Exxaro (EXX) is a BEE coal company with interests in iron and heavy minerals. It has interests in Australia, America, and Europe. Exxaro is a provider of coal to Eskom's Medupi power station. The company initially aimed to increase coal production from 48 million tons to about 60 million tons by 2022, but this policy might be changed due to the lower demand for coal in the global market. The price of export coal has dropped from $100 per tonne at the end of 2018 to as low as $60 per tonne.
This is an immensely cash-generative operation that is usually profitable, depending on coal prices. While demand for coal both locally and in the export market has been strong, the shift towards renewable energy poses a long-term threat to the business. It is becoming increasingly difficult to obtain funding for new coal-fired power stations as banks face pressure from environmental groups.
On 9th April 2021, Exxaro announced that it had sold its interest in Exxaro Coal Central (Pty) Ltd and Leeuwpan Coal Mine operation. In its results for the year to 31st December 2023, the company reported revenue down 17% and headline earnings per share (HEPS) down 22%. The company said, "The revenue contribution from our energy operations was 16% higher than FY22. Energy generation from the Cennergi operating wind assets was higher, driven by improved wind conditions compared to the prior year. Group EBITDA decreased by 29% to R13 399 million (FY22: R19 001 million), mainly attributable to the 36% decrease in Coal EBITDA."
The share has been moving down since the beginning of 2023. Initially, the Ukraine conflict had a beneficial impact on this share through higher commodity prices, but that effect has now disappeared. The company announced that, with the lower price of coal, it was no longer viable to transport coal to port by truck - something it had been forced to do because of the inefficiency of the South African rail and port systems.
Exxaro remains a volatile commodity play, currently on a downward trend but possibly bottoming out. In a pre-close update on 25th June 2024, the company said, "Total coal production (including buy-ins) and sales volume for 1H24 are expected to decrease by 14% and 12% respectively, mainly due to the reduced demand from Eskom at Grootegeluk, based on their latest internal plan."
This is an immensely cash-generative operation that is usually profitable, depending on coal prices. While demand for coal both locally and in the export market has been strong, the shift towards renewable energy poses a long-term threat to the business. It is becoming increasingly difficult to obtain funding for new coal-fired power stations as banks face pressure from environmental groups.
On 9th April 2021, Exxaro announced that it had sold its interest in Exxaro Coal Central (Pty) Ltd and Leeuwpan Coal Mine operation. In its results for the year to 31st December 2023, the company reported revenue down 17% and headline earnings per share (HEPS) down 22%. The company said, "The revenue contribution from our energy operations was 16% higher than FY22. Energy generation from the Cennergi operating wind assets was higher, driven by improved wind conditions compared to the prior year. Group EBITDA decreased by 29% to R13 399 million (FY22: R19 001 million), mainly attributable to the 36% decrease in Coal EBITDA."
The share has been moving down since the beginning of 2023. Initially, the Ukraine conflict had a beneficial impact on this share through higher commodity prices, but that effect has now disappeared. The company announced that, with the lower price of coal, it was no longer viable to transport coal to port by truck - something it had been forced to do because of the inefficiency of the South African rail and port systems.
Exxaro remains a volatile commodity play, currently on a downward trend but possibly bottoming out. In a pre-close update on 25th June 2024, the company said, "Total coal production (including buy-ins) and sales volume for 1H24 are expected to decrease by 14% and 12% respectively, mainly due to the reduced demand from Eskom at Grootegeluk, based on their latest internal plan."
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.