Exxaro, a diversified mining conglomerate with stakes in coal, energy, and ferrous markets, has recently announced significant financial distributions, including final and special dividends, underscoring its strategic approach to capital allocation. This Johannesburg Stock Exchange-listed entity has declared a substantial dividend payout of R10.10 per share, totaling approximately R3.4 billion, alongside a special dividend of R5.72 per share, amounting to around R2 billion. These declarations reflect the company’s adherence to its capital allocation strategy, even as it navigates the complexities of the market.
For the fiscal year ending December 31, Exxaro reported a revenue decrease of 17% to R38.7 billion, compared with the previous year. This decline was accompanied by a 34% drop in net operating profit, from R16.2 billion in 2022 to R10.6 billion. Despite these challenges, Exxaro’s leadership remains optimistic. Dr Nombasa Tsengwa, Exxaro’s Chief Executive, highlighted the company’s resilient financial performance, emphasizing sustained stakeholder returns, a robust balance sheet, and strong cash flow amidst a fluctuating market landscape and challenging conditions.
Tsengwa credited this resilience to the company’s focus on operational efficiencies, governance excellence, and strategic initiatives like the early value strategy and market-to-resource optimisation. She also noted the pivotal role of safety and zero harm as key indicators of the company’s sustainability, proudly mentioning the achievement of zero fatalities in 2023 and a lost time injury frequency rate of 0.07.
Exxaro’s energy division saw a 16% revenue boost, attributed to favorable wind conditions. The energy business, with a stable earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 80%, reflects the annuity nature of its long-term offtake agreement. The division reported a generation of 727 GWh of electricity, marking an 8% increase from the previous year, despite a 15 GWh loss due to an Eskom distribution line fault.
The company’s commitment to sustainable growth and diversification is evident in its disciplined capital allocation framework. This commitment is balanced against maintaining its coal business, investing in growth strategies, ensuring consistent returns to stakeholders, and leveraging a strong balance sheet. However, coal production volumes slightly decreased by 2% to 42.5 million tonnes, mainly due to lower outputs at specific mines, balanced by increased production at others. Sales volumes also saw a 4% decrease, largely due to reduced demand from Eskom, partially offset by higher domestic sales.
Revenue from coal operations fell by 18% to R37 million, primarily due to decreased export prices and volumes, despite higher domestic prices being offset by reduced domestic volumes. The coal sector’s EBITDA also declined by 36%, driven by lower commercial revenue and increased operational costs, including significant overburden removal at Leeuwpan and Belfast, as well as inflationary pressures, notably from electricity tariff increases.
Despite these financial pressures, Exxaro has demonstrated a proactive approach to addressing operational challenges and adapting to market conditions. The company’s strategic focus on efficiency, safety, and sustainability, coupled with its commitment to capital allocation and stakeholder returns, positions it for continued resilience and growth. As Exxaro navigates the evolving landscape of the mining sector, its dedication to a diversified business model and sustainable practices remains central to its vision for the future.
Source: Mining Weekly
