pro forma EBIT +56% to US$1B Strong balance sheet Record production at 4 assets Net debt US$402M Pro forma Underlying earnings +41% to US$575M Simple strategy to To reduce controllable costs Sustaining capital expenditure maximise ROIC by a further US$350M by F
Slide 5: Safety Is Paramount
For personal use only • SAFETY IS PARAMOUNT • 2 fatalities in FY15 and another in FY16 − Worsley (September 2014) − South Africa Manganese (May 2015) − South Africa Aluminium (July 2015) • The loss of any colleague is unacceptable • Safety underpins everything we do − We continue to build on our saf
Slide 6: FY15 Pro Forma Financial Results
For personal use only FY15 PRO FORMA FINANCIAL RESULTS • BRENDAN HARRIS • CFO
Slide 7: Pro Forma Financial Statements
For personal use only • PRO FORMA FINANCIAL STATEMENTS • Important changes made since the publication of the Listing Documents • Carrying value of our Manganese assets revised − Australia Manganese US$1.1B (-US$499M versus Listing Documents) − South Africa Manganese US$576M (-US$826M versus Listing
Slide 8: Underlying Earnings Adjustments
For personal use only • UNDERLYING EARNINGS ADJUSTMENTS FY15 (Post tax) Adjustments required to reconcile pro forma Profit after taxation to Underlying earnings US$M Profit after taxation 28 Impairments 416 - South Africa Energy Coal 391 - Cerro Matoso 25 Repeal of Minerals Resource Rent Tax legisla
Slide 9: Underlying EBIT Waterfall
• UNDERLYING EBIT WATERFALL (US$M) For personal use only 102 1,001 194 Uncontrollable 29 20 282 18 232 642 268 435 62 575 197 taxation expense³ Prices¹ FY14 Underlying Foreign exchange Underlying net Inflation efficiencies² FY15 Underlying FY15 Underlying Other items Volume efficiencies finance cost
Slide 10: Net Finance Costs
For personal use only • NET FINANCE COSTS FY15 Reconciliation of net finance costs US$M Unwind of discount applied to restoration and rehabilitation provisions 120 Finance lease charges 60 Other 14 Underlying net finance costs 194 Exchange variations on net debt (134) Net finance costs 60 24 AUGUST
Slide 11: Closure Provisions
• CLOSURE PROVISIONS Mozambique For personal use only FY15 South Restoration and rehabilitation provisions by asset (our share) US$M America South Africa Energy Coal1 746 Australia South Africa Aluminium2 237 Worsley Alumina 168 Cerro Matoso 85 South Cannington 87 Africa Mozal Aluminium 53 Illawarra
Slide 12: A Strong Balance Sheet
• A STRONG BALANCE SHEET • Pro forma Free cash flow before interest and tax1 of For personal use only 30 June 15 Mozambique US$1.7B in FY15 Balance sheet US$M South America • Capital expenditure of US$768M2 in FY15 Current assets 2,868 • Our strong balance sheet is a key differentiator Non-current a
Slide 13: A Simple Approach to Capital Management
• A SIMPLE APPROACH TO CAPITAL MANAGEMENT • Well defined priorities for cash flow For personal use only ROIC − Maintain safe and reliable operations and an investment grade credit rating through the cycle − Shareholder dividends Competition for excess capital • Intention to distribute a minimum of 4
Slide 14: A Simple Strategy to Maximise Returns
For personal use only A SIMPLE STRATEGY TO MAXIMISE RETURNS • GRAHAM KERR • CEO
Slide 15: Current State
For personal use only • CURRENT STATE High quality, well maintained, Talented people Strong balance sheet cash generative portfolio Systems and processes Organic growth options need to be tailored to suit require a fresh approach the scale of our assets 24 AUGUST 2015 SOUTH32 FY15 FINANCIAL RESULTS
Slide 16: A Simple Strategy to Maximise Returns
• A SIMPLE STRATEGY TO MAXIMISE RETURNS OUR STRATEGY For personal use only Our strategy is to invest in high quality metals and mining operations where our distinctive capabilities and regional model enable us to stretch performance in a sustainable way. By maintaining financial discipline and conti
Slide 17: A Simple Strategy to Maximise Returns
• A SIMPLE STRATEGY TO MAXIMISE RETURNS OUR STRATEGY For personal use only Our strategy is to invest in high quality metals and mining operations where our distinctive capabilities and regional model enable us to stretch performance in a sustainable way. By maintaining financial discipline and conti
Slide 18: Our Regional Model Is a Key Enabler
• OUR REGIONAL MODEL IS A KEY ENABLER Corporate functions1 For personal use only Australian Region African Region Reduce layers of management Worsley Illawarra Alumina Metallurgical Coal Aggregate functional support South Africa Mozal Aluminium Aluminium Foster relationships Australia Cerro Manganes
Slide 19: Optimising Production and Input Costs at Worsley
• OPTIMISING PRODUCTION AND INPUT COSTS AT WORSLEY Alumina production For personal use only • Unlock incremental capacity (Mt, our share) − Targeting refinery availability of 96% in FY16 4.0 − FY16 production guidance of 3.95 Mt, +3% 3.5 • Seeking to increase labour productivity by ~5% in FY16 3.0 −
Slide 20: Optimising Throughput at Cannington
• OPTIMISING THROUGHPUT AT CANNINGTON Silver production and grade For personal use only • An improvement in paste plant performance is required to (FY05 index = 100) increase underground mining rates to mitigate grade decline 100 Production − FY16 silver production guidance of 21.65 Moz, -4% 90 Grad
Slide 21: Optimising Contractor Usage and Rates at Illawarra Metallurgical Coal
• OPTIMISING CONTRACTOR USAGE AND RATES AT ILLAWARRA METALLURGICAL COAL Production For personal use only • Production for FY16 is broadly unchanged (Mt, our share) − Saleable coal production capacity of 9 Mtpa 9 − Appin Area 9 project sustains capacity as West Cliff is 8 depleted 7 • Seeking to incr
Slide 22: Optimising the Product Mix and Costs at South Africa Energy Coal
• OPTIMISING THE PRODUCT MIX AND COSTS AT SOUTH AFRICA ENERGY COAL Production mix For personal use only • Lower production expected due to the curtailment of mining (%) activity in the Khutala open-cut 100 Domestic 90 − FY16 production guidance of 32.0 Mt, -7% 80 − Increasing the proportion of expor
Slide 23: Optimising Energy Efficiency at Our African Aluminium Smelters
• OPTIMISING ENERGY EFFICIENCY AT OUR AFRICAN ALUMINIUM SMELTERS Aluminium production For personal use only • Electricity load shedding events increased in FY15 (kt, our share) Hillside Mozal − Remains within permissible limits 750 − Hillside +100% 700 − Mozal +50% 650 600 • Continual improvement in
Slide 24: Optimising Our Manganese Assets
• OPTIMISING OUR MANGANESE ASSETS EBITDA margin For personal use only • GEMCO is a leading asset in the manganese industry 60% − Low cost and high value in use South Africa Manganese Australia Manganese − EBITDA margin of 46% in FY15 50% − Increase in labour productivity and procurement initiatives
Slide 25: A Simple Strategy to Maximise Returns
• A SIMPLE STRATEGY TO MAXIMISE RETURNS OUR STRATEGY For personal use only Our strategy is to invest in high quality metals and mining operations where our distinctive capabilities and regional model enable us to stretch performance in a sustainable way. By maintaining financial discipline and conti
Slide 26: Converting High Value Resource to Reserve
For personal use only • CONVERTING HIGH VALUE RESOURCE TO RESERVE • Advancing major projects into feasibility in FY16 − Large in-situ resource has the potential to underpin a 20 year extension of the export oriented Klipspruit mine − Assessing development options to significantly extend the life of
Slide 27: A Simple Strategy to Maximise Returns
• A SIMPLE STRATEGY TO MAXIMISE RETURNS OUR STRATEGY For personal use only Our strategy is to invest in high quality metals and mining operations where our distinctive capabilities and regional model enable us to stretch performance in a sustainable way. By maintaining financial discipline and conti
Slide 28: Our Commitments
For personal use only • OUR COMMITMENTS Optimise the performance of Maximise their potential Identify new opportunities our existing assets To reduce controllable costs Sustaining capital expenditure Simple strategy to by a further $350M by FY18 to decline by 9% to $650M maximise ROIC 24 AUGUST 2015
Slide 29: Appendices
For personal use only APPENDICES
Slide 30: Earnings Sensitivities
• EARNINGS SENSITIVITIES EBIT impact +/- 10% Estimated impact on FY15 Underlying EBIT of a 10% change in commodity or currency For personal use only US$M Aluminium 202 Alumina 174 Energy coal 92 Metallurgical coal 79 Manganese ore1 72 Nickel 56 Silver 40 Manganese alloy1 38 Lead 36 Zinc 16 Australia
Slide 31: Capital Expenditure Guidance
For personal use only • CAPITAL EXPENDITURE GUIDANCE Capital expenditure (our share) FY15 FY16e US$M US$M Major projects 51 50 All other capital expenditure (including Deferred stripping) 578 550 Total (excluding equity accounted investments) 629 600 Equity accounted investments 139 100 Total 768 70
Slide 32: Production Guidance
• PRODUCTION GUIDANCE Production guidance for upstream asset (our share unless otherwise noted) FY15 FY16e FY17e For personal use only Worsley Alumina Alumina production (kt) 3,819 3,950 3,955 Brazil Aluminium Alumina production (kt) 1,328 1,320 1,320 South Africa Energy Coal (100%) Domestic coal pr
Slide 33: South32
For personal use only SOUTH32