Exxaro on Thursday reported a 31% drop in full-year headline earnings, owing to a drop in international coal prices and lower demand for mineral sands products, but said it expects 2010 to be firmer.
Full-year headline earnings per share at Exxaro, the main coal supplier to Eskom, fell 31% to 729 cents, also hit by the strong rand against the US dollar, which gained about 20% last year.
Most South African mining companies sell their minerals in dollars, but pay their costs in rand.
Revenue for the group rose 8% to R15-billion.
Exxaro’s coal business reported lower net operating profit after an increase in revenue was offset by lower international coal prices and above inflationary increases in the cost of electricity, rail tariffs and labour costs.
“The group expects the global demand for coal to increase with the demand for local power station coal anticipated to remain strong. The domestic demand for steam and metallurgical coal is, however, expected to be firmer but still to remain subdued in 2010,” the company said.
The diversified miner said it expects higher production and sales volumes at its mineral sands business in 2010, while output at its base metals operations is expected to remain under pressure, owing to a global oversupply of zinc, albeit local demand for the metal is seen remaining stable.
Coal exports may be affected by the lack of rail capacity and port allocation at Richards Bay Coal Terminal.
The port is expanding its capacity to 91-million tonnes by April, but logistics group Transnet has said it might only be able to rail 65-million tonnes due to a lack of investment in its rail infrastructure and an ageing fleet.
Exxaro said the introduction of mining royalties from March 1 will have a negative affect on the group’s operating results, especially its coal business.
The company declared a final dividend of 100 cents per share and a total dividend of 200 cents per share.
Exxaro said net debt increased to R3,73-billion at a net debt to equity ratio of 29%. — Reuters