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Kumba delivers interim dividend amid falling production volumes

Kumba yesterday said it was excited by the announcement made by President Cyril Ramaphosa on Monday where he unveiled energy interventions for energy supply in the country.

Kumba yesterday said it was excited by the announcement made by President Cyril Ramaphosa on Monday where he unveiled energy interventions for energy supply in the country.

Published Jul 27, 2022

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Kumba Iron Ore said yesterday that it would reward its shareholders with a R9.2 billion dividend despite the challenging environment characterised by environmental headwinds, which impacted mining and production volumes.

In its presentation of its six months to end-June results yesterday Kumba, majority owned by Anglo American, said it would use the money into its reserve to declare a dividend of R28.70 per share, representing a payout ratio of 80 percent of headline earnings. This includes a gross base dividend of R27.10 per share and a gross top-up dividend of R1.60 per share.

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Kumba reported half-year earnings before interest, taxes, depreciation, and amortisation (Ebitda) of R23.1bn at an Ebitda margin of 54 percent.

It reported a 32 percent drop in earnings to R42.97bn, with headline earnings per share at R36.13, from R72.78 in the previous period. The company reported closing net cash of R17.6bn.

Looking at its operations, Kumba was affected by high rainfall during the first quarter and safety issues at the Kolomela mine.

Total production for the period under review dropped by 13 percent to 17.8 million tonnes with production from Sishen dropping 7 percent and a 25 percent decline reported for Kolomela.

Kumba chief executive Mpumi Zikalala said: “The first six months have confirmed that as we set the foundations for further value delivery, we need to build a business that is not only resilient but that demonstrates operational excellence. We have robust fundamentals in the quality of our ore body and our assets.

“We have the infrastructure and technology in place. With the support of our people and our strategic partners, we are in a strong position to continue to enhance returns, thereby ensuring that all our stakeholders benefit from the continued success of Kumba.”

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Kumba said logistics throughput had equally been challenged resulting in some revenue opportunities missed. A negative micro-economic environment with ongoing supply chain constraints and high inflation continued to put outward pressure on its costs.

According to Kumba, the price of iron ore is underpinned by a couple of factors.

“The overall iron ore price has been and will be supported by supply disruptions which include the Russian invasion of Ukraine, the global iron ore supply is down on 6 percent year on year, which is very significant.

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“Secondly, the Chinese stimulus will also underpin iron ore prices in the second half of the year. The prices have fallen below $100 a tonne, but have since bounced back, the consensus is we are going to be seeing a price just north of $120 per tonne for the year. In the first part of the year we saw $140 per tonne,” the company said.

Zikalala said Kumba was excited by the announcement made by President Cyril Ramaphosa on Monday where he unveiled energy interventions for energy supply in the country.

“We are quite excited about what the president said and we see a huge opportunity for ourselves and the country. The announcement is seeking to make things easier going forward,” she said.

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Anchor Capital investment analyst Seleho Tsatsi said in a note this week that the 2021 average iron ore price of $161 (R2 707) per tonne was the second-highest price going back to 2011.

“We do not expect iron ore prices to rally back to those levels and so we believe that Kumba’s earnings will continue to decline in the second half of this year,” he said.

BUSINESS REPORT

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