Exxaro expects up to 6% decline in earnings
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JOHANNESBURG - EXXARO Resources, one of the largest black-empowered companies on the JSE, is on Thursday expected to report a decline of up to 6 percent in annual earnings for the year the end of December 2020.
Exxaro, which operates the Grootegeluk mine in Limpopo, yesterday flagged a decline of between 0 and 6 percent in headline earnings during the year to the end of December 2020, compared with a year earlier.
The decline in headline earnings was mainly due to the accounting of non-controlling interest for the outside shareholders of Eyesizwe for the full year compared with only two months in 2019. Eyesizwe is Exxaro’s black empowerment shareholder, which fully settled its acquisition debt in October 2019, three years earlier than anticipated.
Exxaro said the lower headline earnings was partially offset by better profitability from its own operations and higher income from the company’s equity-accounted investments.
The group expected a plunge of between 35 and 21 percent in attributable earnings per share for the year to the end of December 2020 compared with a year earlier.
Earnings before interest, taxation, depreciation and amortisation (Ebitda) for the year to the end of December 2020 were, however, expected to increase between 13 and 27 percent compared with 2019.
Core Ebitda for the year to the end of December 2020 was expected to increase between 16 and 30 percent, compared with the year to the end of December 2019.
Exxaro said although its operations were declared an “essential service” during the lockdown periods and able to operate, the environment remained challenging.
“The company’s own-managed operations were resilient, resulting in higher commercial coal revenue and record coal export volumes, albeit at lower US dollar prices, but benefiting from a weaker exchange rate during the year,” said Exxaro.
Exxaro said in addition to the accounting of non-controlling interest for the external shareholders of Eyesizwe in the current period, the financial results in both periods were influenced by, among other factors, the gain on the partial disposal of Tronox and the redemption of the membership interest in Tronox UK in the comparative year of R2.3 billion and R1.88bn impairment charges in the current year.
These were partially offset by a R1.32bn gain on the deemed disposal of the previously held 50 percent equity interest in the Cennergi joint venture during the current year.
Impairment charges relate mainly to the group’s Exxaro Central Coal mine.
“Our income from equity-accounted investments is higher than the comparable year, mainly due to our investment in Sishen Iron Ore Company,” said the group. Exxaro owns 21 percent of
Sishen, a subsidiary of Kumba Iron Ore, which delivered record earnings and a dividend pay-out during the 12 months to the end of December 2020 on the back of 19 percent higher dollar iron ore prices to $115 (R1 715) a ton.
Exxaro said that following the acquisition of the remaining 50 percent equity interest, power producer Cennergi was now consolidated from April 1, 2020.
Operating costs were knocked by inflationary pressure, additional distribution costs related to higher export volumes and higher buy-in costs for coal, partially offset by foreign exchange gains and the positive impact of the higher discount rates used in rehabilitation provisioning, it said.
Exxaro’s shares closed 2.61 percent lower at R178.20 yesterday.