15 August 2024
SALIENT FEATURES
These results are compared to the second half of 2023.
- Zero fatalities during the reporting period
- 0.05 LTIFR, against a target of 0.05
- Group Revenue of R19 billion, down 4%
- Net Operating Profit of R3.7 billion, down 14%
- EBITDA decreased by 10.5% to R5.1 billion
- HEPS at R15.28 per share, down 31.7%
- Net cash position of R9.77 billion
- Interim dividend of R7.96 per share
- Direct social impact contribution of R1.061 billion
Exxaro, South Africa’s black empowered diversified minerals and energy solutions business released its half year results ended 30 June 2024, with the highlights including coal export sales of 3.2 million tonnes and a price realisation of 95% in line with our target. The group’s performance shows a continued resilience and flexibility to respond with agility to a volatile market. The company announced that it is still within its 2024 market guidance and maintains its R12 – R15 billion cash book and the board has approved an interim dividend of R7.96 per share.
Exxaro’s Chief Executive Officer, Dr Nombasa Tsengwa said, “Our half year results demonstrate that our business performance continues to be resilient despite volatile markets locally and globally. Our Market-to-Resource optimisation strategy continues to add value to our portfolio and ultimately deliver consistent performance. As such, the Board has approved a share dividend of R7.96 per share in line with our strategic approach to capital allocation. Our commitment to safety within our operations has seen us achieve an on-target Lost Time Injury Frequency Rate of 0.05 for the group, which is indication of our approach towards continuing to intensify our day-to-day efforts to achieve zero harm in our operations. Additionally, we were able to successfully operationalise our decarbonisation and environmentally cleaner imperatives in the market by supporting our customers with higher quality, cleaner-burning coal products, in line with our decarbonation strategy.”
Financial results: Group revenue and EBITDA of our own managed operations declined by 4% and 11% respectively due to lower export prices, decreased domestic offtake and increased logistics costs. The total contribution from our non-managed operations was lower than in second half of 2023 as we saw weaker performance by all our equity accounted investments. SIOC’s equity income decreased by R1.6 billion.
It is evident that we are operating in a challenging environment, but despite tougher trading conditions, our cash generation of R4.8 billion resulted in a net cash position of R9.8 billion, setting a solid foundation to execute our growth strategy. This translated into Headline Earnings Per Share of R15.28.
Coal business performance: Coal operations responded with agility to volatile markets by responding promptly to opportunities to maintain business resilience thereby delivering on capital excellence. Total production cash cost were contained below mining inflation of 2.1%. We saw that our alternative logistics channels yielded returns as our export sales increased by 21.8% to 3.2 million tonnes during the first half of 2024.
Coal production volumes declined by 12.7% from 22.1 million tonnes for the second half of 2023 to 19.3 million tonnes in the first half of 2024, mainly attributed to continuing low demand from Eskom and logistical challenges.
Total coal sales volumes for the period decreased by 11.7%, negatively impacted by a lower offtake from Eskom at Medupi and Matimba power stations due to unit outages and equipment breakdowns. However, an improved performance has been seen towards the latter part of the reporting period.
The Coal EBITDA margin is 28%, which is stable when compared to the second half of 2023. The decrease in EBITDA at Waterberg of –R100 million (2%) was driven by a decrease in revenue of –R455 million due to lower sales volumes to both the domestic and export markets at lower export and local prices, offset by higher prices achieved on Eskom sales.
While EBITDA for Matla remained stable, the was a decrease in EBITDA of –R528 million (-108%) in Mpumalanga attributed to lower revenue of –R30 million with higher export volumes from the Belfast and Leeuwpan mines, although at lower prices while volumes to the domestic market decreased in the period, with export sales being prioritised.
The organisation became successful in developing alternative routes to the market which resulted in an increased export volume of 600 thousand tonnes or 22%. With Europe reverting to a normalised proportion of our sales and we have seen India back in the market as coal prices came down. We were able to successfully play into the decarbonisation and environmentally cleaner imperatives in the market by supporting our customers with higher quality, cleaner-burning coal product.
Energy business performance: Energy generation was reported at 339GWh is in line with expectations for the first half of the year and the operational EBITDA margin remains stable at 79% with revenue at R652 million, underpinned by the annuity nature of the long-term offtake agreements.
The operating wind assets project financing of R4.2 billion for the windfarms will be settled by 2031. This has no recourse to the Exxaro balance sheet and is hedged through interest rate swaps.
The FTSE Russell Economic Social and Governance (ESG) rating improved for the organisation to 4/5 for the reporting period and elevated Exxaro to the top 20% of ESG performers convened by the FTSE Russell. This is underpinned by Exxaro’s leading carbon initiatives and relatively strong governance initiatives compared to the organisation’s global peers. The organisation also saw an improved AA ESG rating from MSCI.
Exxaro ploughed back over R1.061 billion in direct social impact investments, with R1.045 billion allocated through its coal business and the remaining R16.2 million through Cennergi, its energy solutions business. The local procurement spend on black Small Medium and Micro Enterprises (SMME’s) constituted 77% of the social investment. Combined, these initiatives have supported 372 SMME’s, through local procurement as well as enterprise and supplier development in the first half of 2024.
Tsengwa concludes, “We remain steadfast in our commitment to our Sustainable Growth and Impact Strategy, which serves as our guiding principle in line with our growth ambitions. To realise this vision, we continue to take a strategic approach by forging meaningful partnerships with our key stakeholders, and the wider community. Together with our employees, this enables us to build a sustainable business that consistently delivers long-term value to our investors and broader stakeholder base”.