Rand, lower iron ore price to hit Kumba earnings by at least a fifth

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Iron ore pellets

KUMBA Iron Ore shareholders, including Anglo American, will be returned to earth after a stellar financial year in 2017 owing to the improvement in the rand which more than offset continued operational improvements for the six months ended June.

The outcome is that Kumba Iron Ore will report interim earnings that would be “at least 20% lower”. Lower iron ore prices had also taken its toll during the period, it said.

“Both headline earnings and basic earnings for the period are likely to be at least R921m  and R917m lower (at least 20% lower), respectively, than reported headline earnings and basic earnings for the comparative period,” the company said in an announcement.

“Headline earnings per share (HEPS) and earnings per share (EPS) are also likely to be at least R2.88 and R2.87 per share lower (at least 20% lower), respectively, than reported HEPS and EPS for the comparative period. Reported headline earnings and basic earnings for the comparative period were R4.6bn and R4.58bn respectively, while reported HEPS and EPS for the comparative period were R14.42 and R14.37 respectively.

For the 2017 financial year, Kumba returned to dividend payments. It declared a final cash dividend of R15/share which, coupled with the interim dividend, resulted in a total dividend of R30,97/share or some R13.1bn to shareholders and keeping R13.9bn on the balance sheet in cash and excluding facilities.

The firm has had some operational mishaps in the interim period. In May, it said derailments on a railway line linking its Sishen mine in the Northern Cape to Saldanha Bay in the Western Cape had resulted in it declaring a force majeure.

“We couldn’t deliver on our shipment commitments to our clients,” Themba Mkhwanazi told BusinessLive. “For the first time in five years, we had to declare force majeure because we could not honour our sales commitments to our clients,” he said.

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