Exxaro grows profit by 13%, despite Medupi hit and lower export coal prices

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Mining company Exxaro [JSE: EXX] reported a 13% increase in headline earnings to R7.6 billion, mainly driven by its income from equity investments.

The group which has operations in coal, ferrous and energy markets on Thursday released its annual results for the year ended 31 December 2019.

Group revenue increased by 1% to almost R26 billion, and headline earnings per share increased to 3 027 cents per share, up from 2 671 cents reported in 2018. According to Exxaro's report, its earnings were mainly driven by income from equity-accounted investments, which helped offset the drop in its coal earnings.

The lower coal export price negatively impacted its revenue – despite export volumes increasing 14%. Prices were 30% lower than that achieved in 2018.

Overall coal production volumes were down 3%.

Exxaro was hit by lower demand from Eskom's Medupi power station after a conveyor belt, which fed coal from Exxaro's Grootegeluk mine to the power stateion, broke at the end of last year.

Lower production from Grootegeluk was partially offset by higher production from Belfast and the ramp-up of Mafube mine. "Sales volumes were only 1% down due to belt failure and ash handling problems experienced at the Medupi power station resulting in lower offtake," the report read.

The group expects domestic thermal coal demand pricing to remain "relatively stable" during 2020.

Coal exports from Richards Bay are expected to remain under pressure, given that the supply wave and lower prices of liquefied natural gas experienced in 2019 is expected to continue into 2020.

"However, a potential increase in thermal coal import demand in China might support the seaborne market somewhat," the report read.

There have been zero fatalities at Exxaro's operations for 33 consecutive months.




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