JOHANNESBURG – Exxaro Resources edged 4.33 percent higher on the JSE on Thursday as the company rewarded shareholders with a bumper dividend on higher coal prices and a solid performance from its iron ore investment.
The company shares closed at R156.49 after declaring a dividend of R10.85 a share in 2018 – up by 55 percent from 2017. The final dividend was R5.55 a share. The company’s 26 percent shareholding in Sishen Iron Ore Company (Sioc) contributed R2.6bn total dividends last year.
Exxaro said it expected Sioc, a Kumba Iron Ore subsidiary, to soar further in the first half of 2019 on higher iron ore prices after the mine disaster in Brazil, relatively higher global lump premium prices and a weaker rand against the US dollar.
Last year, the group introduced a new dividend policy to pass on returns from Sioc.
Pieter Koppeschaar, Exxaro’s financial director, said that the dividend was investor friendly. “We think it is a good dividend for the year,” Koppeschaar said. “We are trading above the 7 percent dividend yield.”
The group said that it also benefited from short-term contracts from Eskom. Executive head for coal operations, Nombasa Tsengwa, said Exxaro secured a 2million ton supply contract with Eskom, starting in January 2018 after the utility’s call for short-term supply contracts while it was looking to enter into long-term contracts.
“This is positive for Exxaro as it provides more flexibility,” she said, adding that the group did not want its coal supply to revolve only around Eskom.
The group said it posted a record 47.8 million tons of coal on the back of improved dermal from the Grootgeluk mine, which rose by 17 percent on the ramp-up at the Medupi power station resulting in higher sales.
However, 21 days were lost as the Mpumalanga community led protests to demand jobs and procurement opportunities.
Exxaro said exports also surged to a record 8 million tons as India increased its demand for lower-grade coal in the third quarter.
Financial highlights included group revenue of R25.4 billion, up 12 percent improvement from 2017 due to higher selling prices.
Cash flow generated by operations was R7bn from R6bn in 2017. The company reported a net debt of R3bn from a net cash position of R69m. It said the debt included a R609m preference share liability at Eyesizwe.
Headline earnings increased to R6.7bn from R1.56bn, driven by the R4.3bn empowerment credential expense and transaction cost.