S.Africa's Exxaro posts 39 per cent drop in H1 earnings, declare dividend - CNBC Africa

S.Africa's Exxaro posts 39 per cent drop in H1 earnings, declare dividend

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This is compared to 1,162 cents in the same period last year. Headline EPS are the main profit gauge in South Africa and strip out certain one-time items.

“Headline earnings achieved, which exclude, inter alia, the impact of the impairment and partial impairment reversal as well as profits realized on the sale of subsidiaries in 2012, were 2.5 billion rand compared to 4.1 billion rand posted in 2012 or 712 cents per share compared to 1 162 cents recorded the previous year for the six-month period ended 30 June 2013. This represents a 39 per cent decrease in headline earnings per share from the corresponding period in 2012,” Exxaro said in a statement.

Attributable earnings, inclusive of Exxaro’s equity-accounted investment in associates, amounted to 2.2 billion compared to 8.8 billion rand from the corresponding period or 632 cents per share compared to 2 488 cents for the previous period for the six-month period, representing an 75 per cent decrease from the 2012 comparative period, mainly as a result of the non-recurring profits on the sale of subsidiaries and other non-core assets recorded in 2012.

Group consolidated revenue decreased by 36 per cent to 6.2 billion for the six-month period ended 30 June 2013, mainly as a result of the disposal of the mineral sands and Rosh Pinah businesses in 2012.

Group consolidated net operating profit was 1.7 billion lower at 1.2 billion, after the exclusion of the items listed in the ‘comparability of results’ section above.

“This was mainly due to the coal operations being the main contributors to the group’s performance in the first half of 2013 compared to 2012 where the mineral sands and Rosh Pinah operations contributed to operating profits for five and a half and five months, respectively. Corporate further saved costs (R231 million) mainly from reduced consulting fees (R180 million),” Exxaro said.

Exxaro said that coal reported revenue of 6.1 billion in the six-month period ended 30 June 2013, representing an increase of 6 per cent compared to 2012, mainly due to higher revenue from tied mines.

Revenue from the commercial mines was however lower due to lower prices realised on export and domestic sales partially offset by higher revenue from Eskom.

A 24 per cent decrease in net operating profit to R1 031 million – at an operating margin of 17 per cent - was achieved, mainly as a result of the decrease in selling prices, lower volumes sold as well as inflationary pressures on costs.

Operating costs recorded were 320 million rand higher than in the corresponding period in 2012 mainly due to a higher corporate service fee allocated, higher distribution costs and higher labour.

The income received from Eskom as a result of the delay on the Medupi power station during the six-month period ended 30 June 2013 was 601 million rand higher than the corresponding period in 2012.

Due to a continued decline in global market interest rates, the group revised the inflation and discount rates used to calculate the net present value of its rehabilitation provisions in line with the latest cost of debt indicators.

The decrease of the rehabilitation provision increased the tied mines’ net operating profit by 132 million rand.

To broaden coal marketing options, Exxaro is active in developing new markets in China, India and Pakistan. A proposed ban on low-grade imports to China may benefit higher-grade South African coal. However, developments in the financial markets may impact on the availability of trade finance and impact coal trading.

“Whilst expected to remain stable, domestic market demand is expected to be sensitive to international market pricing influences. Supply to Eskom from Exxaro will remain on schedule at agreed supply levels.”

Exxaro declared a gross interim cash dividend Number 21 of 235 cents per share for the six-month period ended 30 June 2013 payable to shareholders of ordinary shares.

“The dividend declaration was carefully considered to take into account the group’s capital allocation strategy, with an effort to balance distribution between shareholders and long term growth,” said Exxaro in a statement.