Exxaro not sitting back during business

I-Net Bridge | Wed, 13 May 2009 06:57
[miningmx.com] -- Diversified resources group Exxaro Resources said it was not sitting back and expecting its successes to carry it through the current economic climate.

"We're committed to stable production and operational excellence, and we continue to manage the bottom line very carefully," Exxaro financial director Wim de Klerk said in a letter to stakeholders.

Last year, Exxaro achieved record production and financial results on the back of very strong commodity prices and markets.

However, this situation changed dramatically in the third quarter of last year, and the impact of the economic crunch continues to be felt in various commodity businesses.

"In the face of the economic downturn, Exxaro is fortunate to be more insulated than its peers, as Eskom presents us with a very strong coal off-take at prices that do not follow international coal trends," said De Klerk.

"While we didn't benefit significantly from the peaks in carbon-related product prices in the last few years, we are now insulated from the troughs, and are not subject to the volatility that many other markets are displaying. This makes Exxaro a defensive choice for investors - particularly appealing in the current economic climate," he added.

Exxaro's sands business experienced a significant turnaround in the last six months as a result of various factors, including stable prices, favourable exchange rates and technological breakthroughs.

However, the business is very much exposed to GDP growth and the world economy, so it could be a challenging year.

Even though the base metals business made a significant loss in 2008, Exxaro is managing the business through the cycle.

"We know that a down cycle will be followed by an upside on prices and demand, and the capital we've invested in the zinc business in the last few years has put us in a good position to make the most of the next upward cycle," said De Klerk.

The group has embarked on an aggressive cost-cutting initiative that filters through every level.

"The company no longer allows for local business class flights, and vacant positions may not be filled without express approval from the executive committee. We're determined not to cut back on production, which at this stage means that we will not be faced with the spectre of retrenchments, like so many other commodity businesses have been," De Klerk said.

He said the group's focus is on safety first, followed by stable production, continuous improvement and tight cost control.