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December 2014 Half Year Pro Forma Financial Information
South32 Limited
(Incorporated in Australia under the Corporations Act 2001)
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32
ISIN: AU000000S320
9 December 2015
DECEMBER 2014 HALF YEAR PRO FORMA FINANCIAL INFORMATION
South32 Limited (ASX, LSE, JSE: S32) ("South32") will release its financial results for the
December 2015 half year (H1 FY16) on 25 February 2016. This will be the Company's first half
year financial result following the demerger from BHP Billiton in May 2015.
To assist shareholders to prepare in advance of its H1 FY16 results, South32
is providing unaudited pro forma financial information for the December 2014 half year (H1 FY15).
This information has been prepared in a consistent manner to the 2015
financial year (FY15) pro forma financial information that was published on 24 August 2015.
The Company's pro forma financial information reflects the business as it was structured at 30 June 2015 and must be read in conjunction with
the notes on page 3.
Unaudited statutory financial information for the December 2014 half year does not reflect the complete six months of performance of the operations that now form the South32 Group.
INVESTOR RELATIONS
Leng Lau
T +61 8 9324 9008
M +61 (0) 408 202 698
E Leng.Lau@south32.net
Susie Bath
T +61 8 9324 9647
M +61 (0) 418 933 792
E Susie.Bath@south32.net
Paul Formosa
T +61 8 9324 9376
M +61 (0) 431 152 742
E Paul.Formosa@south32.net
MEDIA RELATIONS
Jill Thomas
T +61 8 9324 9191
M +61 (0) 423 259 190
E Jill.Thomas@south32.net
Further information on South32 can be found at www.south32.net
31 DECEMBER 2014 PRO FORMA FINANCIAL INFORMATION
The demerger ASX Information Memorandum was published in March 2015 and included South32's pro forma financial
information for FY14 and H1 FY15. To assist shareholders in their understanding of the South32 Group, pro forma financial
information (non-IFRS financial information) was prepared to illustrate financial information of the South32 Group (Group) as
it was expected to be structured at 30 June 2015, and as though the Internal Restructure (refer below) had occurred as at 1 July 2013.
For the Group's FY15 pro forma financial information, additional adjustments were made to the Basis of Preparation to
include information that was not known when the ASX Information Memorandum was prepared. These adjustments were
disclosed in the South32 FY15 Annual Report.
The impact of the relevant adjustments, including the associated tax effect, has been incorporated into the previously
published H1 FY15 pro forma financial information on a consistent basis with FY15 and presented in this document.
Internal Restructure
South32 shares were transferred to eligible BHP Billiton Limited and BHP Billiton plc shareholders on 24 May 2015 and
25 May 2015, respectively. Economic separation and distribution of South32 shares to shareholders became effective from
25 May 2015. Prior to the demerger, the Group and BHP Billiton Group were required to undertake a number of internal
share and asset transfers in connection with the corporate restructure (Internal Restructure). As a result of the
Internal Restructure, several entities, assets and liabilities were transferred to the Group and entities and assets and
liabilities relating to the BHP Billiton Group were transferred out of the Group during FY15.
Basis of preparation
The Group's pro forma financial information has been derived from the statutory information of the Group and material
adjustments have been made to include the results of the current Group operations prior to the Internal Restructure and
other pro forma adjustments. The Directors are responsible for the preparation of the pro forma financial information and
believe that the basis of preparation fairly presents the Group's pro forma financial information for H1 FY15, including the pro
forma consolidated income statement, pro forma consolidated cash flow statement before financing activities and tax, and
after capital expenditure, and pro forma segment information.
The Group's pro forma financial information is intended for illustrative purposes only and does not purport to reflect the actual
financial performance that the Group would have obtained if the Group had operated as a stand-alone entity for the period
presented.
The Group's pro forma financial information has been prepared in accordance with the Group's accounting policies, including
the basis of preparation of the South32 Limited Financial Statements, as set out in the Notes to the Financial Statements
of the Group's 2015 Annual Report, including the recognition and measurement principles prescribed in IFRS and the
election to account for the acquisition of entities and net assets as common control transactions; except that IFRS does not
provide for:
- The preparation of Group financial information where the Group did not constitute a separate legal group during the
relevant period; and
- The amendment of financial information for pro forma adjustments.
Reconciliations between the pro forma financial information and the unaudited statutory financial information are included.
The reconciliations and pro forma financial information are unaudited.
31 December 2014 pro forma financial information and reconciliations
Pro forma income statement
US$M HY15
Revenue 4,089
Other income 150
Expenses excluding net finance costs (3,513)
Share of profit of equity-accounted investments 60
Profit from operations 786
Net finance cost 5
Taxation expense (452)
Profit after taxation 339
Basic earnings per share (US cents)(1) 6.37
Other financial information
Profit from operations 786
Earnings adjustments to derive underlying EBIT (76)
Underlying EBIT(2) 710
Depreciation and amortisation 417
Underlying EBITDA(2) 1,127
Profit after taxation 339
Earnings adjustments after taxation 121
Underlying earnings(2) 460
Basic underlying earnings per share (US cents)(1) 8.64
Pro forma operating cash flow before financing activities and tax, and after capital
expenditure
US$M HY15
Profit from continuing operations 786
Non-cash items 445
Profit from equity-accounted investments (60)
Change in working capital (205)
Cash generated from continuing operations 966
Dividends received (including equity-accounted investments) 131
Capital expenditure (317)
Operating cash flows from continuing operations before financing activities and tax, and after
capital expenditure 780
The following table notes the relevant significant items excluded from the Group's Underlying measures.
Pro forma earnings adjustments
US$M HY15
Earnings adjustments to underlying EBIT
Exchange rate (gains)/losses on restatement of monetary items (64)
Fair value (gains)/losses on derivative instruments (6)
Earnings adjustment included in operating loss of equity-accounted investments (6)
Total earnings adjustments to underlying EBIT (76)
Earnings adjustments to net finance costs
Exchange rate variations on net debt (93)
Total earnings adjustments to net finance costs (93)
Earnings adjustments to income tax expense
Tax effect of earnings adjustments to underlying EBIT 22
Tax effect of earnings adjustments to net finance costs 28
Exchange rate variations on tax balances 144
Other:
Repeal of Minerals Resource Rent Tax legislation 96
Total earnings adjustments to income tax expense 290
Total earnings adjustments after taxation 121
Pro forma segment note
Group and
South South Illawarra South unallocated
HY15 Worsley Africa Mozal Brazil Africa Metall- Australia Africa items/ Equity
US$M Alumina Alum- Alum- Alum- Energy urgical Mang- Mang- Cerro Cann- elim- accounting Total
inium inium inium Coal Coal anese(d) anese(d) Matoso ington ination adjustment South32
Revenue
Group production 319 823 340 268 683 425 339 231 340 486 (569) 3,685
Third-party products(a) 404 404
Inter-segment revenue 332 (332) -
Total revenue 651 823 340 268 683 425 339 231 340 486 72 (569) 4,089
Underlying EBITDA 155 203 94 140 93 122 151 40 115 187 (33) (140) 1,127
Depreciation and
amortisation (76) (34) (18) (39) (92) (100) (56) (27) (27) (29) (2) 83 (417)
Underlying EBIT 79 169 76 101 1 22 95 13 88 158 (35) (57) 710
Comprising:
Group production 79 169 76 101 (2) 22 95 13 88 158 (65) (108) 626
Third-party products(a) 30 30
Share of profit of
equity-accounted
investments(b) 3 51 54
Underlying EBIT 79 169 76 101 1 22 95 13 88 158 (35) (57) 710
Net finance costs(c) (88)
Income tax expense (162)
Underlying earnings 460
Earnings adjustments (121)
Profit after taxation 339
Capital expenditure 27 10 5 5 58 180 34 22 18 14 – (56) 317
(a) Third-party product sold comprises US$358M for aluminium, US$46M for coal and US$ nil for other. Underlying
EBIT on third-party products comprises US$17M for aluminium, US$13M for coal and US$ nil for other.
(b) Share of profit of equity-accounted investments includes the impacts of earnings adjustments to Underlying EBIT.
(c) Excludes interest income and interest expense on borrowings with BHP Billiton.
(d) The segment information reflects South32's interest in its manganese assets on a proportional consolidation basis,
which is the measure that is used by South32's management to assess the performance of its manganese assets.
The equity accounting adjustment is shown to reconcile to the treatment of its manganese assets on an equity-
accounted basis per the statutory financial information.
The following tables reconcile pro forma and statutory earnings for the December 2014 half year (H1 FY15).
Unaudited
statutory Demerger- Pro forma
consolidated related consolidated
HY15 income pro forma financial
US$M statement adjustments(a) information
Revenue 649 3,440 4,089
Other income 114 36 150
Expenses excluding net finance costs (676) (2,837) (3,513)
Share of profit/(loss) of equity-accounted investments – 60 60
Profit/(loss) from continuing operations 87 699 786
Net finance costs (24) 29 5
Taxation expense (153) (299) (452)
Profit/(loss) after taxation from continuing operations (90) 429 339
Profit from discontinued operations, net of tax 7 (7) –
Profit/(loss) after taxation (83) 422 339
Other financial information
Profit/(loss) from continuing operations 87 699 786
Earnings adjustments 4 (80) (76)
Underlying EBIT from continuing operations 91 619 710
Depreciation and amortisation 133 284 417
Underlying EBITDA from continuing operations 224 903 1,127
Profit/(loss) after taxation from continuing operations (90) 429 339
Earnings adjustments after taxation 147 (26) 121
Underlying earnings from continuing operations 57 403 460
The following tables reconcile pro forma and statutory operating cash flows before financing activities and tax, and after
capital expenditure for the December 2014 half year (H1 FY15).
Unaudited
statutory Demerger- Pro forma
consolidated related consolidated
HY15 cash flow pro forma financial
US$M statement adjustments(a) information
Profit/(loss) from continuing operations 87 699 786
Non-cash items 138 307 445
(Profit)/loss from equity accounted investments – (60) (60)
Change in working capital (67) (138) (205)
Cash generated from continuing operations 158 808 966
Dividends received (including equity accounted
investments) 4 127 131
Capital expenditure (184) (133) (317)
Operating cash flows from continuing operations
before financing activities and tax and after capital
expenditure (22) 802 780
(a) The significant items contained in the demerger-related pro forma adjustments comprise:
- The results of the current South32 Group operations between 1 July 2014 and their date of acquisition during the
December 2014 half year as part of the Internal Restructure;
- Exclusion of the results of New Mexico Coal for the period 1 July 2014 to 27 October 2014 being the date that it
ceased to be part of the South32 Group as a result of the Internal Restructure;
- Presenting South32 manganese assets (comprising South Africa Manganese, Australia Manganese and Samancor AG)
on an equity-accounted basis from 1 July 2013 including associated depreciation;
- Additional corporate costs associated with South32 Limited becoming a stand-alone group of US$38M;
- Exclusion of net finance costs charged by the BHP Billiton Group of US$39M;
- Exclusion of demerger related major corporate restructuring costs of US$13M;
- The tax effect of the above items; and
- Including certain significant tax expense items such as the impact of the Brazil Aluminium tax accounting adjustments
of US$16M.
Notes
(1) Pro forma December 2014 half year (H1 FY15) basic earnings per share is calculated as pro forma profit after taxation
from continuing operations divided by the number of shares on issue at 30 June 2015. Pro forma December 2014
half year (H1 FY15) basic Underlying earnings per share is calculated as pro forma Underlying earnings divided by the
number of shares on issue at 30 June 2015.
(2) Underlying EBIT is profit from continuing operations before net finance costs, taxation and any earnings adjustment
items, including impairments. Underlying EBIT is reported inclusive of South32's share of net finance costs and
taxation of equity-accounted investments. Underlying EBITDA is Underlying EBIT, before depreciation and amortisation.
Underlying earnings is Profit after taxation and earnings adjustment items. Underlying earnings is the key measure that
South32 uses to assess the performance of the South32 Group, make decisions on the allocation of resources and
assess senior management's performance. In addition, the performance of each of the South32 assets and operational
management are assessed based on underlying EBIT. In order to calculate Underlying earnings, Underlying EBIT and
Underlying EBITDA, the following items are adjusted as applicable each period, irrespective of materiality:
- Exchange rate gains/losses on restatement of monetary items;
- Impairment losses/reversals;
- Net gain/loss on disposal and consolidation of interests in businesses;
- Fair value gain/loss on derivative instruments;
- Major corporate restructures; and
- The income tax impact of the above items.
In addition, items that do not reflect the Underlying operations of South32, and are individually significant to the financial
statements, are excluded to determine Underlying earnings.
(3) The following abbreviations may be used throughout this report: US$ million (US$M); financial year (FY): Six months
ending 31 December (H1), for example six months ended 31 December 2014 is abbreviated to H1 FY15.
JSE Sponsor: UBS South Africa (Pty) Ltd
9 December 2015
Date: 09/12/2015 08:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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