South32 digs in against volatile exchange rates

South32 has released its Quarterly Report for September, showing a significant reduction in financial leases as the Australian dollar has depreciated against the US dollar.

After falling to 10.3 per cent on the ASX in June earlier this year, South32 has managed to reduce its net debt from US$206 million to US$196 million during the September 2015 quarter.

Capital expenditure rates for South32 are also expected to decline further than the previously forecast nine per cent drop, reflecting the weaknesses of the average exchange rates. 

According to South32 CEO Graham Kerr, “Our high quality and low-cost assets, motivated workforce and strong balance sheet remain a key point of differentiation.”

Production has increased overall within the alumina sectors, leading South32 to predict a saleable production increase of 3 per cent to 3.95 million tonnes

Manganese ore production also saw an increase during the quarter, maintaining competitiveness and sustainability throughout the cycle.

Declines of three to four per cent were witnessed in both coal sections as coal production in the 2016 financial year is forecast to decline by per seven cent to 31.95 million tonnes.

By reducing costs and de-capitalising the business, South32’s production increases may provide a temporary relief amidst the volatile exchange rate and the declining profitability in mining operations.