South Africa’s Exxaro Resources on Thursday posted a 28% jump in 2022 profit after seeing average coal prices surge more than 150%, but warned prices were easing, partly due to high inventories at European power utilities.
Exxaro posted a 41% increase in revenue to 46.4 billion rand ($2.53 billion). It realised an average coal price of $251 per tonne last year, up from $96 in 2021, due to a price surge after the European Union banned coal imports from Russia following its invasion of Ukraine in February 2022.
However prices, which started coming off in the final quarter of 2022 due to the European inventories amid milder winter temperatures in October and November, have continued to decline in the new year, Exxaro’s finance director Riaan Koppeschaar told Reuters.
“We should expect a bit of a discount on the API4 side because of the weakness in the Atlantic basin. If you look at the forecasts, it’s somewhere between $120 and $140 per tonne,” Koppeschaar said. API4 is the benchmark price reference for South African coal exports.
Like its peers, Exxaro has been trucking some of its coal to ports due to rail capacity problems at South Africa’s state-owned Transnet.
Transnet is struggling to haul minerals to port due to the shortage of locomotives and spares as well as cable theft and vandalism of its infrastructure, forcing exporters to resort to rail.
But coal volumes moved by trucks, an expensive alternative to rail, are declining due to weaker prices, Koppeschaar said.
“There is very little coal being shipped from the trucking route in Richards Bay, so it’s clear there’s already a material chunk (of coal) that’s not economical,” he said.
Exxaro exported 5.2 million tonnes in 2022, down from 7.6 million tonnes the previous year due to the rail capacity problems.
The miner reported a 28% jump in headline earnings per share to 60.16 rand ($3.27) in the year ended Dec. 31, compared with 46.83 rand previously, but declared a lower dividend, citing lower income from its iron ore investment as well as uncertainty over rail performance.
It declared a final dividend of 11.36 rand per share, compared with 11.75 rand last year.
