COVID-19 (the pandemic) and associated control measures resulted in a record decline in real GDP for the second quarter of 2020 in most of the world’s economies. Notwithstanding the unusually strong rebound in GDP activity during the third quarter, a much deeper global recession in 2020 compared to 2008/09 is anticipated.
Commodity markets recorded mixed results over the period under review. In respect of Exxaro’s key commodities for FYE20, the API4 coal export price index is expected to average US$61 (FY19: US$71) per tonne, free on board (FOB), and the iron ore fines price US$100 (FY19: US$94) per dry metric tonne, cost and freight (CFR) China.
Total coal production (excluding buy-ins) and sales volumes are both expected to increase by 5%, mainly due to the increased Eskom demand at Medupi Power Station and the ramping up of production at Belfast.
While Exxaro expects an increase of 27% in export volumes, a weaker US$ sales price per tonne is expected to be realised, in line with the weaker API4 coal export price index, cushioned somewhat by a weaker rand/dollar exchange rate.
In terms of Exxaro’s capital allocation programme, the company expects the capital expenditure for FYE20 in its coal business to be about 47% lower compared to FY19, mainly due to project delays linked to the pandemic as well as key projects reaching completion.
At 31 October 2020, the group’s net debt (excluding Cennergi’s net debt of R4.6 billion) was R5.9 billion (FY19: R5.8 billion). In addition to operational measures implemented to combat the spread of COVID-19, the group has sufficient liquidity to withstand an interruption to its operations and will remain a going concern for the foreseeable future.
We will provide a detailed account of FYE20 business performance when we announce our financial results on 18 March 2021,” said Riaan Koppeschaar, Exxaro’s Finance Director.