Lower benchmark iron ore prices and sales and a stronger rand weighed on Kumba Iron Ore’s full-year earnings, with revenue falling 21% and a 38% decline in adjusted earnings before interest, tax, depreciation and amortisation (ebitda).
Revenue for the year ended December declined to R68.5bn from R86.2bn the previous year, due to a 21% decrease in the average realised free-on board (FOB) iron ore export price of $92/wet metric tonnes which resulted in a R17.6bn decrease in revenue, a 2% decrease in total sales volumes of 36.3-million tonnes, resulting in a R2bn decline in revenue, and a 1% stronger average rand-dollar exchange rate, leading to a R400m decrease in revenue.
Lower revenue was partly offset by a 38% increase in shipping revenue to R8.2bn due to higher freight rates and cost and freight (CFR) volumes increasing to 65% of total sales volumes.
Adjusted ebitda fell to R28.1bn from R45.7bn. Iron ore prices remain the most significant driver of Kumba's adjusted ebitda and earnings largely reflect the impact of lower iron ore prices combined with a decrease in sales volumes, higher freight rates and a stronger rand, the group said.
After depreciation of R5.7bn, an impairment reversal of R3.9bn and tax of R7.4bn, net profit decreased to R19.3bn from R29.8bn.
Headline earnings per share (HEPS) were 45% lower at R38.94. Kumba declared a final cash dividend of R19.90 per share, taking the total 2024 cash dividend to R38.67.
The group said the 2024 financial performance reflected its decision to reconfigure its business to a lower production profile, which was more closely aligned to Transnet’s logistics performance.
Its cost optimisation initiatives achieved R4.4bn of savings, exceeding the company's full-year target of R2.5bn-R3bn.
Total operating expenses increased by 2% to R46.1bn.
Global markets outside China, particularly in Europe, were under pressure due to low steel demand, Kumba said.
Kumba’s sales to these markets fell to 46% (2023: 49%) of total sales from 49%, relative to its medium-to long-term target of 45%-55%. Within the EU/MENA/Americas region, sales decreased to 24% from 29% in 2023 followed by the Japan/South Korea/Taiwan region which increased to 22% from 20% the prior year. China’s share of export sales increased to 54% from 2023's 51%.
The outlook for Kumba’s production for the period 2025 to 2027 had been updated, subject to Transnet’s logistics performance.
In 2025, the production guidance of between 35-million tonnes and 37-million tonnes is unchanged. In 2026, due to the main shutdown and tie-in of the UHDMS technology, production has been revised to 31-million tonnes and 33-million tonnes, with the balance of the saleable product expected to be supplemented by finished stock at Sishen.
Thereafter, in 2027, production is expected to increase to 35-million tonnes to 37-million tonnes.
Its sales guidance of 35-million tonnes to 37-million tonnes for 2025 was in line with the production guidance.
Based on its production outlook, Kumba was targeting a cost optimisation benefit of R2.5bn-R3bn for the full-year 2025.
“As we look forward to unlocking further value, Kumba’s UHDMS technology underpins our premium product strategy. More broadly, Kumba as part of the Ore Users’ Forum, will work closely with government and Transnet in support of logistics network reform and prioritise the Ore Export Corridor restoration programme,” said CEO Mpumi Zikalala.
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