JOHANNESBURG - Kumba Iron Ore cut its interim cash dividend by almost 30 percent after declaring a cash dividend of R19.60 per share, or R6.3 billion, representing a payout ratio of 75 percent of headline earnings.
Kumba, said that the company's capital allocation framework remained unchanged and was premised on a business that generated strong cash flows after sustaining capital which is then allocated firstly to a base dividend targeting 50 to 75 percent of headline earnings.
The company also said that balance sheet flexibility remained key especially in this uncertain environment and its position on liquidity was unchanged.
In the first half, the Kumba generated R10.5 bn of attributable cash flow, after sustaining capital but before discretionary capital. It paid a 2019 dividend of R6.1 bn in February and applied discretionary capital of R1 billion.
“ This left us with R15.7 bn at the end of the period. After that, we considered the balance sheet flexibility we want to retain and further discretionary capital options and arrived at our dividend decision,” said the company.
Earnings before interest, tax, depreciation and amortisation were R17.4bn, down 14 percent on R20.1bn it reported in 2019 on the back of lower sales volumes and lower realised free onboard prices.
Kumba’s chief executive, Themba Mkhwanazi, said the group’s proactive response to protect the business had enabled it to deliver R4.1bn through income tax and royalties to the economy and to pay R2.4bn in salaries.
“Every aspect of our business has been reviewed by our marketing, operational, financial and other support teams to mitigate potential risks and we have responded quickly to the dynamic and fast-evolving landscape,” Mkhwanazi said.
Production of 17.9 million tons and sales of 18.6 million tons were in line with the Covid-19 adjusted guidance for the first half of the year.
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