Thungela Minerals yesterday flagged that it expects to be printing money hand over fist in its interims on the back of the strong benchmark coal price for thermal coal, and higher realised prices achieved.
In its trading statement for the six months ended June 30, 2022 released yesterday the coal producer said its earnings per share (eps) were expected to increase by about 2 044 percent to between R66.85 and R67.45.
Headline earnings per share (heps) were likely to increase by about 2 101 percent to between R66.85 and R67.45.
Thungela has gained from the global coal prices that have risen in the first half of the year, amid the Russian invasion of Ukraine and a drought in China; while supply disruptions and rebounding electricity demand have warmed up the market for thermal coal.
The Newcastle thermal coal average benchmark price is roughly at $386 (R6 354) per tonne currently.
The group said headline earnings attributable to shareholders were likely to be about 3 842 percent higher year-on-year or between R8.9 billion and R9bn.
The group produces its thermal coal from seven mining operations, both underground and open pit, in Mpumalanga.
Thungela which demerged in Anglo American in June, last year said it was impacted by increased operating costs.
“The increase in operating costs were driven by increased royalty charges and external factors such as rising costs across the energy complex, as well as global inflationary pressures,” it said.
Thungela said given the strong benchmark coal price forward curve, earnings had also been negatively impacted by fair value losses on the price risk-management programme undertaken by the group, and the capital support agreement.
An internal restructure, which was completed in March 31, 2021 also impacted its earnings.
In its last results released in March, Thungela reported that it delivered a stellar full-year profit boosted by coal prices even though it lost export opportunities worth billions of rand due to Transnet’s poor rail infrastructure.
The company posted a profit of R6.9bn for the year ended December 31, 2021 compared with a loss of R362 million in the previous year.
At the time, the group said it faced several challenges, most notably Covid-19 and rail infrastructure constraints due to the underperformance of Transnet Freight Rail (TFR). Despite these, Thungela has successfully transitioned from a loss-making group with a net-debt position to a profitable, highly cash-generative pure-play thermal coal business.
Thungela’s share price on the JSE increased by 1.13 percent and traded at R294.15. The shares rose by 538.85 percent in a year.
Thungela expects to release its interim financial results on August 15.
Analysts on social media were jubilant on the trading update with Yash Raghavjee @YashRaghavjeee, a junior portfolio manager at Sanlam Private Wealth, saying, “If only all earnings reports could look like this.”
Anthony Clark, an independent analyst at Small Talk Daily @smalltalkdaily, said, “Not one I cover but (sector) is interesting. Thungela Coal pissed cash H1 (first half) with rocket-busting H1 trading update off the charts.”