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MELBOURNE, Aug 25 (Reuters) - Australia's South32 Ltd S32.AX , the world's biggest producer of manganese, reported a 76 percent drop in annual underlying profit on Thursday, hit by weak metals prices.
Underlying earnings fell to $138 million in the year to June from $575 million a year ago, but beat analysts' expectations of around $75 million for the company's first full year since it was spun out of BHP Billiton BHP.AX BLT.L .
South32 produces manganese, aluminium and coal, commodities that have all slumped over the past year due to oversupply and slowing growth in China. It also produces nickel which has outperformed on concerns over supply cuts in the Philippines.
The company said the deterioration in commodity markets had cut revenue by $1.5 billion, with selling prices for its products tumbling by an 21 percent.
At the bottom line it reported a net loss due to hefty impairments booked in the first half of the 2016 financial year.
However, chief executive Graham Kerr said the company had significantly reduced its costs, and the company announced a 1 cent dividend. Analysts had expected no dividend.
"Looking to fiscal 2017, we have maintained production guidance for the majority of our upstream operations and will stretch performance to meet cost targets," he said.
South 32 cut costs by $386 million and slashed capital expenditure by 40 percent as it completed restructuring at its Worsley Alumina, Illawara metallurgical coal, manganese and Columbian nickel operations.
It expects capital expenditure to remain largely unchanged out to fiscal 2018 at $450 million a year.
Production at its Australian Manganese TEMCO operations returned to full production in July after power shortages last financial year, but it has idled three of four furnaces at its South Africa Manganese operations until market operations improve.