The market yesterday gave Thungela's annual results a thumbs down despite the company declaring a final cash dividend of R40 per share for its 2022 year, and bumper earnings.
The shares dropped by almost 11% in intraday trading yesterday, hitting a low of R174.50, but later closing 2.43% lower at R191.60. The shares have decreased by 37.5% in the past six months.
In its 2022 annual results, the coal exporter declared a final cash dividend of R40 per share for its 2022 year, more than doubled from R18.00 in 2021, bringing its total dividend for the year to R100 per share.
Headline earnings per share rose to R130.82 a share from R66.57 a share the prior year. Headline earnings increased by 143%, amounting to R17.5bn for the year compared with R7bn in 2021.
Profit for the reporting period was R18.2 billion, from R6.9bn the prior year, as European demand for coal increased after Russia and Ukraine's war. Adjusted operating free cash flow was R18.1bn and net cash R14.7bn.
However, Thungela noted that given Transnet Freight Rail's deteriorating performance since 2021, and the poor performance in 2022, it had to reset its production outlook for 2023.
“Export saleable production guidance for 2023 was between 10.5 Mt (million tonnes) and 12.5 Mt, as we plan to draw down on the high on-mine stockpiles to the extent that the rail performance exceeds production levels," it said.
Parastatal Transnet has been plagued with a shortage of locomotive spare parts and vandalism on the line that runs from coal mines in Mpumalanga to Richards Bay Coal Terminal on the east coast.
Thungela chief executive July Ndlovu said: “Our operations continued to be impacted by the poor and inconsistent rail performance, which deteriorated materially in the second half of 2022, placing an even greater strain on on-mine stockpiles, which were already near capacity".
Coal exports declined from 13.9Mt in 2021, to 12.2Mt last year.
"We will continue working with Transnet to resolve the issues plaguing the rail performance and call on the government to support these efforts to ensure that the mining industry can continue to create value together for South Africa and its people," Ndlovu said.
Looking ahead, Ndlovu said: "We look ahead with a sense of caution in the short term, yet confidence in the longer term".
He said that in the short term, fixing the rail network was a matter of critical importance to South Africa as the mining industry delivered far-reaching benefits, sustained jobs and livelihoods in communities, and contributed significantly to the fiscus and economy.
Ndlovu said the fundamentals supporting thermal coal remained firmly in place, although prices had softened in early 2023. While Thungela was unlikely to see the historic price levels observed in 2022, it expected prices to remain robust.
"In the longer term, we anticipate continued strong coal demand from emerging markets, especially those in Asia, where coal is likely to remain part of the energy mix for at least the next two decades," he said.
Thungela reiterated that the creation of diversification options remained an important focus for its business growth going forward.
In February, it had announced the acquisition of a controlling shareholding in the Ensham thermal coal business in Australia.
BUSINESS REPORT