Last checked at 
LONDON (Alliance News) - South32 Ltd took further action to battle the fall in commodity prices on Thursday, sending its shares higher, after the company reported a hefty loss in the first half of the financial year.
South32 shares were trading up 4.6% to 59.62 pence per share on Thursday morning.
The miner, which was spun off from BHP Billiton PLC last year, launched a series of restructuring initiatives across a number of its assets in Australia and Colombia, and made further cuts to its full year budgets.
The restructuring plans will lead to severe cuts in sustaining capital expenditure at four of its operations, three of which are in Australia, and the plans will also lead to over 1,000 jobs being cut, as it attempts to streamline its assets following the large loss booked in the first half.
South32 reported a pretax loss from continuing operations of USD1.58 billion in the six months to the end of December, swinging from a USD786.0 million profit a year earlier, as revenue declined 27% to USD2.98 billion from USD4.08 billion.
Underlying results, which excludes exceptional items and used to measure the underlying performance of the business, also experienced severe declines in the period.
Underlying earnings before interest, tax, depreciation and amortisation came in at USD542.0 million, less than half the USD1.12 billion reported last year whilst underlying Ebit was down a staggering 80% to USD141.0 million from USD710.0 million. Both Ebitda and Ebit margins shrunk year-on-year.
South32 just about managed to stay in the black in terms of underlying earnings, reporting USD26.0 million by that measure, though still down 94% from the USD460.0 million reported a year ago.
South32, much like the wider market, continued to slash expenditure and costs to offset lower commodity prices. South32 said controllable costs in the first half were lowered by USD182.0 million whilst total capital expenditure was reduced by 22%.
That helped the company reduce its net debt to USD116.0 million from USD402.0 million at the end of June.
The restructuring plans launched Thursday will underpin the plan to reduce controllable costs further in the second half by another USD300.0 million, whilst the full year capital expenditure budget was slashed to only USD550.0 million from the original budget of USD700.0 million.
The miner aims to bring down operating costs at its assets in Australia and Colombia during the second half of this financial year and in the next financial year. South32 also aims to increase efficiency and productivity at those operations and said it is "well positioned to significantly exceed our cost savings targets, both in terms of quantum and timing".
The operations included in the plan are the Worsley alumina operation, South32's manganese asset and Illawarra coal operation, all in Australia, alongside the Cerro Matoso ferro-nickel asset in Colombia.
South32 retained its full-year guidance for most of its commodities, but lowered its production guidance at its Illawarra coal mine in Australia by 7% due to "difficult ground conditions".
At the Worsley alumina operation, which is one of the largest refinery operations in the world, South32 is implementing plans to bring operating costs, including sustaining capital expenditure, down to USD200 per tonne, building on the 11% year-on-year fall in 2015 to USD228 per tonne, based on an alumina price of USD225 per tonne.
At the wholly-owned Illawarra metallurgical coal operation, South32 aims to bring down operating unit costs, including sustaining capital expenditure, by 37% to USD66 per tonne.
Operating costs, including sustaining capital expenditure, at the manganese operations in Australia, in which it holds a 60% stake, will be brought down 43% to USD1.56 per dry metric tonne. This operation will not suffer redundancies like the others, and therefore will not lead to restructuring costs.
Lastly, the Cerro Matoso operation will see its operating costs, including sustaining capital expenditure, drop to around USD3.90 per pound of copper, building on the 11% year-on-year fall in 2015 to USD4.43 per pound of copper.
South32 are targeting three areas at the operations to bring those costs down; job cuts, reductions in sustaining capital expenditure, and through the aggregation of its procurement activities.
Worsley will see its headcount fall by around 15% by the end of 2016 as 390 jobs are cut, Illawara will cut 300 jobs to reduce its workforce by around 14% and Cerro Matoso will reduce its workforce by around 18% through 350 job cuts.
The total restructuring costs, mainly made up of redundancy costs, will amount to USD37.0 million.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.