Kumba a share­holder div­i­dend dar­ling again

The Star Early Edition - - NEWS - Di­neo Faku

KUMBA Iron Ore yes­ter­day be­came a share­holder dar­ling as it gained 12 per­cent to trade at R19.50 a share on the JSE af­ter it an­nounced it had de­cided to re­sume pay­ing a div­i­dend in the first half of 2017 for the first time in two years.

Kumba, an An­glo Amer­i­can sub­sidiary, de­clared a R5.1 bil­lion in­terim div­i­dend, which trans­lated to R15.79 a share – brought about by the higher com­mod­ity prices and im­proved pro­duc­tiv­ity.

The div­i­dend was sig­nif­i­cant as it was 9 per­cent on clos­ing share price on Mon­day, an­a­lysts said.

Themba Mkhwanazi, Kumba’s chief ex­ec­u­tive, said the com­pany had de­cided to re­sume pay­ing a div­i­dend in line with the board’s pol­icy to re­turn ex­cess cash to share­hold­ers.

He added the com­pany re­mained con­ser­va­tive and did not out­line a div­i­dend pol­icy other than say it was still un­der re­view.

“We are pay­ing a div­i­dend based on a con­fi­dence in the mar­ket,” he said, adding that Kumba was a player that fo­cused on a sin­gle com­mod­ity and was sen­si­tive to changes in the price en­vi­ron­ment.

The last time Kumba paid a div­i­dend was in 2015.

How­ever, due to the eco­nomic head­winds and low price en­vi­ron­ment it put the brakes on div­i­dends.

Kumba, which is fo­cused on min­ing iron ore in the Sishen Mine and Kolomela in the North­ern Cape, also re­ported that its net cash flow po­si­tion was R13.5bn in the first half of the year as a re­sult of the 48 per­cent higher cash flow.

The com­pany’s rev­enue from con­tin­u­ing op­er­a­tions in­creased to R21.5bn from R17.6bn for the com­pa­ra­ble pe­riod last year, mainly as a re­sult of the 29 per­cent in­crease in the av­er­age re­alised iron ore ex­port price to $71 a ton from $55 a ton in the first half of last year as well as a 5 per­cent higher to­tal sales vol­umes.

How­ever, the gains were par­tially off­set by the strength­en­ing of the av­er­age rand ex­change rate which was R13.21 in the first half of 2017 com­pared with R15.40 in the first half of the pre­vi­ous year.

Com­mod­ity prices

The com­pany also said that the stronger op­er­a­tional per­for­mance and and com­mod­ity prices had re­sulted in the op­er­at­ing mar­gin im­prov­ing to 36 per­cent from 29 per­cent in the first half, with head­line earn­ings in­creas­ing 53 per­cent.

Op­er­at­ing profit rose 50 per­cent to R7.7bn from R5.2bn for the same pe­riod last year.

Seleho Tsatsi, an in­vest­ment re­searcher at An­chor Cap­i­tal, said the big sur­prise from re­sults was the re­sump­tion and size of the div­i­dend, which was gen­er­ally ex­pected to oc­cur at year-end.

“Al­though the iron ore price has de­clined from its highs of ear­lier in the year, Kumba is still highly cash-gen­er­a­tive at the cur­rent iron ore price,” he said.

The Kumba share price closed 17.34per­cent higher on the JSE at R203 yes­ter­day.

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