Kumba Iron Ore, the South African iron ore subsidiary of Anglo American, wants speedy reforms and greater private sector participation in unlocking the gridlocks and logistical gaps dogging Transnet, whose inefficiencies resulted in the company’s stockpiles rising for the interim period to June, a period in which its earnings and dividends also slithered.
Kumba Iron Ore yesterday reported a 26% plunge in interim headline earnings per share for the June 2024 period to R22.23 per share.
This resulted in the iron ore miner’s interim dividend for the period lowering by 17% to R18.77 per share.
After announcing that it was reducing production to adjust for Transnet’s inefficiencies, Kumba CEO Mpumi Zikalala said the company now has faith in the Government of National Unity (GNU)’s ability to reform the rail sector through allowing for greater private sector participation.
“One thing I have learnt about the new government is that they are open to collaboration. Policy reforms (will) enable greater private sector participation (and) the critical thing is that Transnet is not holding back,” Zikalala said.
In spite of the challenges occasioned by Transnet, Kumba said it was making progress with its restructuring plans as it reconfigures its operations.
The Sishen and Kolomela mines were being restructured to operate “as an integrated business” which would enable Kumba to attain a “value-based production” profile.
“We are translating into a lower-cost profile to ensure that our business can withstand the impact of Transnet logistical challenges while maintaining healthy buffers and optimal levels of finished stock,” said Zikalala.
During the interim period under review, Kumba Iron Ore’s output declined by 2% to 18.5 million tons, with Sishen output standing at 13.2 million tons and Kolomela production amounting to 5.2 million tons.
Due to port and rail challenges, sales volumes for the period dipped by 5% to about 18 million tons.
During the period, Kumba Iron Ore achieved cost savings of R1.8 billion and improved unit costs to $38.5 per wet metric ton.
Coupled with an average realised price of $97 per ton, this had contributed to earnings before interest, tax, depreciation and amortisation (Ebitda) of R15.6bn for the half year at an Ebitda margin of 44%.
Revenue for the period was 6% lower at R35bn compared to the first-half period a year ago. Despite this, Kumba closed the interim period with attributable free cash flow of R9.1bn.
This helped the company to declare a half-year dividend that amounts to R6bn, although at R18.77 per share it was 17% lower compared to the same period a year earlier.
Shares in Kumba Iron Ore were marginally lower by 0.57% in afternoon trade on the JSE at around R402 per share, although it is weaker by 11% and 12% in the past one week and 30 days respectively.
Headwinds for the company also emanated from weak steel demand in China and Europe, while robust iron ore supply contributed to a 26% plunge prices since the beginning of 2024.
However, an increase in steel exports had provided some relief, while “lump premium was supported by lump stock being at multi-year” lows.
Watch the results presentation below:
Kumba Iron Ore releases its 2024 interim results and shares how its robust fundamentals and priorities are set to ensure our operations are safe, stable, capable and cost efficient and we will continue to build on the momentum gained from the first half.
— Anglo American South Africa (@AngloAmericanZA) July 23, 2024
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