Exxaro earnings up on coal exports

Diversified miner Exxaro, which supplies coal to Eskom, has fared well amid SA’s lockdown due to record coal exports and a weaker rand. Earnings before interest, taxation, depreciation and amortisation (ebitda) are expected to rise by as much as 28% to R4.078bn in the group’s half year to end-June, when it operated as an essential service.

Diversified miner Exxaro, which supplies coal to Eskom, has fared well amid SA’s lockdown due to record coal exports and a weaker rand.

Earnings before interest, taxation, depreciation and amortisation (ebitda) are expected to rise by as much as 28% to R4.078bn in the group’s halfyear to end-June, when it operated as an essential service.

Ebitda is a measure of the underlying operational performance of a company, excluding items such as finance costs.

The group’s performance is a rare bright spot among SA businesses that generally have been hard hit by the economic effects of the nationwide lockdown.

While its business was able to operate, having been declared an “essential service” during the lockdown period, “the environment remained challenging”, the company said.

However, “our own managed operations were resilient, resulting in higher commercial coal revenue supported by record coal export volumes, albeit at lower US dollar prices, but benefiting from a weaker exchange rate during the period,” the company said.

The domestic industrial sector took less coal during the lockdown while some markets — such as Pakistan and Vietnam — took advantage of the low coal price to buy more coal from SA.

The group is a 21% shareholder in Sishen Iron Ore, which was permitted to operate at 50% in the first weeks of lockdown and ramped up to full production in mid-April.

Headline earnings per share is expected to fall by 18%-34% from the prior period’s R17.30. This was largely due to the effect of Exxaro accounting for the non-controlling interest of its black empowerment scheme from November.

Exxaro’s share price closed 0.74% up at R139.72, giving the company a market capitalisation of R50.1bn.