South Africa’s Exxaro Grapples with Annual Profit Drop Amid Coal Price Challenges
On March 7, South Africa’s Exxaro Resources (EXXJ.J) announced that it anticipates a potential 30% decline in its 2023 profits, primarily attributed to reduced coal export prices. The mining company projects its headline earnings per share (HEPS), a commonly used profit metric in South Africa, to range between 42.11 rand and 50.53 rand ($2.24 and $2.68) for the fiscal year ending December 31, 2023. This represents a decrease from the previous year’s figure of 60.16 rand.
While international coal prices declined in the past year after reaching peak levels in 2022 following Russia’s invasion of Ukraine, Exxaro, a major supplier to South Africa’s thermal power stations, reported that it achieved higher prices in the domestic market. The company attributes this to increased domestic prices and the depreciation of the South African rand against the U.S. dollar. These factors partially mitigated the impact of the lower coal export prices on Exxaro’s overall financial performance.
Furthermore, Exxaro foresees an augmented contribution from its renewable energy unit, citing improved wind conditions, and anticipates increased income from its Sishen Iron Ore Company investment.
The mining firm is scheduled to unveil its financial results on March 14, providing a more comprehensive overview of its performance during the specified period.
Notably, the disclosure of a potential decline in profits underscores the challenges faced by Exxaro Resources in navigating the volatile dynamics of the global coal market and the broader economic conditions. The company’s diversified portfolio, encompassing both traditional and renewable energy sources, appears to play a strategic role in addressing these challenges and mitigating the impact on its financial outlook. As investors await the detailed financial report, they will be keen to understand how Exxaro plans to navigate the evolving market conditions and capitalize on opportunities within its various business segments.
