South32 (ASX:S32) Beats Profit Estimates by 12.5% and Hikes Dividend- Is It Time to Buy?

South32 Profit Surprise Meets High Expectations

South32 (ASX:S32) told two very different stories on Thursday. In the morning, the stock surged to around A$4.91 as investors cheered a strong half-year result. By the close, it had fallen nearly 8 per cent from the high to A$4.52, giving back all its gains. The message was clear: South32 delivered, but after rallying hard over the past year, expectations were already sky-high.

And the company did deliver. Statutory profit jumped 29 per cent to US$464 million, while underlying earnings of US$435 million came in well ahead of the US$386.6 million consensus. Management backed it up with a 15 per cent dividend hike and added US$100 million to its buyback program. But here is what we think matters most. These results show a business going through a major change, one that could make South32 look very different two years from now.

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Manganese Rebounds, and South32 Is Quietly Cutting Its Weakest Assets

A major part of the improvement came from operations recovering after earlier disruptions. The Australian manganese division, which was shut down by Tropical Cyclone Megan, moved from a US$34 million loss last year to a US$66 million profit. That marks a US$100 million turnaround in twelve months. Stronger copper, silver, and aluminium prices also helped, along with tighter cost management across the group.

On the other hand, aluminium continues to be a challenge. The Mozal smelter in Mozambique is set to move into care and maintenance around 15 March after South32 failed to secure affordable electricity. Production guidance for Brazil Aluminium was also reduced from 160,000 to 135,000 tonnes.

At first glance, these developments may seem negative. We view them differently. South32 appears willing to exit high-cost, energy-intensive aluminium assets and shift focus toward metals with stronger long-term demand. That requires discipline and is the type of move that can build sustainable value over time.

The Copper Story That Makes South32 Worth Watching

Here is where the excitement lies. South32’s Sierra Gorda copper mine in Chile is already pulling its weight, delivering US$180 million in cash distributions in just six months. A fourth grinding line under study could lift capacity by around 20 per cent, with a final investment decision expected mid-2026.

But the bigger potential lies underground. Exploration at Catabela Northeast, right next door to Sierra Gorda, has outlined an initial target of 1.1 to 2.9 billion tonnes of copper ore, open in every direction. If even the lower end holds up, it would meaningfully extend the mine’s life and give South32 a much larger copper footprint than the market currently appreciates. Add in the Hermosa project in Arizona, which is on track to bring zinc, lead, and silver online, and South32’s future commodity mix starts to look very different from its past.

The Investor’s Takeaway for South32

South32 ticked the important boxes this half: strong earnings, growing dividends, and a portfolio moving in the right direction. The shift from a sprawling miner weighed down by aluminium toward a leaner copper-focused business is becoming hard to ignore.

For bulls, the case is simple. Manganese is back, Sierra Gorda is generating serious cash, and Catabela could be a game-changer. For bears, the concern is that the stock has already had a big run, Hermosa will eat capital before it generates returns, and not every asset is performing.

We believe the copper growth optionality is not yet fully reflected in the share price. The key catalyst is the Sierra Gorda expansion decision expected in mid-2026. If it gets the green light, the stock could re-rate meaningfully. Current holders have good reason to stay patient. New investors might find a better entry if the recent pullback continues.