Kumba queries Transnet’s capacity
KUMBA Iron Ore, the country’s largest iron ore producer and a supplier to the global steel industry, has raised concerns about Transnet’s capacity to transport ore destined for the export market from its Northern Cape mines to the Port of Saldanha in the Western Cape.
The group said the recovery plan to ease logistics problems on Transnet’s Sishen-Saldanha railway had not allayed its unease about the line’s performance in the rest of the financial year.
Kumba chief executive Themba Mkhwanazi yesterday said rail challenges had cost the group opportunities to raise its export sales volumes. He said the group had raised its concerns with Transnet. “There is a recovery plan which they have shared with us,” Mkhwanazi said. “But Kumba remains concerned.”
He said the contract with Transnet had a penalty clause, but this could only be triggered after the review of the full-year performance.
He said there had been six derailments on the iron ore export channel that links its Sishen and Kolomela mines in the Northern Cape with Saldanha. He said the derailments resulted in Kumba’s iron ore exports remaining unchanged at 20.8 million tons in the six months to June.
Mkhwanazi said rail challenges had resulted in lost opportunities to achieve higher export sales volumes.
The derailments and erratic weather conditions at the Saldanha port saw Kumba miss out on export sales worth R2 billion, because it could not move 2.4 million tons in the six months.
Kumba said the derailed wagons had been replaced and performance was being monitored closely to secure delivery of contractual capacity.
“Initiatives have been implemented to mitigate the impact of derailments, which include reducing loading times and improving our turnaround times at the mines.
“Severe weather disruptions at Saldanha port have resulted in a number of vessels being delayed into July, impacting shipments for the period, which remained at similar levels of 19.5 million tons relative to the comparative period,” Kumba said.
Lost
Mkhwanazi said the lost export sales opportunities, a 7 percent strengthening of the rand against the US dollar and lower iron-ore export prices, were the main reasons for the 9 percent decrease in total revenue to R19.5bn.
Kumba’s headline earnings fell from R4.6bn to R2.98bn during the period, while profit was down to R3.85bn, from R6bn.
The company’s net cash position decreased from R13.9bn to R11.7bn.
Earnings before interest, tax, depreciation and amortisation was down 24 percent from the previous R9.1bn to R7bn. Kumba’s operating expenses increased by 4 percent to R14.4bn, from the previous R13.8bn.
Kumba also announced a new targeted dividend ratio policy of between 50 and 75 percent of headline earnings.
“While we will prioritise shareholder returns in allocating capital, our aim is to maintain a flexible capital structure and continue to protect the balance sheet from market volatility, as well as to ensure an appropriate level of capital is allocated to life extension projects,” the company said.
Kumba yesterday declared a total interim dividend of R14.51 per share, which was made up of R6.98 per share, representing
75 percent of headline earnings in accordance with the new dividend policy and R7.53 per share as a onceoff top-up cash dividend “to reset the balance sheet net cash position given the accumulation of cash since the recovery in the iron ore market in 2016”.
Kumba shares rose 2.90 percent on the JSE yesterday to close at R299.