Kumba delivers record earnings despite Covid impact

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Kumba delivers record earnings despite Covid impact

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Published Date: 2021-02-24 | Source: Stephen Gunnion | Author: Stephen Gunnion

Kumba delivers record earnings despite Covid impact

The iron ore miner produced less metal last year but benefitted from efficiencies and higher export prices.

Kumba Iron Ore has delivered record earnings for 2020, supported by a rise in the price of iron ore. It's raised its annual dividend by close to a third.

The mining company grew earnings for the year despite a 13% decline in production to 37 million tonnes, with output from both its Sishen and Kolomela mines falling. It attributed this to the impact of Covid-19 on the mines and at the Saldanha Port, as well as reduced off-take from steel producer ArcelorMittal South Africa.

Sales for the year fell 6% to 39.7 million tonnes. However, its operating margins improved as it adapted its value chain and capitalised on the high-quality iron ore products it mines. Together with the strengthening price, this helped it achieve a 19% higher average FOB (freight on board) export price of $115 per tonne for its metal. A focus on costs resulted in savings of R1.3 billion, including R613 million of Covid-related savings. Cumulative and sustainable cost savings since it initiated its programme in 2018 now totalled R3.2. billion, it said.

Revenue for the year to end-December rose 25% to R80.1 billion and it grew earnings before interest, tax, depreciation and amortisation (EBITDA) to R45.8 billion. Headline earnings per share increased by 40% to 71.07c. Due to strong net cash generation, which delivered R20.7 billion of free cash flow, it raised its final dividend by 158% to R41.30 per share, taking its total dividend for the year 30% higher to R60.90.

The company said it was realising its ambition to extend the life-of-mine of its assets to 2040. It increased the life-of-mine of Sishen to 2035 through pit optimisation and its board also approved an ultra-high dense media separation project, which would maximise product quality and extend it further to 2039. It was also developing its Kapstevel South mine at Kolomela, while continuing its exploration programme in the Northern Cape as it developed its pipeline of resources.

Kumba's shares fell 2.6% to R650.99 yesterday, paring gains for this year to 4.5%





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