Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exxaro Resources Ltd (EXXAF, Financial) achieved two consecutive years of zero fatalities across all operations, marking a significant improvement in safety performance.
- The company reported a 22% increase in export sales to 3.3 million tonnes in the first half, driven by alternative logistics channels.
- Exxaro Resources Ltd (EXXAF) maintained a stable coal EBITDA margin of 28%, despite challenging market conditions.
- The company announced an interim dividend of ZAR7.96 per share, reflecting strong cash generation and disciplined strategy execution.
- Exxaro Resources Ltd (EXXAF) reduced carbon emissions by 12% between 2019 and 2023, with a target to reduce Scope 1 and Scope 2 emissions by 40% by 2026.
Negative Points
- Exxaro Resources Ltd (EXXAF) experienced a 12.7% decline in coal production due to low demand and logistical challenges.
- The company's group EBITDA decreased by 10.5% to ZAR5 billion, impacted by lower export prices and domestic sales volumes.
- The synergy operations delivered 339 gigawatts hour of wind energy, a decrease of 13.5% due to seasonality.
- Exxaro Resources Ltd (EXXAF) faced increased production costs, with a 23.3% rise in unit cost per tonne due to lower domestic offtake and higher distribution costs.
- The company reported a 31.7% decline in headline earnings per share to ZAR15.8, reflecting challenging market conditions and lower equity income from investments.
Q & A Highlights
Q: Can you provide an outlook on the unit cost trajectory for coal in the second half, given the expected improvement in production capacity?
A: Mellis Walker, Board of Director, explained that the reduction of 2.8 million tonnes impacted the cost per tonne. If normalized, the inflation per rand per tonne would have been around 5%. This can be used as a proxy for the expected cost trajectory in the second half.
Q: How do you plan to achieve a 40% reduction in Scope 1 and 2 carbon emissions by 2026, especially considering diesel abatement challenges?
A: Nombasa Tsengwa, CEO, stated that the reduction will be driven by portfolio optimization and significant contributions from the Lephalale Solar Project (LSP), which accounts for just below 20% of the reduction. The balance will come from energy diesel efficiency improvements.
Q: What is supporting the Richards Bay Coal benchmark, and what is your outlook for the second half?
A: Sakkie Swanepoel, Group Manager of Marketing & Logistics, noted that the Richards Bay benchmark is supported by mining inflation, which has increased costs. The current price is expected to remain stable for the rest of the year, according to analysts.
Q: With the BEE structure shares becoming available, does "once empowered, always empowered" hold for Exxaro?
A: Pieter Koppeschaar, Finance Director, mentioned that not all shares are expected to exit the structure. The company is monitoring the regulatory position and engaging with shareholders to ensure alignment with both shareholder interests and Exxaro's value system.
Q: What progress has been made in M&A, and how do you consider climate targets in your acquisition strategy?
A: Richard Lilleike, Chief Growth Officer, confirmed positive progress in M&A, with active engagement in due diligence and discussions with asset owners. ESG considerations are central to investment decisions, focusing on transition metals that support decarbonization and a cleaner world.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
