THUNGELA Resources, the South African thermal coal producer that was spun off from global Anglo American, is contemplating declaring a maiden dividend after shooting the lights out in its debut financial results for the half-year to the end of June.
Thungela, which means to “ignite” in Zulu, surged nearly 9 percent on the JSE on Friday in intraday trade as it posted a profit of almost R1 billion profit in the half-year to the end of June. The share closed 5.36 percent higher at R49.31.
Chief executive July Ndlovu said: “Our strong balance sheet, coupled with the above, paves the way for Thungela to consider the declaration of a maiden dividend at the annual results for 2021, in line with Thungela’s stated dividend policy of a minimum payout of 30 percent of adjusted operating free cash flow.”
Thungela generated a R990 million operating profit and R1.88bn in adjusted earnings before interest, taxation, depreciation and amortisation as it rode the wave of strong global coal prices.
The company, in tandem with its coal-exporting counterparts, benefited from the 47 percent jump in thermal coal prices to an average of $97.71 (R1 437) a ton, up from $66.39 a ton a year earlier, as Covid-19 loosened its grip on the global economy, which has rebounded since a year ago.
Thungela said upgrading its portfolio, which included placing the Khwezela and Bogkoni mines that have higher production costs into care and maintenance during the first quarter of 2021, also bolstered its balance sheet.
However, the company said the under-performance by Transnet Freight Rail (TFR) severely impacted its ability to transport coal to the Richards Bay Coal Terminal. TFR has grappled with vandalism, theft of infrastructure, including overhead power cables, and the derailment of locomotives.
“Should the South African government and TFR reduce or eliminate the issues relating to theft and equipment failures, then an improved rail performance during the second half of 2021 is expected. Thungela will continue working closely with TFR in order to resolve these challenges,” said Thungela.
Anglo American hived off its South African thermal coal assets into Thungela in June, as part of its journey to cutting its Scope 3 emissions.
Thungela, which received a R2.5bn cash injection from Anglo American upon demerger, is sitting on cash after recording a cash position of R3.13bn at the end of June.
Ndlovu said the company’s listing on the JSE and the London Stock Exchange in June had been a milestone for the group.
“After a month of operating as a standalone business, we are cash positive and well positioned to deliver on our targets. We are pleased to note the recent recovery of global thermal coal prices. These are reflective of the continued demand for high quality coal amid challenging supply dynamics across many regions,” said Ndlovu.
Highlights included headline earnings per share of 305 cents compared to a headline loss of 193c.
“Our business reported an increase in earnings, with earnings a share of 313c. The steps we have taken to upgrade our portfolio and our continued focus on improving productivity and operating costs will no doubt stand us in good stead into the future,” said Ndlovu.