Exxaro Resources, a South African diversified resources group, lowered its interim dividend by 28% to 1,143 cents per share due to lower sales prices, sales volumes, and logistics challenges affecting operations.
- Revenue decreased by 15% to R18.94 billion, with coal contributing R18.1 billion to the total. Challenges were offset by a slightly weaker exchange rate in the coal business. Revenue from the wind energy business was 17% higher.
- Group earnings before interest, tax, depreciation, and amortization (EBITDA) fell by 28% to R7.66 billion, primarily due to a 34% decline in coal EBITDA.
- Bearish market sentiment in the first half was attributed to price declines resulting from sufficient gas and coal stocks in Europe, warmer-than-usual winter temperatures, strong renewables performance, and lower gas prices.
- Lower coal prices led to increased demand for South African coal from India. Domestic market demand remained stable. Overall coal production volumes decreased by 7%, with Grootegeluk, Belfast, and Mafube mines seeing declines partially offset by higher production at Leeuwpan.
- Overall sales volumes were 9% lower. Logistics challenges, including rail performance issues due to locomotive availability, cable theft, derailments, and vandalism, remained a challenge.
- Exxaro expects rand volatility to remain elevated in the second half of 2023. Rising global industrial activity and hot northern hemisphere summer weather might support energy demand.
- Risks for Europe’s winter energy supply included weather conditions, liquefied natural gas availability, and potential further gas cuts from Russia.
- Rising iron ore supply and exports were expected to limit iron ore prices in the second half.
- As of June 30, Exxaro recorded six lost-time injuries resulting in a lost time injury frequency rate (LTIFR) of 0.08 against a target of 0.05. The LTIFR indicates a 50% decline in performance compared to the same period last year. The group has deployed safety initiatives across all business units.