19th Aug 2024 12:15
(Alliance News) - Thungela Resources Ltd had a good operational first half, an analyst on Monday said, with South African operations expected to be at the top end of the guidance range, while the outlook in Australia was raised.
On Monday, Thungela cut its interim dividend after profit more than halved on the back of lower coal prices, logistical constraints in South Africa, and sluggish demand in Europe.
The Rosebank-based thermal coal exporter suffered a 59% drop in pretax profit to ZAR1.77 billion from ZAR4.29 million a year earlier. Profit plunged 61% to ZAR1.19 billion, compared to ZAR3.01 billion.
For the first half, revenue rose 17% to ZAR16.75 billion, from ZAR14.36 billion. Adjusted earnings before interest, taxes, depreciation and amortisation slumped 52% to ZAR2.1 billion from ZAR4.4 billion.
South African export saleable production was up 1.6% to 6.2 million tonnes from 6.1 million tonnes. In Australia, export saleable output was 1.6 million tonnes. Thungela Resources in August 2023 completed its acquisition of the Australian-based Ensham coal mine.
Thungela said its first-half operational performance was in line with 2024 guidance in South Africa and ahead of full-year guidance in Australia.
As a result, Thungela upgraded the production guidance at Ensham. The firm now expects export saleable production between 3.5 to 3.8 million tonnes, up from 3.2 to 3.5 million tonnes before.
"Following the strong performance at Ensham in the first half of the year, we are upgrading the production guidance for the full year 2024. We continue to drive productivity improvements and improve the cost competitiveness of the mine. We remain optimistic in discovering value accretive opportunities at Ensham once the resource development plan has been completed," the firm said in a statement.
The company expects full-year export saleable production in South Africa to be at the upper end of the guidance range for between 11.5 to 12.5 million tonnes.
Coal prices were lower. Richards Bay Benchmark coal price fell 22% on average to USD101.05 per tonne for the first half of 2024 from USD129.50 per tonne a year before. On average, Newcastle Benchmark coal price slumped 36% to USD130.66 per tonne from USD204.27.
The continued underperformance by Transnet Freight Rail also hurt Thungela's results in the first half and the milder winter conditions in the northern hemisphere led to reduced demand for coal.
Thungela cut its interim dividend to 200.00 rand cents, down 80% from 1,000 cents. It plans a share buyback of up to ZAR160 million to be completed by December 31.
Earnings per share tumbled to 952 cents, down 58% from 2,245 cents, while headline EPS plummeted by the same percentage margin to 952 cents from 2,246 cents.
Thungela Marketing International, which was established in the United Arab Emirates, is now fully operational and is responsible for the marketing of the group's South African and Australian coal, Thungela said.
Shares in Thungela were down 1.1% to 532.00 pence at midday Monday in London, reversing some initial gains earlier in the morning. They were down 1.0% to ZAR123.00 in Johannesburg.
Panmure Liberum analyst Ben Davis said Thungela has a good operational first half, with raised guidance at Ensham to 3.5 to 3.8 million tonnes from 3.2 to 2.5 million tonnes.
South African operations are also expected to be at the top end of guidance range, he noted.
He explained the rail capacity in South Africa is still dragging on export performance and while the company can see scope for improvements, they do not expect them to take hold until 2025.
Ebitda was below his estimates of ZAR3.4 billion, due to higher than expected costs.
"We still believe that in these weak markets that coal and precious are the best place to hide with upside risk from supply disruption," Davis added.
Davis said the dividend and ZARR2 per share (ZAR281million) and a buyback of ZAR160 million compared to his total capital return assumptions of ZAR5.8 per share.
Davis reiterated a 'buy' rating on Thungela.
By Jeremy Cutler, Alliance News reporter
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