South32 Rallies Despite Citis Earnings Downgrade

Highlights:

• South32 Limited (ASX: S32) rose 3.6% at the time of writing despite Citi’s forecast downgrade.
• Citi cut FY25 and FY26 earnings estimates due to lower alumina prices.
• Market sees value in South32’s diversified portfolio and strong balance sheet.

Shares of diversified miner South32 Limited (ASX: S32) gained momentum, rising 3.6% at the time of writing, even as investment bank Citi revised its earnings forecasts downward for the company. The upbeat investor response came despite a more cautious outlook for the company’s financial performance in the next two years.

Citi Cuts Forecasts on Alumina Price Weakness

Citi analysts lowered their earnings estimates for South32 for fiscal years 2025 and 2026, citing sustained weakness in alumina prices. The revision reflects expectations of reduced profitability in the company’s alumina operations, a key contributor to its revenue. The commodity has faced pricing pressures due to softer global demand and increasing supply.

Despite the downgrade, Citi maintained a neutral stance on the stock, acknowledging South32’s strong balance sheet and diversified asset base, which includes operations in aluminum, manganese, coal, and base metals across multiple regions.

Market Responds Positively to Broader Strength

The positive share price movement indicates that investors may be focusing on broader market dynamics or potential long-term value in South32’s diversified portfolio. The mining sector, in general, has shown resilience in recent sessions, driven by stabilizing commodity prices and optimism around demand recovery in key markets like China.

Additionally, South32’s cost discipline and ongoing efforts to optimize its asset portfolio may be offering reassurance to shareholders despite near-term earnings pressure.

Outlook Remains Mixed

While the downgrade in earnings forecasts presents a headwind, South32’s performance today suggests that the market remains cautiously optimistic about the company’s long-term fundamentals. As alumina prices continue to fluctuate, investor attention will likely turn to South32’s upcoming quarterly production and financial updates for clearer guidance.

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