Exxaro: operating environment remained challenging

Exxaro Resources is expecting headline earnings for the six-month period ended 30 June 2020 to decrease between 34% and 18% compared to the six-month period ended 30 June 2019. This was mainly due to the accounting of non-controlling interest for the outside shareholders of Eyesizwe RF Proprietary Limited from 1 November 2019. HEPS are based on a weighted average number of shares (WANOS) of 251 million.

Attributable earnings for the six-month period ended 30 June 2020 are expected to decrease between 43% and 27% compared to the six-month period ended 30 June 2019.

In addition to the accounting of non-controlling interest for the external shareholders of Eyesizwe RF in the current period, the financial results in both periods were influenced by various once-off items, such as the gain on the partial disposal of Tronox Holdings plc and the redemption of the membership interest in Tronox UK in the comparative period as well as a gain on the deemed disposal of the previously held 50% equity interest in the Cennergi joint venture during the current period.

Exxaro Resources’ income from equity-accounted investments is also lower than the comparable period, mainly due to its investment in Sishen Iron Ore Company. AEPS are based on WANOS of 251 million.

EBITDA for the six-month period ended 30 June 2020 are expected to increase between 12% and 28% compared to the six-month period ended 30 June 2019. Whilst Exxaro’s operations were declared an “essential service” during the lockdown period, being able to operate, the environment remained challenging.

However, its own managed operations were resilient, resulting in higher commercial coal revenue supported by record coal export volumes, albeit at lower US dollar prices, but benefiting from a weaker exchange rate during the period.

Following the acquisition of the remaining 50% equity interest, Cennergi is now consolidated from 1 April 2020. Operating costs were negatively impacted by some inflationary pressure, additional distribution costs related to higher export volumes and higher buy-in costs for coal, but partially offset by the positive impact of the higher discount rates used in rehabilitation provisions and foreign exchange gains.

After adjusting for non-core items for both financial periods core EBITDA* for the six-month period ended 30 June 2020 are expected to increase between 30% and 46% compared to the six-month period ended 30 June 2019.

Exxaro will release its reviewed financial results for the six-month period ended 30 June 2020 on 13 August 2020.

*EBITDA is calculated by adjusting net operating profit before tax with depreciation, amortisation, impairment charges/reversals and net losses or gains on disposal of assets and investments (including translation differences recycled to profit or loss).

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