Exxaro's dividend soars after a bumper year


Exxaro's dividend soars after a bumper year

Published Date: 2019-03-15 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Exxaro's dividend soars after a bumper year

The resources group has lifted its full-year dividend by 55% after a year of record production and a bigger payout from Sishen.

Exxaro Resources achieved a triple record last year as production, sales and exports of coal all rose to new highs. And shareholders get to share in its strong performance, with its payout up by over a half for the year.

The resources company produced 47.8 million tonnes of coal, up 4.9% from 2017, and lifted sales volumes to 45.2 million tonnes. Exports improved to 8 million tonnes. Apart from operational improvements, it benefited from strong trading conditions in SA, which resulted in all premium product being sold at stable prices. Supplies to Eskom increased in line with contractual commitments while all other markets remained stable.

Exports benefited from increased demand from India for lower-grade material up to the third-quarter of the year, when the market became oversupplied with coal from Indonesia and Australia after a ban on coal imports by China. Although it couldn't compete with Colombian coal for the South Korean market, it said Japan opened a door after a trial cargo to a power plant resulted in a new order for this year. It's also made further inroads into the Pakistan market.

Revenue rose 12% to R25.5 billion in the year to end-December, assisted by higher coal selling prices and better Eskom commercial volumes at the Grootgeluk mine due to demand from the Medupi power station. Core earnings before interest, tax, depreciation, and amortisation increased by 1% to R7.3 billion. The core number removes once-off items. Core headline earnings per share improved by 7% to R21.59 and it's paying a final dividend of R5.55, taking its total dividend 55% higher to R10.85 per share. It said this included the pass-through of a R2.6 billion dividend received from its stake in the Sishen Iron Ore Company.

The company said it was committed to monetising its remaining 23.4% stake in titanium dioxide producer Tronox so that it can focus on its core business, repay debt, fund capital commitments and make further distributions to shareholders.

It expects the the domestic market to remain stable for the first half of this year, supported by healthy prices due to tight supply in premium quality sized coal. Eskom is also looking for more short-term supply contracts while it negotiations longer-term contracts, which is positive for the company.

Its shares gained 4.3% to R156.49 yesterday.

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