Thungela creates value for stakeholders with a record set of interim results.
Highlights
- Completed the first half of the year without a loss of life and remains committed to operating a fatality-free business
- A record half-year profit of R9.6bn (30 June 2021: R351 million)
- Adjusted operating free cash flow of R8.9 billion resulting in a robust net cash position of R14.8 billion
- Headline earning per share of R67,23
- Interim ordinary cash dividend of R60 per share declared, returning R8.2bn to shareholders, in excess of the minimum 30% payout ratio*
- SACO Employee and Nkulo Community Partnership Trusts to receive a distribution of R0.5 billion in keeping with commitment to create shared value
- Elders production replacement project approved, enabling us to maximise the value of our existing assets and support livelihoods in the region
- Full year guidance for export saleable production revised to 13.0Mt to 13.6Mt, reflecting the ongoing poor rail performance by Transnet Freight Rail (TFR)
Thungela Resources Limited (“Thungela” or the “Company”) released its half year results for the period ended 30 June 2022. An interim cash dividend of R60 per share was declared resulting in a total of R8.2 billion returned to shareholders, emphasising the company’s ability to deliver attractive returns during periods of strong coal prices.
Against the backdrop of firm demand for affordable and secure energy sources in a volatile operating environment, Thungela achieved adjusted EBITDA of R16.7bn while profit was R9.6bn (H1 2021: R351 million) with headline earning per share at R67,23. Elevated coal prices combined with a strong operational focus resulted in a net cash position of R14.8bn at the end of the period.
July Ndlovu, CEO of Thungela commented: Delivering attractive shareholder returns while maintaining disciplined capital allocation remains a cornerstone of Thungela’s strategy. Our robust cash flow generation and substantial net cash position allow us to declare an interim ordinary dividend of R60 per share. This represents a payout of approximately 92% of adjusted operating free cash flow, once again substantially higher than the minimum payout ratio of 30% as per our stated dividend policy. These results were achieved safely with no loss of life recorded.
The Employee and Nkulo Community Partnership Trusts will receive a distribution of R0.5 billion. These distributions cement our people as our partners and will create a lasting legacy for our communities.”
Demand for affordable energy sources
During the period under review, benchmark coal prices were high due to the energy crisis in Europe and the supply constraints in major coal producing regions. This drove prices to record levels amidst volatility.
Thungela’s ability to take full advantage of the strong price environment in H1 2022 was hindered by TFR’s continued underperformance.
Despite the impact of rail performance on export sales, Thungela achieved record cash generation of R8.9bn adjusted operating free cash flow, up from R1.9bn in the first half of 2021.
“A consistently well-run logistics corridor between Mpumalanga and Richards Bay is crucial not only for coal exporters such as Thungela, but also for the South African economy which generates billions of Rands in foreign currency earnings, tax and royalty revenues through coal exports. We remain committed to working with TFR, government and the industry, but we are also evaluating alternative logitistics so as to migitate the impact of TFR on our operations.”
Delivering on strategy and operating responsibly
Aligned to Thungela’s strategic pillar to maximise value from existing assets, the Elders project has been approved by the board. The project aims to replace volumes from Goedehoop as the mine comes to the end of its life. In line with the commitment to make environmental social and governance (ESG) considerations a key driver of our capital allocation strategy the social impacts of the project were carefully considered. Elders will support regional livelihoods and benefit from a solar-powered energy solution. The forecast capital spend is R2bn in 2022 money terms.
In addition to the R188 million contribution made to the Green Fund in the first half of 2022, Thungela is committing a further discretionary amount of R200 million to increase the quantum of cash set aside for future environmental obligations.
Driving our ESG aspirations requires an on-going focus on reducing carbon emissions. Thungela has started the journey towards setting intermediate carbon reduction goals to help us chart our path to net-zero by 2050.
Further cementing our commitment to building sustainable livelihoods in the communities where we operate, Thungela launched an enterprise and supplier development programme called Thuthukani focused on providing hands-on entrepreneurial business support, loan funding and technical development to small enterprises in Mpumalanga.
Outlook
Energy security, reliability and affordability concerns in Europe have highlighted the importance of coal in the energy transition. Coal is set to remain a critical input for affordable and reliable power generation, not only in the developing world but also in highly industrialised and developed nations which have recently increased their reliance on coal to meet their energy needs. We are monitoring these trends and their implications for Thungela’s strategy in the short to medium-term, with particular attention given to exploring opportunities for geographic diversification.
Considering the continued uncertainty about TFR’s performance for the remainder of the year and the view that the level of rail performance has not improved sufficiently, the company revised its guidance for export saleable production to a range of 13.0Mt to 13.6Mt for 2022. Previous guidance was between 14Mt to 15Mt.
Capital expenditure will be between R1.7 billion and R2 billion, with the bulk of the spend taking place in the second half of the year in line with historical seasonality.
“Operating a fatality-free business and ensuring exceptional shareholder returns are crucial to earning the trust and support of our stakeholders. We remain committed to delivering on our purpose of responsibly creating value together for a shared future.”
*Thungela’s dividend policy is to target a dividend pay-out of a minimum of 30% of adjusted operating free cash flow.
ENDS
For further information, please contact:
Media
Tarryn Genis
tarryn.genis@thungela.com
+27 82 324 4650 Investor Relations
Ryan Africa
ryan.africa@thungela.com
+27 11 638 0237