Exxaro, SA’s largest coal miner, said on Thursday its coal production and sales for the six months to end-June were down about 13% and 12%, respectively, compared with the previous six months due to lower demand from Eskom and logistical challenges.
Thanks to improved performance at some of its coal stations Eskom did not load-shed for more than four months. But due to poorer performance and increased maintenance it had to resort to frequent power cuts during the quarter.
Total coal sales volumes for the period fell 11.7% to 18.9-million tonnes compared with the previous six months. Sales were down 5% on those of the first six months of 2023. These volumes were affected negatively by lower offtake from Medupi and Matimba power stations due to unit outages and equipment breakdowns, Exxaro said in its interim results presentation.
But the company said an improved performance was seen towards the latter part of the reporting period.
Coal production volumes fell 12.7% from 22.1-million tonnes for the second half of 2023 to 19.3-million tonnes in the first half of 2024.
There was a drop of only 1% in production volumes compared with 2023’s matching period.
The company expects full-year production of 39-million tonnes to 43.2-million tonnes, compared with 42.5-million tonnes in 2023. Sales volumes for the year are likely to be 38.4-million tonnes to 42.4-million tonnes, compared with 40.5-million tonnes last year.
Alternative ports
The miner increased exports during the first half of the year 22% to 3.2-million tonnes, compared with the previous six months. Exports were up 25% compared with the same six months in 2023.
Group manager of marketing and logistics Sakkie Swanepoel told journalists that about 75% or 2.4-million tonnes were exported via rail through the Richards Bay Coal Terminal (RBCT) and the remaining 820,000 tonnes through alternative ports at Maputo and Richards Bay.
After exporting 5.1-million tonnes last year, the group said it wanted to increase coal export sales to 5.7-million to 6.3-million tonnes in 2024.
Exxaro CEO Nombasa Tsengwa told shareholders that to implement “stringent cost containment” their coal business has been designed to run optimally at a production level of 50-million tonnes per year, including exports of 8-million to 12-million tonnes.
However, the deterioration in rail performance on the Transnet Freight Rail (TFR) coal line resulted in its coal shipments decreasing from 12-million tonnes in 2020 to 7.6-million tonnes in 2021 and 5.1-million tonnes in 2023.
RBCT exported 47.9-million tonnes in 2023, down from a 76-million tonne peak in 2017. It has set a target of increasing exports to 50-million tonnes this year.
Exxaro chief coal operations officer Kgabi Masia said they believed “we have seen the lows in TFR performance and we are cautiously confident that we will start seeing some improvement”.
Lower price
Having to operate below optimum production levels and the additional logistics costs incurred from having to make use of trucking to export coal through alternative ports was putting much pressure on cost management, and making it difficult to cushion against inflation, said Tsengwa.
The average benchmark API4 RBCT export price of $101 per tonne was 22% lower compared with $130 per tonne during the first half of 2023, resulting in a 24% decrease in the average realised export price for Exxaro of $96 per tonne (compared with $127 in the first half of 2023).
Swanepoel said $100 per tonne was still a “good” price when coal was exported using rail via RBCT, however if it had to be trucked to other ports $100 “does not go very far”.
Group revenue and earnings before interest, taxes, depreciation and amortisation from the group’s own managed operations fell 4% and 11% respectively.
Despite headline earnings per share falling about 38% compared with the first six months of 2023 and 32% compared with the previous six months to R15.28, the group declared a dividend of R7.96 per share.
“Our half-year results demonstrate that our business performance continues to be resilient despite volatile markets locally and globally,” said Tsengwa.
The revenue contribution from its energy business was 6% higher at R652m compared with the same six months in 2023. Generation from the Cennergi wind assets was about in line with last year’s performance at 339GWh.
By market close on Thursday Exxaro’s share price had fallen the most since May 8, down 3.91% to R174.90. While it fell about 7% so far this year, it is up 31% over the past year.
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