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South32 Limited (SOUHY)
OTHER OTC:SOUHY
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South32
(OTC:SOUHY)
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Rating:66Neutral
Price Target:
$17.00
▲(33.23% Upside)
Action:ReiteratedDate:02/17/26
The score is driven primarily by mixed financial performance (stable balance sheet but weak margins and declining free cash flow). Technicals add support with a clear uptrend and healthy momentum. The main offset is valuation risk from a high P/E and only modest dividend yield, while the earnings call was constructive but tempered by Mozal and project execution uncertainties.
Positive Factors
Conservative balance sheet
Low leverage (debt-to-equity ~0.18) and a strong equity ratio give South32 durable financial flexibility. Over the next 2–6 months this supports funding for ongoing capex, buffering commodity cycles, and sustaining capital returns without forcing distressed asset sales or dilutive financing.
Strong H1 operating performance
Robust H1 EBITDA and a high operating margin demonstrate operational resilience and cash-generation capacity. The near-net-zero net debt position boosts investment optionality and underpins the company’s ability to continue shareholder returns and fund staged project development.
Asset optionality & reserve growth
Reserve increases and underground optionality at Cannington, plus exploration targets at Sierra Gorda, extend mine life and optionality. These durable asset improvements support medium-term production profiles and provide optional, lower-risk pathways to future volume and margin growth.
Negative Factors
Weak margins & falling FCF
Low net margins and a steep drop in free cash flow weaken the company’s ability to self-fund growth and return capital. Persistently low FCF conversion increases reliance on asset-level improvement or commodity upcycles to sustainably finance projects and dividends.
Mozal power shortage & care/maintenance
A prolonged outage at Mozal materially removes production and creates ongoing care and closure liabilities. This structurally reduces group aluminium supply, trims near-term volumes and earnings, and creates multi-year uncertainty over asset reinstatement and social-cost exposure.
Project execution & approval uncertainty
Technical, contractual and approval delays at Sierra Gorda and shaft execution challenges at Hermosa raise the risk of slippages and cost overruns. Such execution risk can defer expected production and cashflow benefits, stretching payback timelines and reducing near-term project returns.
South32 (SOUHY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$14.51B
Dividend Yield2.48%
Average Volume (3M)8.54K
Price to Earnings (P/E)6.0
Beta (1Y)1.15
Revenue Growth4.84%
EPS GrowthN/A
CountryUS
Employees9,906
SectorBasic Materials
Sector Strength58
IndustryIndustrial Materials
Share Statistics
EPS (TTM)0.48
Shares Outstanding897,297,100
10 Day Avg. Volume0
30 Day Avg. Volume8,536
Financial Highlights & Ratios
PEG Ratio-0.18
Price to Book (P/B)0.97
Price to Sales (P/S)1.49
P/FCF Ratio25.86
Enterprise Value/Market Cap1.00
Enterprise Value/Revenue2.68
Enterprise Value/Gross Profit5.95
Enterprise Value/Ebitda17.56
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)0.99
Revenue Forecast (FY)$6.68B
South32 Business Overview & Revenue Model
Company DescriptionSouth32 Limited operates as a diversified metals and mining company in Australia, Southern Africa, North America, and South America. The company operates through Worsley Alumina, Hillside Aluminium, Mozal Aluminium, Brazil Alumina, Illawarra Metallurgical Coal, Eagle Downs Metallurgical Coal, Australia Manganese, South Africa Managanese, Cerro Matoso, Cannington, Hermosa, and South Africa Energy Coal segments. It has a portfolio of assets producing alumina, aluminum, bauxite, energy and metallurgical coal, manganese ore and alloy, ferronickel, silver, lead, zinc, and other base metals. The company also exports its products. South32 Limited has a strategic alliance agreement with AusQuest Limited for exploration opportunity in gold-copper targets at the Gunanya Project. The company was formerly known as BHP Coal Holdings Pty Limited and changed its name to South32 Limited. South32 Limited was incorporated in 2000 and is headquartered in Perth, Australia.
How the Company Makes MoneySouth32 generates revenue primarily through the sale of its mined products, which include aluminum, manganese, nickel, silver, zinc, and coal. The company operates a revenue model based on the extraction, processing, and marketing of these minerals and metals. Key revenue streams include the sale of aluminum products to industries such as automotive and construction, manganese ore to steel manufacturers, nickel for battery production, and coal for energy generation. Additionally, South32 engages in long-term contracts and spot market sales, allowing it to adapt to market conditions. The company also benefits from strategic partnerships and joint ventures that enhance its operational efficiency and market reach, contributing to its overall earnings.
South32 Earnings Call Summary
Earnings Call Date:Feb 11, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Aug 20, 2026
Earnings Call Sentiment Positive
The call conveyed a predominantly positive operational and financial position: strong H1 financial results (USD 1.1bn underlying EBITDA, 28.2% margin), a very low net debt position (USD 25m), maintained production guidance, active growth project progress (Taylor, Hermosa, Sierra Gorda, Ambler) and meaningful shareholder returns (USD 175m dividend + capital program increase). However, material near-term negatives — notably the Mozal power-driven care-and-maintenance decision, operational instability at Brazil aluminium, and execution/approval uncertainties on key projects (Sierra Gorda fourth grinding line and some Hermosa shaft issues) — temper the outlook. On balance, the positive financial performance, strong balance sheet and clear project momentum outweigh the operational challenges and asset-specific setbacks.Q2-2026 Updates
Positive Updates
Strong Financial Results
Underlying EBITDA of USD 1.1 billion, group operating margin of 28.2%, and growth in underlying earnings of USD 435 million. Net debt of USD 25 million at period end, indicating a strong balance sheet and cash position.
Shareholder Returns and Capital Management
Declared a fully franked ordinary dividend of USD 175 million for H1 FY26 and increased the USD 2.6 billion capital management program by USD 100 million, with USD 209 million remaining to be returned to shareholders.
Production Guidance Maintained
FY'26 production unit guidance unchanged across operated assets, reflecting confidence in safe and reliable operating performance and ability to capture higher commodity prices.
Safety Performance Improvement
Further significant improvement in significant hazard frequency and reductions across lagging safety indicators, demonstrating better hazard awareness and proactive reporting culture.
Project Progress — Taylor and Hermosa
Advanced construction of the large-scale Taylor zinc-lead-silver project and continued Hermosa execution: total spend to date just over USD 1 billion (~48% of schedule). Bench shaft ~56% complete (459m of 824m) and main shaft ~41% complete (370m of 898m). Process plant foundations and cable trays progressing well; draft EIS previously issued and final EIS expected in H2 FY26 with federal permits for Taylor, Clark and Peake expected in H1 FY27.
Cannington Ore Reserve Increase and Optionality
Announced a 28% increase in the underground ore reserve and highlighted further potential growth via underground and open pit development options. Underground resource ~45 million tonnes and management expects to spend ~USD 65–80 million across FY27–FY28 on ventilation, electrical and shaft infrastructure to enable life extension.
Sierra Gorda Exploration and Growth Potential
Defined an exploration target at Catabela Northeast adjacent to the Catabela pit ranging from 1.1 to 2.9 billion tonnes (exploration target reported), supporting potential mine life extension. Feasibility study for Sierra Gorda's fourth grinding line nearing completion with an independent review and potential joint final investment decision mid-calendar 2026.
Ambler and Broader Growth Pipeline
Pursuing further growth in copper and zinc, including Ambler Metals JV in Alaska and continued high-grade copper exploration at Peake supporting potential connectivity across the Hermosa complex.
Negative Updates
Mozal Power Shortage and Care & Maintenance
Mozal aluminium smelter faces prolonged power constraints from Cahora Bassa (drought-related). Management is planning care and maintenance due to lack of viable power supply; ongoing care & maintenance cost estimated at ~USD 5 million per year (100% basis) and closure/rehab estimate of ~USD 119 million. The shutdown has significant social/economic impacts (4,000–5,000 direct jobs, ~20,000 total impacted and ~3.9% of Mozambique's GDP).
High Cost/Unattractive Alternative Power
Alternative power offers from Eskom would be at very high rates (Megaflex ~USD 100/MWh cited), making restart uneconomic and contributing to the Mozal care and maintenance decision.
Operational Instability at Brazil Aluminium (Alcoa Operated)
Alcoa-reported instability resulted in an unplanned outage of ~80 pots; plant operating ~565 of 710 pots (~80% capacity). Alcoa revised production guidance down to ~135,000 tonnes in FY26 and ~140,000 tonnes in FY27 (versus capacity ~179,000 tonnes), adversely affecting South32's exposure to that asset.
Sierra Gorda Project Delays & Management Changes
Fourth grinding line experienced technical/contractual issues around solids thickness and licensing; engineering and approvals delayed. Management changes were made due to previous leadership underperformance. Independent review and partner approvals still required, delaying final investment decision timing.
Hermosa Shaft Challenges and Uncertainties
Bench shaft experienced steel supply issues, some water inflow (though less than expected) and contractor underperformance; main shaft improved but remains below completion. Time-and-materials contracts for shafts create execution cost uncertainty until later works are committed. Tariff/currency movements remain an external risk.
Restart Risk and Uncertainty for Smelters
Management noted restarting idled smelters is difficult and lengthy (Brazil and Mozal examples), creating uncertainty about timing and cost to return these assets to full production once power/supply issues are resolved.
Company Guidance
The company reiterated that FY‑26 production unit guidance is unchanged across operated assets and flagged upside from commodity price tailwinds and a planned drawdown of Mozal inventories expected to boost H2 cash generation; H1 results included underlying EBITDA of USD 1.1 billion, group operating margin 28.2%, underlying earnings growth of USD 435 million and net debt of USD 25 million, and the board announced a fully‑franked H1 dividend of USD 175 million plus a USD 100 million increase to the USD 2.6 billion capital management program (USD 209 million remaining to return). Major project and capital guidance: Taylor/Hermosa spend to date ~USD 1 billion (~48% of scheduled budget), bench shaft 56% complete (459/824 m) and main shaft 41% (370/898 m), with a project milestone and capex assessment due H2 FY‑26 and federal records of decision for Taylor/Clark/Peake expected in H1 FY‑27; Sierra Gorda’s fourth grinding line feasibility is nearing completion with an independent review and potential joint FID mid‑calendar 2026 and a Catabela Northeast exploration target of ~1.1–2.9 billion tonnes, plus ~110 million tonnes of oxide stockpile (~0.38% Cu) being evaluated; Cannington saw a cited 28% ore reserve uplift (noted as moving from 3 Mt to 13 Mt) increasing ~2 years of life, an underground resource of ~45 Mt, and planned capital of ~USD 65–80 million over FY27–28 for ventilation/shaft works; Mozal is being placed into care and maintenance with ongoing care cost ~USD 5 million p.a. and closure/rehab ~USD 119 million, current pot run‑rate ~565 of 710 pots (~80% capacity) and plant power demand ~940 MW, while Alcoa’s revised restart guidance cited ~135,000 t in FY‑26 and ~140,000 t in FY‑27 versus ~179,000 t capacity.South32 Financial Statement Overview
Summary
Mixed fundamentals: modest revenue rebound (+4.7% in 2025) and a conservative balance sheet (debt-to-equity 0.18) support stability, but profitability is weak (net margin 3.7%) and free cash flow declined (-15% in 2025) with low FCF conversion (FCF-to-net income 0.25).Income Statement
South32's income statement shows a mixed performance. The company has experienced a recent revenue growth of 4.7% in 2025, recovering from a decline in previous years. However, profitability margins such as the net profit margin (3.7%) and EBIT margin (14.3%) are relatively low, indicating challenges in maintaining high profitability. The gross profit margin has decreased from previous years, suggesting increased cost pressures.65
Positive
Balance Sheet
The balance sheet reflects a stable financial position with a low debt-to-equity ratio of 0.18, indicating conservative leverage. The equity ratio is strong, and the company maintains a positive return on equity of 2.4%, although it has decreased from prior years. Overall, the balance sheet suggests financial stability but with room for improvement in generating returns.70
Positive
Cash Flow
Cash flow analysis reveals a decline in free cash flow growth, which was -15% in 2025, indicating potential liquidity concerns. The operating cash flow to net income ratio is healthy at 0.85, suggesting efficient cash generation relative to net income. However, the free cash flow to net income ratio is low at 0.25, highlighting challenges in converting earnings into free cash flow.60
Neutral
| Breakdown | TTM | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 5.41B | 5.78B | 5.48B | 5.65B | 9.27B | 5.48B |
| Gross Profit | 2.44B | 2.52B | 2.53B | 2.56B | 3.82B | 1.01B |
| EBITDA | 826.07M | 1.34B | 141.00M | 416.00M | 4.47B | 769.00M |
| Net Income | 296.72M | 213.00M | -203.00M | -173.00M | 2.67B | -195.00M |
Balance Sheet | ||||||
| Total Assets | 13.80B | 13.73B | 14.24B | 14.56B | 16.34B | 13.24B |
| Cash, Cash Equivalents and Short-Term Investments | 1.66B | 1.68B | 842.00M | 1.26B | 2.37B | 1.61B |
| Total Debt | 1.69B | 1.63B | 1.57B | 1.74B | 1.83B | 1.21B |
| Total Liabilities | 4.54B | 4.87B | 5.27B | 5.19B | 5.56B | 4.29B |
| Stockholders Equity | 9.24B | 8.85B | 8.96B | 9.38B | 10.78B | 8.96B |
Cash Flow | ||||||
| Free Cash Flow | 388.16M | 332.00M | -2.00M | 303.00M | 2.48B | 815.00M |
| Operating Cash Flow | 1.43B | 1.33B | 1.12B | 1.19B | 3.07B | 1.41B |
| Investing Cash Flow | -892.17M | -20.00M | -1.11B | -908.00M | -2.10B | -608.00M |
| Financing Cash Flow | -475.87M | -405.00M | -417.00M | -1.39B | -215.00M | -501.00M |
South32 Technical Analysis
Positive
12.76
Price Trends
14.51
Positive
12.56
Positive
10.95
Positive
Market Momentum
0.43
Positive
55.97
Neutral
58.78
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SOUHY, the sentiment is Positive. The current price of 12.76 is below the 20-day moving average (MA) of 16.02, below the 50-day MA of 14.51, and above the 200-day MA of 10.95, indicating a bullish trend. The MACD of 0.43 indicates Positive momentum. The RSI at 55.97 is Neutral, neither overbought nor oversold. The STOCH value of 58.78 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SOUHY.
South32 Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $197.01B | 6.78 | 21.38% | 3.55% | -7.86% | 14.17% | |
69 Neutral | $156.83B | 13.01 | 17.00% | 4.60% | -0.44% | -4.20% | |
68 Neutral | $65.92B | 22.50 | 6.88% | 10.04% | -8.49% | -41.69% | |
67 Neutral | $3.12B | 34.48 | 8.26% | 0.43% | 3.93% | -73.94% | |
66 Neutral | $14.51B | 5.98 | 3.56% | 2.48% | 4.84% | ― | |
61 Neutral | $10.43B | 7.12 | -0.05% | 2.87% | 2.86% | -36.73% | |
54 Neutral | $10.39B | -100.09 | -4.98% | ― | 26.44% | -95.87% |
* Basic Materials Sector Average
SOUHY
South32
16.16
4.92
43.76%
BHP
BHP Group
75.60
26.96
55.41%
MTRN
Materion
150.40
61.69
69.54%
RIO
Rio Tinto
93.37
33.12
54.96%
VALE
Vale SA
15.42
6.69
76.59%
MP
MP Materials
58.48
34.08
139.67%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.