JOHANNESBURG (miningwekly.com) – Black-empowered diversified resources group Exxaro Resources on Thursday declared an interim dividend on posting a 40% increase in earnings before interest, taxes, depreciation and amortisation of R3.9-billion for the six months to June 30.
In the face of global trade tensions, a challenging local economy and declining thermal coal pricing, the consolidated half-year revenue of the JSE-listed company, headed by CEO Mxolisi Mgojo, was up 18% on the corresponding period of last year to R14-billion.
“Despite sustained global and domestic economic headwinds, compounded by market challenges and Covid-19, Exxaro maintained a resilient financial and operational performance, continuing our positive trajectory year-on-year,” Mgojo stated in a release to Mining Weekly.
The company’s operations generated a cash flow of R4.7-billion and core headline earnings a share rose 11% to 1 339c a share.
The company reported ongoing disciplined capital management and dynamic supply management responding to changing demand requirements.
Coal production volumes excluding buy-ins was 7% higher at 1 495 000 t and record coal export volumes were achieved as the company continued its pursuit of early value realisation.
Exxaro’s intense focus on environment, socioeconomic and governance, or ESG, has resulted in it being included in the FTSE4Good index
The company, which has been operating for three years without a fatality, has achieved 41 consecutive months of fatality-free shifts, as at August 1.
The improved revenue was mainly owing to higher commercial coal revenue supported by record coal export volumes, albeit at lower dollar prices but offset by a weaker exchange rate. This result is against a backdrop of severe market disruption, fluid operating conditions and general uncertainty.
Cost containment was actively managed during the period to effectively mitigate inflationary pressure on costs, however, Exxaro incurred higher distribution costs relating to higher export volumes, higher buy-ins and higher costs due to the ramp up at Belfast.
Total capital expenditure in the first half of 2020 decreased by R1 434-million when compared with the corresponding period last year, mainly owing to delays on the GG6 expansion project, delayed sustaining capital expenditure owing to the Covid-19 lockdown and cash flow preservation and optimisation measures implemented as part of the capital excellence strategy.
The higher coal production volumes were attributed to Belfast and Grootegeluk, subsequently resulting in 10% higher sales of 2 182 000 t. First-half export sales volumes increased from 4.3-million tons to 5.9-million tons with the group realising an average export price of $52/t compared with $54/t in the first half of last year and 17% weaker exchange rate. Export sales increased by 39% to 5 921 000 t attributable to more coal being available from Belfast, ECC, Grootegeluk as well as higher buy-ins, being partly offset by lower sales by Leeuwpan and Mafube.
In the Waterberg region, thermal coal production at Grootegeluk was up 6% to 816 000 t on increased offtake from Eskom for the Medupi power station as well as increased production at GG4/5. This resulted in sales volumes increasing 11% to 1 268 000 t mainly owing to Eskom and exports, partly offset by lower domestic sales owing to the impact of the Covid-19 lockdown.
Grootegeluk’s metallurgical coal production was in line with the comparative period while sales volumes were slightly lower mainly owing to the impact of the lockdown restrictions.
The commercial Mpumalanga mines’ thermal coal production was up 4% to 230 000 t on higher production at Belfast ramping up production. The lower production owing to Covid at ECC and Mafube partly offset that increase, while at Leeuwpan lower production was owing to the management of high stock levels on no Eskom sales and no alternative market being available.
Optimisation of the portfolio progressed well in the period with the effective date of consolidation of Cennergi into the Exxaro group being April 1. The company retains around 10% interest in the US-listed entity and 26% in the South African operations of Tronox. The disposal of its interest in Black Mountain Mining, which is currently held-for-sale, is imminent. The sale of Leeuwpan and ECC is progressing according to schedule.
“For the remaining coal business, portfolio optimisation will involve maximising the value of our coal resource through an ‘early value’ strategy, and we are continuously evaluating options in this regard,” Mgojo said.
Exxaro's broad-based black economic empowerment (B-BBEE) status remains at B-BBEE Level 2.