Kumba warns of plunge in earnings
Kumba Iron Ore has warned of a drop of more than one-third in interim earnings because of reduced export sales due to derailments, a stronger rand and lower iron ore prices compared with a year earlier.
Kumba Iron Ore has warned of a drop of more than one-third in interim earnings because of reduced export sales due to derailments, a stronger rand and lower iron ore prices compared to a year earlier.
Kumba said its headline earnings for the six months to end-June would fall up to 37% and basic earnings 38% compared to the same period a year earlier when it reports its financial results on July 24.
SBG analyst Tim Clark said that he expected Kumba to declare an interim dividend of R12.45 a share.
Earlier in 2018, Kumba CEO Themba Mkhwanazi referred to an unprecedented number of derailments on the line linking the Northern Cape mines of SA’s largest iron ore producer to the port at Saldanha.
State rail operator Transnet has said there had been four derailments in 2018, lasting from three to six days. Two of the derailments involved full trains and two empty wagons.
“We have stepped up additional maintenance activities and daily and weekly checks on infrastructure,” Transnet said in response to Mkhwanazi’s comment in May that Kumba had to declare force majeure on its iron ore deliveries for the first time in five years in March because of the derailments.
Companies declare force majeure when an unexpected event prevents them from complying with a contract.
Due to the derailments and “suboptimal rail performance” during the second quarter of 2018, Kumba lowered its fullyear sales forecast by between 1-million and 2-million tonnes.
Kumba projected sales of between 42-million tonnes and 44-million tonnes for 2018.
The railway problems and adverse weather at Saldanha resulted in stockpiles rising “above optimal levels” to 6.2-million tonnes at the end of June, from 4.3-million tonnes at the end of December.
“Kumba is working closely with Transnet to secure delivery of the contractual capacity and to mitigate further derailments,” the company said.