South32 (ASX:S32) Is Down 7.1% After Mozal Power Update and Impairment Plan - Has The Bull Case Changed?

• Earlier this week, South32 announced an update on its work to secure a new electricity supply agreement for the Mozal Aluminium smelter, along with plans to recognise an impairment expense in its fiscal year 2025 results.
• This operational development highlights South32's reliance on regional hydroelectric power, while also signaling future earnings pressure from the anticipated impairment charge.
• We’ll explore how the anticipated impairment expense for Mozal could influence South32’s broader investment narrative and forward-looking risk profile.

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South32 Investment Narrative Recap

To be a South32 shareholder, you need to believe in the company’s ability to manage operational complexity and ongoing project development while securing reliable resources for long-term aluminium production. The recent update on electricity supply negotiations and a flagged impairment expense at Mozal Aluminium is an operational hurdle, but it doesn’t materially change the biggest current catalyst, South32’s production growth and cost improvements, or the principal risk associated with future revenue disruptions from geopolitical or infrastructure issues in Mozambique.

Of recent corporate announcements, the reaffirmation of production guidance for 2025 stands out as particularly relevant, as it suggests the company’s confidence in maintaining operational targets in spite of uncertainty surrounding its Mozal power supply and upcoming impairment. This continued focus on stable output and cost performance remains a central point for those monitoring near-term earnings and margins.

Yet, in contrast, investors should pay close attention to the risk of supply chain disruptions in Mozambique, especially given that...

Read the full narrative on South32 (it's free!)

South32's narrative projects $7.4 billion revenue and $697.9 million earnings by 2028. This requires 5.9% yearly revenue growth and a $935.9 million earnings increase from -$238.0 million.

Uncover how South32's forecasts yield a A$3.54 fair value, a 22% upside to its current price.

Exploring Other Perspectives

Six members of the Simply Wall St Community estimated South32's fair value from A$3.37 to A$12.42 per share, reflecting wide variation in outlooks. Some expect steady production improvements to support performance, but the uncertain power agreement at Mozal adds another layer the company must manage.

Explore 6 other fair value estimates on South32 - why the stock might be worth over 4x more than the current price!

Build Your Own South32 Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your South32 research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
• Our free South32 research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate South32's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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