THUNGELA Resources, the Johannesburg listed coal producer, announced plans on Monday to buy back up to R500m of its own shares.
Commenting in its results for the 12 months ended December, in which headline earnings fell 73% year-on-year to R34,97/share – the group said the share buy back took returns to 49% of adjusted operating free cash flow of R6.8bn (2022: R18bn).
Included in this is the declaration also announced today of a R10 per share final dividend, taking the total dividend for the 12 month period to R20/share, or 41% of adjusted operating free cash flow. The group has a minimum 30% of free cash flow dividend policy.
Shares in Thungela gained 6% in the first hour of trade on the Johannesburg Stock Exchange. On a 12 month basis, the stock is 42% down.
Thungela ended with net cash of R10.2bn as at December, about R4bn lower than a year ago when the company enjoyed the benefits of skyrocketing thermal coal prices amid the energy security emergency in Europe.
Nonetheless, the payout to shareholders represents a strong vote of confidence in the group’s outlook despite a year-on-year retraction in the internationally traded coal price and lower export volumes from South Africa.
Export production from Thungela’s South Africa mines totalled 12.2 million tons (Mt) which was 7.6% lower than in the 2022 financial year.
For 2024, the group has guided to export production from South Africa of between 11.5Mt and 12.5Mt “based on expected rail performance” of the state-owned Transnet Freight Rail (TFR). Thungela has capacity to export about 15Mt a year through Richards Bay.
In 2023, TFR railed 47.9Mt of thermal coal to the Richards Bay Coal Terminal (RBCT), marking a 4.8% decline compared to 2022.
Export sales from Ensham, Thungela’s Australian mine acquired last year, were forecast to be between 3.2Mt and 3.5Mt on a 100% basis and includes plans to ramp up production from the mine.
The share buy-back announcement comes despite heavy demands on Thungela’s balance sheet. Expansion potential at Ensham has not been budgeted while the group works on its options.
But at the South Africa operations expansionary capital of R1.6bn to R1.9bn on the Zibulo South and Elders replacement projects has been earmarked against which Thungela has set aside R2.6bn. This is in addition to is now standard cash buffer, held for general purposes, of about R5bn. In addition to cash, Thungela has undrawn credit facilities of about R3.2bn.
