South32 Ltd.'s shares were down 5% in early afternoon trading on the ASX as the company recorded a 71% drop in net profit in fiscal 2019 to US$389 million, or 7.6 cents per share.
The drop was mainly attributed to a US$578 million posttax impairment charge related to its South Africa Energy Coal operation, which the company plans to divest.
South32 said it entered exclusive negotiations with Seriti Resources Holdings Pty. Ltd. for sale of the unit, and approvals for the transaction is expected by June 2020.
Seriti's offer, according to an Aug. 22 release, includes an up-front cash payment and a mechanism for both companies to share commodity price upside for an agreed period.
Citing people familiar with the process, Bloomberg News reported Aug. 20 that final offers for the unit ranged from US$300 million to US$350 million. South32 previously confirmed that it received bids for its South Africa Energy Coal unit, and The Australian Financial Review noted that the company received up to six bids for South Africa Energy Coal from companies.
South32's revenue in fiscal 2019 slid 4% to USS$7.27 billion as lower prices for aluminum and thermal coal more than offset stronger prices for alumina. Underlying earnings were down 25% to US$992 million as strong operating performance was more than offset by the lower prices.
The board declared a final dividend of 2.8 US cents per share, taking total dividends for the year to 9.6 cents, from 13.5 cents a year ago.
The company also increased its existing on-market share buy-back program by US$250 million to a total of US$1.25 billion, with a 12-month extension to the completion, leaving US$264 million expected to be returned by Sept. 4, 2020.
In 2020, South32 expects group production to rise 3% in fiscal 2020 with Illawarra metallurgical coal unit on-track to return to a three longwall configuration during the June 2020 quarter and the Worsley alumina expected to achieve nameplate capacity following an improvement in calciner availability.
Meanwhile, operating unit costs for majority of the company's operations is expected to decrease in fiscal 2020.
