Exxaro Resources, the South African diversified resources group, lowered its interim dividend 28% to 1 143 cents per share after lower sales prices and sales volumes and logistics challenges impacted operations.
Revenue fell 15% to R18.94 billion, with coal making up R18.1bn of the total, after these challenges were offset by a slightly weaker exchange rate at the coal business.
Revenue from the wind energy business was 17% higher. Energy generation from the Cennergi assets was higher, driven by better wind conditions despite an energy generation loss from an Eskom line fault.
Group earnings before interest, tax, depreciation and amortisation (Ebitda) fell 28% to R7.66bn, mainly due to the 34% decline in coal Ebitda.
Exxaro directors said bearish market sentiment in the first half was due to price declines from sufficient gas and coal stocks in Europe, warmer than usual winter temperatures, a strong renewables performance and lower gas prices.
Lower coal prices caused an increase in demand for South African coal from India. The domestic market demand remained stable.
A decline in coal export prices impacted the viability of exports through alternative ports.
Demand for low calorific value coal remained resilient as domestic end users continued to offtake power station coal from Exxaro’s mines.
Overall coal production volumes fell by 1 517kt or -7%. The decrease was mainly at Grootegeluk, Belfast and Mafube mines, partly offset by higher production at Leeuwpan. Overall sales volumes were 9% lower.
Lacklustre rail performance due to locomotive availability, cable theft, derailments and vandalism remained a challenge.
Exxaro railed 2.45Mt of export coal to Richards Bay Coal Terminal versus 2.54Mt the same period last year.
The group anticipates rand volatility to remain elevated during the second half of 2023.
Rising global industrial activity and hot northern hemisphere summer weather might support energy demand in the second half, it said.
Risks for Europe’s winter energy supply included the weather, the availability of liquefied natural gas and the risk of further gas cuts from Russia.
Rising iron ore supply and exports were expected to be a limiting factor for iron ore prices in the second half.
Logistical challenges were likely to persist.
As at June 30, Exxaro recorded six lost-time injuries resulting in an LTIFR (lost time injury frequency rate) of 0.08 against a target of 0.05, with the LTIFR indicating a 50% decline in performance over the same period last year. The group said “various safety initiatives have been deployed across all our business units.”