- Group Export Salable Production: 7.8 million tonnes, up from 6.1 million tonnes last year.
- Ensham Export Salable Production: 1.6 million tonnes on an 85% basis or 1.9 million tonnes on a 100% basis.
- Group Capital Expenditure: ZAR1.5 billion.
- Profit: ZAR1.2 billion for the period.
- Adjusted Operating Free Cash Flow: ZAR936 million.
- Net Cash Position: ZAR6.7 billion at June 30, 2024.
- Interim Ordinary Cash Dividend: ZAR281 million or ZAR2 per share.
- Share Buyback: Up to ZAR160 million.
- Adjusted EBITDA: ZAR2.1 billion compared to ZAR4.4 billion in the first half of 2023.
- Net Profit: ZAR1.2 billion compared to ZAR3 billion year-on-year.
- Cash Flows from Operating Activities: ZAR1.7 billion.
- Earnings Per Share: ZAR9.52.
- Export Saleable Production in South Africa: 6.2 million tonnes.
- FOB Cost per Export Tonne in South Africa: ZAR1,189 excluding royalties.
- FOB Cost per Export Tonne at Ensham: ZAR1,360 excluding royalties.
- Sustaining Capital Expenditure: Just over ZAR700 million.
- Expansionary CapEx: Approximately ZAR800 million.
- Richards Bay Benchmark Coal Prices: Averaged $101 per tonne in the first half of 2024.
- Average Newcastle Coal Price: $131 per tonne in the first half of 2024.
- Operating Costs: Increased by ZAR5.2 billion compared to the first half of 2023.
- Adjusted EBITDA Margin for South Africa: Approximately 10%.
- Adjusted EBITDA Margin for Ensham: 21%.
- Net Cash Balance at June 30: ZAR6.7 billion.
Release Date: August 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Thungela Resources Ltd (TNGRF, Financial) reported a profit of ZAR1.2 billion for the first half of 2024.
- Group export salable production increased to 7.8 million tonnes, up from 6.1 million tonnes last year.
- The Ensham operation in Australia delivered strong performance, contributing nearly one-third to the Group's profit.
- The company declared an interim ordinary cash dividend of ZAR281 million and approved a share buyback of up to ZAR160 million.
- Thungela Resources Ltd (TNGRF) has been operating for 18 months without a loss of life, achieving significant safety improvements.
Negative Points
- Softer coal prices and underperformance of Transnet Freight Rail negatively impacted financial results compared to the same period last year.
- Adjusted EBITDA for the period was ZAR2.1 billion, down from ZAR4.4 billion in the first half of 2023.
- Net profit decreased to ZAR1.2 billion from ZAR3 billion year-on-year, mainly due to lower coal prices.
- Operating costs for the first half of 2024 increased by ZAR5.2 billion compared to the first half of 2023.
- The company faces ongoing challenges with Transnet Freight Rail's performance, impacting export sales.
Q & A Highlights
Q: Can you give us a little color on ForEx hedging, what's your exposure for the second half and what sort of price levels you're at there? And then the second question is on the ZAR4.4 billion cash buffer. Maybe just a bit of commentary around that, perhaps why ZAR4.4 billion? Why not ZAR4 billion? Why not ZAR3 billion? Why not ZAR5 billion?
A: (Gideon Smith, CFO) We have sold forward over $400 million at around ZAR1,930 per dollar, resulting in a significant mark-to-market at the end of June. Regarding the cash buffer, we are comfortable with a range of ZAR3 billion to ZAR5 billion to meet obligations and distribute cash to shareholders through the cycle.
Q: You had mentioned that the TFR was operating well in June and July at 50 million tonnes. Are you still seeing that in August? And also related to that, do you think when the agreement expires in March 2025, what's your orderbook priority in terms of half the TFR, I mean is it rates or is it penalty clauses or is it reliability?
A: (July Ndlovu, CEO) We see encouraging signs with TFR performance, and they are ahead of where they were last year. For the long-term agreement, we prioritize volume, competitive cost, reliability, and necessary investments in rail infrastructure.
Q: Can you provide more detail as to whether Ensham could run into rail capacity bottlenecks over the short- to medium-term given your improved guidance? Does the rail capacity have any buffers available for any additional operational growth as a result of the resource evaluation plans?
A: (July Ndlovu, CEO) Ensham has a contract for roughly 4.4 million tonnes of rail and port capacity, which is more than adequate for current performance. If we identify brownfield opportunities that are incremental beyond 4 million tonnes, we will engage with providers for additional capacity.
Q: What is your view on how many more years will there be significant imports at ARA in Europe? Given the continent is trying to wind down all coal power plants, how would the end of exports to Europe affect your business?
A: (July Ndlovu, CEO) Europe does not feature as a driver for our long-term fundamentals. The demand growth in emerging markets, particularly China and India, far outweighs the declines in coal demand in the US and Europe.
Q: Can you speak to Thungela's appetite for any M&A opportunities? Also, at what point is Thungela likely to draw down on its ZAR3.2 billion debt funding facilities?
A: (July Ndlovu, CEO) We are looking for cash-generative assets that can enhance our returns. We will draw down on the ZAR3.2 billion debt funding facilities if we find efficient and value-enhancing uses for that cash.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
