Crafting a well-rounded portfolio is a must for every investor. Selecting the balanced array of stocks can set the stage for successful investment journey.
To begin with, a portfolio should have a few blue chip shares moving on a consistent growth path. Two such ASX 100 blue chip shares are
South32 Limited (ASX: S32)
South32 Limited has announced the selection of its Hermosa project in Arizona, United States for a US$166M award negotiation from the US Department of Energy (DOE).
The grant from the DOE’s Battery Materials Processing and Battery Manufacturing program will contribute towards the potential development of a commercial-scale manganese production facility.
South32 Limited, announcing its FY24 annual results for the period ended 30 June 2024 reported a strong performance in the second half of FY24 with an Underlying EBITDA of US$1.8 billion and Underlying earnings of US$380 million.
In FY24, South32 Limited achieved 98% of its revised copper equivalent production guidance, setting records at Hillside Aluminium and South Africa Manganese, and increasing Cannington's production by 10% despite weather challenges.
For FY25, the company plans to boost low-carbon aluminium production by 17% and copper output by 15%, driven by improvements at Brazil Aluminium, Mozal Aluminium, and Sierra Gorda. Australia Manganese will restart mining in phases, with wharf operations expected to resume in Q3 FY25. Capital expenditure is set to decrease by $52 million to $990 million, mainly due to lower sustaining costs following the Illawarra Metallurgical Coal divestment, though growth capital at Hermosa will rise significantly. Material EAIs are projected to increase by $70 million to $385 million, focusing on infrastructure repairs and expansions.
South32 is actively reshaping its portfolio to focus on base metals and growth opportunities. The sale of Illawarra Metallurgical Coal is a strategic move to simplify the portfolio and strengthen the balance sheet, allowing for increased capital management, including a US$200 million on-market share buy-back. The company is channeling investments into critical development projects, notably the Taylor zinc-lead-silver deposit at Hermosa and expanding copper production at Sierra Gorda. These initiatives align with South32’s goal of enhancing base metals exposure and advancing growth projects through rigorous study phases and exploration in promising regions. The expected decrease in capital expenditure for FY25, coupled with increased growth capital investment, underscores the Group’s commitment to strategic development and future expansion.
Suncorp Group Limited (ASX: SUN)
Suncorp Group Limited in its FY24 annual results for the period ended 30 June 2024 reported a robust increase in earnings for FY24, driven by improved underlying margins, strong investment returns, and natural hazard costs coming in below projections.
The Group's net profit after tax (NPAT) rose to $1,197 million, compared to $1,071 million in the previous year. The General Insurance business saw a significant boost, with gross written premiums (GWP) climbing by 13.9% due to unit growth and targeted price adjustments in response to rising reinsurance and claims costs. The underlying insurance trading ratio (UITR) improved to 11.1%, up from 10.6%, and net investment returns reached $661 million, reflecting favourable market conditions.
The Group's decision to sell Suncorp Bank to Australia and New Zealand Banking Group Limited (ANZ) on July 31, 2024, contributed to the overall financial strength, with net proceeds from the sale totalling approximately $4.1 billion, most of which is expected to be returned to shareholders in early 2025. While the Bank contributed NPAT of $379 million (down from $470 million), the sale allows Suncorp to focus solely on its insurance operations. Operating expenses for the Group rose by 8.5% to $2.5 billion, largely due to inflationary pressures and growth-related costs, although these increases were partially mitigated by productivity improvements.
Looking ahead, Suncorp's Common Equity Tier 1 (CET1) capital stands at $203 million, reflecting a disciplined approach to capital management, with a commitment to return excess capital to shareholders. The Board declared a fully franked final ordinary dividend of 44 cents per share, bringing the total dividend for FY24 to 78 cents, representing a payout ratio of 72% of cash earnings. The Group plans to enhance its insurance offerings and customer experiences, positioning itself as a dedicated insurer in the evolving market landscape.
Suncorp's transformation into a streamlined general insurer appears promising, especially following the strategic divestment of its banking operations. This allows the Group to sharpen its focus on insurance, positioning itself well for future growth. The anticipated GWP increases signal a strong demand environment, and if Suncorp successfully manages input costs, it could enhance profitability. Additionally, the commitment to modernizing its operations and integrating AI capabilities reflects a forward-thinking approach that aligns with industry trends. Overall, Suncorp is on a path to solidify its market presence while delivering value to shareholders, making it a company to watch in the evolving landscape.
Source: Company’s Report
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