Exxaro, the black owned JSE listed company, yesterday reported a 10% boost for coal revenue of R10.67 billion in its interim results to end June compared to R9.7bn recorded during the corresponding period last year while net profits surged 35% to R2.9bn.
The group attributed the increase in profits to higher contributions from its coal operations, driven by improved sales prices.
It also said higher Eskom commercial volume demands at Grootegeluk mine in Mpumalanga for the Medupi Power Station also contributed to the improved profits.
Exxaro chief executive Mxolisi Mgojo said the group wanted to diversify its markets in order to reduce heavy reliance on exports to India.
“Export markets are still reliant on demand from India for lower-quality coal.
“However, Exxaro is actively diversifying its markets for lower-quality coal in order not be overly dependent on the Indian market,” Mgojo said.
The company said the average price per ton on exports rose to $65 (R860.70) during the period under review against the $42 price in the comparative period.
This was offset by a stronger average spot exchange rate of R13.20 to the greenback recorded in the first half of this year, versus the R15.39 recorded in the first half of last year and lower export and domestic volumes.
The planned diversification of exports markets comes in the wake of calls in India to end coal imports as the country moves to boost home production.
BMI Research, a subsidiary of Fitch, earlier this year revised its 2017 thermal coal price forecast upwards from $70 a ton to $75 a ton, following strong Chinese demand and weather disruptions at hydro power stations.
BMI said that it however expected the prices to ease towards the end of the year as better weather would restore Chinese hydropower capacity and the global market became better supplied by increased output from the major producers.
While the outlook was positive for China, there were bearish expectations for coal imports from India, with the country energy authorities pledging to end imports within a few years.
India briefly became the top importer of coal in 2015, but China regained the crown last year.
Exxaro shares fell 0.64% on the JSE yesterday to close at R108.