Illawarra cost out targets

SOUTH32, which plans to cut 65 jobs by closing the Wollongong office of Illawarra Coal according to analysts, is expected to reveal the associated cost-out goals in August.
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Illawarra Coal image courtesy of South32.

Blair Price

“S32 is set to report its maiden production result in mid-July and its maiden earnings result in mid-August,” Macquarie Wealth Management said.

“We expect S32 to provide some production guidance in July and its cost out targets with the full-year result in August.”

Macquarie, which issued a report on S32 following the B grade credit ratings from Moody’s and Standard and Poor’s on the company, also believed the BHP Billiton spinoff could comfortably maintain those ratings.

“We believe S32 could increase returns to shareholders by $US400-500 million and maintain its B grade ratings on our forecasts for the next two years,” the broker said.

“The outlook becomes more challenging on spot prices, but S32 should still be able to sustain the ratings, although the potential for additional capital management declines.”

An S32 analyst trip last month revealed Illawarra Coal’s cost-out plans to close down the Wollongong office according to UBS.

Macquarie, which also attended this trip, has said S32 could save $10 million from Illawarra Coal as part of cost out plans to rationalise the head offices across the various former BHP Billiton divisions.