Exxaro Resources pays out special dividend from healthy cash pile

Exxaro described its 2023 financial performance as robust despite lower export prices and lower domestic and export sales volumes. Photo: Supplied

Exxaro described its 2023 financial performance as robust despite lower export prices and lower domestic and export sales volumes. Photo: Supplied

Published Mar 15, 2024

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The market warmly welcomed a special dividend by Exxaro Resources, which is exploring acquisition opportunities, which saw its shares surge 7% after it posted its results for the year to December.

The mining firm paid out a special dividend of R5.72 per share with its R11.36 per share final dividend.

The shares traded at an intraday high of R186.18, but by 4.20pm the share moderated to trade 0.14% higher at R174.22. Year to date the share was 14.92% lower.

Earnings before interest, tax, depreciation and amortisation at Exxaro for the period were also 29% lower at R13.4 billion, with headline earnings per share resultantly falling 22% to R46.81 per share.

Revenue fell 17% to R38.3 billion, hurt by significantly “lower export sales prices achieved due to the steep decline in the API4 index price, which averaged $121 (R2266) per ton”, compared to $271 per ton a year earlier.

However, this low revenue and pricing realisation was partially offset by a weaker exchange rate and higher prices achieved on domestic sales.

Despite a reduced earnings performance, Exxaro declared a final cash dividend of R10.10 per share, which was lower compared to the previous contrasting period’s payout of R11.36 per share.

Exxaro CEO Nombasa Tsengwa said, “I am happy to announce that our board approved a share dividend of R10.10 per share, which is approximately R3.4bn and on top of that approved a special dividend of R5.72 per share of approximately R2bn, in line with our strategic approach to capital allocation.”

Financial trader Marco Olevano said the “special dividend declared by the board” was because of a “strong net cash position” for the period.

Exxaro closed the period in a net cash position of R14.8bn, excluding its energy division’s net debt of R4.3bn, compared to a net cash position of R9.6 billion in the year earlier period.

Other market watchers said Exxaro’s normal dividend for 2023 had been lower compared to the previous year, blaming Transnet for the woes of the company.

“The normal dividend is down from last year, but I expected less too. Transnet is (affecting) all mining investments. The cash is piling up and they need to pay it out cos the freaking coal can't move to the ports,” said one market watcher yesterday.

Exxaro described its 2023 financial performance as “robust despite lower export prices and lower domestic and export sales volumes”.

It added that the performance demonstrated “the exceptional performance of its coal business, driven by high-quality” product mix.

“We remain confident in our ability to foster value creation as shown by our FY23 financial performance. Yet again, we have maintained our stakeholder returns, robust balance sheet and strong cash flows despite the fluid market and challenging environment (and) we remain focused on embedding efficiencies and governance excellence,” said Tsengwa.

A 22% decrease in headline earnings to R11.3bn has been attributed to a 4% decrease in adjusted equity-accounted income, although SIOC’s adjusted equity-accounted income increased by 26% due to higher iron ore prices, sales volumes and cost optimisation initiatives.

This was offset by a 73% decrease in Mafube, Exxaro’s 50% JV with Thungela, whose adjusted equity-accounted income was mainly affected by lower export prices.

“Exxaro remains prudent in its strategic approach to capital allocation, in terms of returning cash to shareholders, managing debt, and selectively reinvesting for the growth of the business in a low carbon future,” the company said.

During the period under review, Exxaro received dividends from equity-accounted investments amounting to R4.9bn, which helped to fund capital expenditure, tax and ordinary dividend payments.

Sales volumes for coal decreased by 4% to 40.5 million tons, mainly as a result of lower Eskom demand. This was partially offset by higher domestic sales due to export coal being diverted to the local market.

Coal revenue decreased 18%, largely driven by a decrease in revenue from commercial mines due to lower export prices and volumes. Higher domestic prices were offset by lower domestic volumes.

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