JOHANNEBSURG - KUMBA Iron Ore rewarded shareholders with a total dividend of R60.90 a share during the year ended December 2020 up 30 percent from 2019 after posting record earnings, spurred by higher iron ore prices and a weaker rand.
Cash flush Kumba delivered R20.7 billion of free cash flow in 2020 clearing the way for the board to declare a final cash dividend of R41.30 per share, which combined with the interim cash dividend of R19.60 a share brought the total cash dividend to R60.90 a share.
The final R60.90 a share dividend represented a payout ratio of 86 percent of headline earnings.
Chief executive Themba Mkhwanazi said Kumba had delivered record earnings before interest, tax, depreciation and amortisation (Ebitda) of R45.8 billion while keeping its commitment on health and safety and supporting communities as it navigated exceptional conditions.
“Our business resilience and balance sheet strength, together with the hard work of our dedicated workforce and suppliers, allowed us to meet Covid-19's challenges from a position of strength.
“We have emerged stronger and we are even more focused on building a better business for the longer term,” said Mkhwanazi.
Kumba's Ebitda margin was 57 percent up from 52 percent in 2019 as the group benefited from favourable iron ore prices, a weaker exchange rate and R1.3bn in cost savings up from R920 million a year earlier.
Iron ore prices reached a 7-year high in 2020 of $109 (R1600) a ton from an average of $125 a ton in
2013, largely driven by China's rapid economic recovery and subsequently by the reopening of other global steel markets.
Commenting on the results, investment analyst at Sanlam Private Wealth, Christiaan Bothma, said Kumba had delivered record earnings and dividend pay-out on the back of 19 percent higher dollar iron ore prices to $115 a ton, while break-even costs were kept flat at $45 a ton.
“Given that Kumba is in a net cash position, they could pay out almost all of their free cash flows as dividends, with majority shareholder Anglo American receiving almost $1 billion from Kumba,” said Bothma.
Kumba's operational performance reflected the impact of the pandemic at the Kolomela and Sishen mines and Saldanha Port.
Total output fell to 37 million tons from 42.4million tons in 2019 after being rocked by Covid-related operational and logistical constraints, as well as the reduced off-take from ArcelorMittal South Africa (Amsa).
Domestic sales fell by 84 percent due to lower off-take of 400 000 tons by steel giant Amsa, down from 2.2 million tons a year earlier.
Export sales and volume shipped each fell 1.8 percent to 39.3 million tons from 40 million tons earlier.
Kumba reported savings of R1.3bn, including R613 million of Covid-related savings, bringing its cumulative and sustainable cost savings to R3.2 billion since initiating our programme in 2018.
“We worked closely with and supported our logistic partner, Transnet, to regain its pre-Covid run-rates, while drawing down on high finished stock levels as we further improved the efficiency of our value chain," said Mkhwanazi.
Kumba paid total income tax of R10.1bn from R7.8bn in 2019 and mineral royalties of R3bn from the government, up from R2.6bn a year earlier.
Kumba shares closed 2.75 percent lower at R650.49 on the JSE yesterday.
BUSINESS REPORT