Exxaro revenue rises on record exports, weaker rand
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JOHANNESBURG – Diversified mining company Exxaro Resources’ revenue jumped 18 percent to R14.1 billion in the six months ended in June on record export volume and help from a weaker rand.
Exxaro said on Thursday that that its coal revenue accelerated 15 percent to R13.73bn from R11.92bn a year earlier, driven by higher volumes to Eskom and exports as well as the addition of clean energy revenue relating to Cennergi, contributing 100 percent from April.
Last year Exxaro acquired 100 percent of Cennergi, a renewable energy company, in a bid to enhance the group’s energy diversification strategy.
The weaker rand against the US dollar also served as a buffer from the API4 index price which dropped 11 percent to $66 (R1 152.30) per ton compared to $74 a ton a year earlier.
Chief executive Mxolisi Mgojo said Exxaro maintained a resilient financial and operational performance during the period, despite sustained headwinds compounded by market challenges and Covid-19.
“The improved revenue was mainly due to higher commercial coal revenue supported by record coal export volumes, albeit at lower US 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,” said Mgojo.
Exxaro exported 5.9 million tons during the first half of 2020, 39 percent higher compared to the first half of 2019, on a seven-fold increase in sales to Vietnam and strong sales to Pakistan. This was despite a 20 percent decline in demand from India.
General manager for marketing and logistics Sakkie Swanepoel said Pakistan proved to be a very sustainable market for South Africa, given that a lot of coal-fired generation had been constructed in the country.
Swanepoel said Vietnam also grew remarkably, importing less than 10 million tons of coal by 2017. He said the supply was forecast to grow by close to 50 million tons this year.
“If Vietnam was not such a strong buyer of South African coal in the first half, the South African coal industry would have been in serious trouble,” he said.
Exxaro said, however, that the export performance would likely drop and estimated that the seaborne market was currently oversupplied by around 30 million tons. “It will contract by between 70 million tons and 100 million in 2020 compared to 2019,” said the company.
Thermal coal production volumes excluding buy-ins were up 7 percent during the period mainly due to the ramping up of the Belfast mine and higher off-take from Eskom at Grootegeluk and Matla, resulting in 10 percent higher sales.
Executive head for coal operations Nombasa Tsengwa said challenges at Grootegeluk due to the lower off-take from the Medupi power station had been resolved. “We can now say that Medupi has been able to improve its off-take, resulting in Grootegeluk moving up by 1.1 million tons,” said Tsengwa, adding that the group also realised improvement from Transnet Freight Rail.
“We see a lot of trains coming out in the Waterberg. We are seeing eight trains a week, which is something we have not seen at any time,” she said.
Exxaro said it was still engaging on the force majeure notification by Eskom. Eskom had declared force majeure for the supply of coal to the Medupi and Matimba power stations in April following the Covid-19 lockdown.
Financial highlights included the interim dividend of R2.3bn or R6.43 per share, down from R3.09bn or R8.64 per share a year earlier.
Consolidated group core earnings before interest, taxation taxation, depreciation amortisation increased 40 percent, mainly as a result of the higher revenue, which was partly offset by inflationary pressure on costs, additional distribution costs relating to higher export volumes, higher buy-ins and higher costs due to the ramp-up at Belfast. Headline earnings were down 24 percent to R3.3bn.
Exxaro shares declined 2.68 percent on the JSE on Thursday to close at R136.15.