South32 lifts payout despite soft outlook

South32 has more than doubled its half year payout to shareholders, overshadowing a softer outlook for the diversified miner.

CEO Graham Kerr says South32 has cash on its books, despite a dip in first-half profit.

CEO Graham Kerr says South32 has cash on its books, despite a dip in first-half profit.

Shareholders are to be paid 7.3 US cents a share, including an partially-franked special dividend of three US cents.

It also lifted its capital management program by $US250 million to $US1 billion, meaning it will return another $US540 million to shareholders before April 2019 in the form of dividends or share buybacks.

It joins a list of other big miners that have lifted shareholder payouts after a rebound in commodity prices in 2017 left them with excess cash.

South32 made a first-half profit of $US543 million ($A685 million), down 12 per cent from the same period last year when it recognised a gain on non-trading derivative instruments.

Underlying earnings for the six months to December 31 were up 14 per cent to $US544 million, as higher realised prices for its commodities boosted revenue by $US273 million.

Chief executive Graham Kerr said volumes are expected to increase marginally in the second-half.

"After a challenging start to the 2018 financial year, production for the majority of our operations is tracking on or ahead of schedule," he said.

The miner kept full-year production guidance unchanged for most of its commodities, but has already suffered a significant reduction in coal and base metal production at its Illawarra Metallurgical Coal and Cannington operations due to extended outages.

After repeated warnings about rising cost pressures, South32 on Thursday confirmed unit costs would be higher-than-expected at its WA alumina, Illawarra coal, Cannington base metals, Colombian nickel and South African coal operations.

South32, which was spun off from BHP Billiton in 2015, is the world's largest producer of manganese ore, and also operates significant assets in the coal, nickel, alumina, silver, zinc and lead sectors.

RBC Capital Markets analyst Paul Hissey said the results were "mixed" and costs appeared slightly higher.

"There is sufficient moving parts to make a definitive result assessment difficult; however, the outlook commentary pushes us towards a more negative view," he said.

South32 shares slid 20 cents, or 5.4 per cent, to $3.50.

SOUTH32 HALF-YEAR PROFIT DIPS

* Net profit down 12pct to $US543m

* Revenue up 8pct to $US3.49b

* Interim dividend up 0.7 cents to 4.3 US cents, plus 3 cent special dividend

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