Exxaro looks to Asian markets for exports growth

DIVERSIFIED resources group Exxaro Resources is looking to the South-East Asian markets for its next growth phase for new markets to diversify its exports of coal.

“Export markets are still reliant on demand from India for lower quality coal.

“However, Exxaro is actively diversifying its markets for lower quality coal to minimise dependency on the Indian market,” the group said.

During the six months to end June, the group’s total coal production was up 7 percent to 23 397 tons, up from 21 892 tons last year.

The group added that it expected a stable outlook for the coal business in the second half of 2018, based on favourable trading conditions in domestic markets and strong international coal prices.

The price of coal on export increased to $79 (R1 144.50) a ton during the period, up from $65 last year.

Higher volumes

The increase in coal prices was favourable for the group as it reported a 10 percent increase in headline earnings to R3.07 billion, up from R2.79bn, while revenue increased by 14 percent to R12.26bn.

This was mainly due to a higher contribution from the coal operations driven by improved coal sales prices and higher Eskom commercial volumes at Grootegeluk, based on demand from the Medupi power station.

The group said the average price a ton achieved on exports of $79 was offset by a stronger average spot exchange rate of R12.30 to the US dollar during the period, as compared to R13.20 to the dollar last year.

Headline earnings per share rose by 39 percent to 1 222 cents a share, up from 882c, and the board declared an interim dividend of 530c, up by 77 percent compared to last year’s 300c.

The group said it achieved zero fatalities in the past 15 months.

Peak expenditure

Chief executive Mxolisi Mgojo said Exxaro’s return to shareholders of 530c a share for the interim period was 77 percent higher year-on-year, considering that they were heading into peak capital expenditure at their largest coal asset, Grootegeluk Complex.

“The value-add of our new coal projects and functional efficiencies drive since 2016, in which we have invested heavily, is evidenced by the 55 percent increase in the group’s core earnings before the interest, tax, deprecation and amortisation number over that time,” Mgojo said.

He added that Exxaro’s new dividend policy going forward clearly reflected their confidence in their coal operations to continue the positive trends in production, cost control, cash generation and value accretion, supported by their strong track record of project execution.

Exxaro rose 7.99 percent to close at R140 on the JSE yesterday.