Thungela registers strong debut with whisper of dividend outperformance in the air

July Ndlovu, CEO, Anglo American: Coal

THUNGELA Resources published strong financial results following its June listing with interim share earnings coming in at 313 South African cents – a performance that puts it in line to announce its first dividend at the year-end.

Operating profit was R990m and adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) totalled R1.9bn for the six month period.

“After a month of operating as a standalone business, we are cash positive and well positioned to deliver on our targets,” said July Ndlovu, CEO of Thungela Resources in notes to the thermal coal producer’s published results.

Thungela Resources was created from the unbundling of Anglo American’s South African coal assets, announced in April. The company has been operating as an independent entity for a month of the period under review.

The results “… paves the way for Thungela to consider the declaration of a maiden dividend at the annual results for 2021, in line with Thungela’s stated dividend policy of a minimum payout of 30% of Adjusted operating free cash flow,” said Ndlovu.

Commenting later in a media call, the firm’s CFO Deon Smith said there was a possibility Thungela’s year-end dividend could exceed its policy. “But it’s difficult to say at this stage if we could do better,” said Smith, adding that coal prices were hard to forecast.

Thungela achieved an average realised price for its coal of $75.27/t which compares to R48/90/t realised when the assets were held in Anglo American. Prices were strong owing to a recovery post the onset of the Covid-19 pandemic and supply-side challenges that Ndlovu described as “short-term”.

Coal exports from South Africa have been well below expectations as a result of ongoing rail utilisation problems at Transnet, the state-owned freight and logistics company. Smith said today the “numbers were staggering for us and as a country”.

It emerged during a presentation of Exxaro Resources’ interim results on Thursday that Transnet Freight Rail (TFR), a division of Transnet, short delivered 1.5 million tons (Mt) a month owing to a complex of problems including theft, vandalism, and absenteeism.

“Should the South African government and TFR reduce or eliminate the issues relating to theft and equipment failures, then an improved rail performance during the second half of 2021 is expected,” Thungela said in its results commentary.

Ndlovu added that Transnet management had responded positively to the challenges. “All things being equal we expect to reach 15Mt to 16Mt in sales at year-end,” he added. Sales for the interim period totalled 6.68Mt, a decline partly owing to a comparable fall in coal production as well as TFR’s problems.

Capital expenditure for the year would come in at the low end of its R2.6bn to R3bn guidance. As of June 30, Thungela had cash of R3bn by dint of a commitment by Anglo American to inject R2.5bn into the business.

The company opened in Johannesburg at R21.90 per share but is currently trading at R46.80/share, an improvement of about 114%.

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