The loss was a result of $1.7 billion in impairments, while underlying earnings were $26 million.
Underlying earnings before interest, tax, depreciation and amortisation of $542 million represents an operating margin of 20%.
While controllable costs were reduced by 22% to $182 million, the company announced major restructuring measures to target $300 million in cost savings this financial year.
The restructure will involve a 4500 reduction in jobs by FY17, when compared to FY15 employee levels.
Around 1750 jobs will go this financial year.
The biggest cuts come at Worsley Alumina in Western Australia, where 390 jobs will go, equivalent to 15% of the workforce at the end of June last year, which will result in around $15 million in redundancy charges this half.
The company will cut Worsley capital expenditure for FY17 by 34% to $41 million, lift refinery utilisation, optimise power use, and continue to aggregate procurement activities.
Similar moves will take place at Illawarra Metallurgical Coal, where 300 jobs will go.
A small number of roles will go at GEMCO, while at least 350 jobs will be cut at Cerro Matoso in Colombia.
Overall, the changes lower South32’s FY16 capex guidance by $150 million to $550 million.
South32 CEO Graham Kerr said the initiatives would continue to strengthen underlying cashflow in a challenging commodity price environment.
“The refinement of our regional operating model allows us to remove additional layers of management while further aggregating functional support,” he said.
“As a result, we expect another significant increase in labour productivity and a corresponding reduction in cash costs. When combined with our broad-based focus on all procurement activities, we are well positioned to significantly exceed our costs savings target, both in terms of quantum and timing.”
Kerr said operating costs at Illawarra, Worsley and Cerro Matoso would move “sharply lower” to solidify their positions at the lower end of the cost curve.
“In addition, the reconfiguration of our leading Australia Manganese mine, GEMCO, will ensure that it becomes a positive contributor to free cashflow at current prices.”
The company had net debt of just $116 million at December 31 after repayments of $286 million, and had further lowered that debt to only $36 million at the end of January.
Kerr said the company was more focused on implementing its restructure than any merger and acquisition activity.
“We can afford to be patient and make the right decision,” he said.
South32 shares jumped nearly 6% to $A1.195.
