Exxaro’s manganese deal lifts sales but fails to offset profit dip

Exxaro Resources reported weaker first-half earnings on Thursday, with HEPS falling despite higher revenue as lower contributions from its investments in other mining operations weighed on the group.

Revenue for the six months to end-June rose 7% to R22.1bn, while HEPS fell 20% to R13.77, the company said on Thursday.

The lower earnings were mainly due to a 39% fall to R1.4bn in income from companies in which Exxaro has stakes. Income from its iron ore investment, Sishen Iron Ore Company (SIOC), fell to R1.16bn from R1.94bn, while income from its zinc investment, Black Mountain, fell to R1m from R289m. The recently acquired manganese business, however, contributed R242m for the first time.

Exxaro completed the R10.6bn acquisition of select manganese assets from Ntsimbintle Holdings and OMH Mauritius, giving it full ownership of Ntsimbintle Mining and Ntsimbintle Marketing, at the end of February.

Exxaro’s coal business performed better during the period, with production rising 11% to 21.5-million tonnes (Mt), sales increasing 4% to 19.9Mt and export sales rising 13% to 3.9Mt.

Coal revenue increased 8% to R21.3bn, while coal earnings before interest, tax, depreciation and amortisation (ebitda) rose 5% to R5.8bn. The company said higher prices and sales volumes were partly offset by the stronger rand, inflation and higher selling and distribution costs, including diesel.

Cash generated from operations rose 15% to R6.1bn, despite the weaker earnings. Exxaro’s net cash position, excluding debt in its energy business, fell to R6.4bn from R18.3bn a year earlier after its acquisition of selected manganese assets.

The company declared an interim dividend of R7 per share, down 17% from a year ago.

Exxaro said the dividend was based on its new policy of paying between 1.5 and 2.5 times adjusted group earnings, as well as passing through dividends received from SIOC.

The group maintained its full-year coal production, sales and export guidance. Coal production and sales are expected at between 39.4Mt and 42.8Mt, while exports are forecast at 7.3Mt-8Mt.

Renewable energy generation guidance was revised down to between 800GWh and 830GWh because of weaker wind conditions.

Exxaro has also included manganese guidance for the first time. Production and sales from the Tshipi operation are expected to be between 3.2Mt and 3.4Mt for the full year.