Exxaro blames low Eskom offtake, depressed prices for half-year earnings dip

Exxaro Resources has blamed low offtake of coal volumes by Eskom and depressed prices for the expected fall in its earnings for the half-year period to June, though it expects a higher contribution from its wind energy business in the second-half of the year.

Exxaro expects its headline earnings per share (Heps) for the six-months period ended June 30, 2024 to decrease by between 31% and 45% to between 1 686 cents and 1 344c compared to the previous contrasting period.

The JSE-listed company has attributed this to “lower sales prices and sales volumes, amid ongoing logistical challenges and reduced offtake” by Eskom.

However, this had been partially offset by a slightly weaker exchange rate for its coal business.

Nonetheless, Exxaro is expecting “a higher contribution from our energy business due to slightly improved wind conditions” compared to the six-months period ended June 30, 2023.

“Income from our equity-accounted investments at the Sishen Iron Ore Company and Mafube Coal were also negatively impacted by lower prices,” the company said.

Exxaro had previously said it expects to report an increase of 23% in export sales. This has mainly been enabled by the company’s ability to move volumes through alternative export channels, mainly at Belfast.

As at the end of May, Exxaro had net cash of R15.3 billion excluding its energy division’s net debt of R4.2bn. Its finance director Riaan Koppeschaar said capital expenditure for the first-half period to end June is expected to narrow down by 33% to R1.1bn, attributable to lower capital spending allocation at the company’s coal operations.

“The coal business’s capex is expected to decrease by 33%, mainly due to the timing of the equipment replacement strategy and the license to operate projects at the Grootegeluk and Mpumalanga mines,” said Koppeschaar.

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