Exxaro, led by South African exec Nombasa Tsengwa, sees profit drop below $270 million in H1 2024

Omokolade Ajayi -

Key Points

  • Exxaro Resources’ H1 2024 profits fell 37.5% to $268.7 million, driven by a 27% decline in coal business earnings.
  • Revenue edged down to $1.04 billion, while operating costs surged, impacting overall profitability despite resilient revenue.
  • Total equity and retained earnings declined slightly, but Exxaro declared an interim cash dividend of $0.445 per share.

Exxaro Resources, a Gauteng-based diversified resource group led by South African business executive Nombasa Tsengwa, reported a disappointing financial performance for the first half of 2024, as profits fell below $270 million due to persistent challenges in its coal business.

The group’s interim financial statements for the six months ended June 30, 2024, revealed a 37.5 percent decrease in profit, from R7.68 billion ($429.7 million) in H1 2023 to R4.8 billion ($268.7 million) in H1 2024. This decline was primarily attributed to a 27 percent drop in earnings from its coal business, which constitutes the majority of Exxaro’s revenue.

Operating costs weigh on profits

Exxaro’s revenue remained resilient, totaling R18.68 billion ($1.04 billion) in H1 2024, slightly down from R18.84 billion ($1.05 billion) in H1 2023. However, a surge in operating costs, particularly in the coal segment, eroded overall profitability.

The company’s coal production volumes decreased by 5 percent, and sales volumes dropped by 1 percent, while increased rail and transport costs led to a substantial decline in earnings before interest, taxation, depreciation, and amortization (EBITDA) for the coal business, falling from R6.92 billion ($386.8 million) to R5.06 billion ($283.8 million).

Total equity and retained earnings fall slightly

Exxaro Resources operates in South Africa, Europe, the Democratic Republic of the Congo, and the United States, with interests spanning coal, TiO2, ferrous metals, and energy. Nombasa Tsengwa, who became CEO in March 2021, has guided the company through various challenges, including the post-lockdown economic landscape and civil unrest in 2021.

Exxaro’s financial strain from weak coal performance led to a slight drop in total assets, from R92.85 billion ($5.19 billion) on Dec. 31, 2023, to R91.25 billion ($5.1 billion) by June 30, 2024. Total equity decreased from R66.4 billion to R65.84 billion ($3.68 billion), and retained earnings fell from R49.92 billion ($2.79 billion) to R49.77 billion.

Despite the financial strain, Exxaro’s strong financial position enabled its board to declare an interim cash dividend of R7.96 ($0.445) per share for the six months ending June 30, 2024. The dividend will be paid on Oct. 7, 2024, from income reserves.