Exxaro declares dividend despite drop in profit

Exxaro Resources, a leading South African mining company, has faced numerous challenges in the past year, impacting its operations and financial performance. In a recent interview with CNBC Africa, Dr. Nombasa Tsengwa, CEO of Exxaro Resources, discussed the key drivers affecting the business and the company's strategic decisions moving forward. One of the major challenges highlighted by Dr. Tsengwa was the capacity constraints at Transnet, a state-owned rail and logistics company. The inability to transport the full capacity of coal produced by Exxaro resulted in reduced revenue and margins for the company. Despite facing these challenges, Exxaro still managed to declare a special dividend, indicating confidence in its financial position and future prospects. The fluctuating commodity prices also posed a significant challenge for Exxaro, with the average price dropping from $1550 per ton in 2022 to $800-$810 per ton in the current year. This decline in prices had a direct impact on the company's profitability, highlighting the volatility of the commodity market. In response to the challenges faced, Exxaro had to explore alternative logistical routes to export its coal products. Dr. Tsengwa mentioned that the company utilized alternative ports such as Maputo Port and alternative routes to Richards Bay Coal Terminal (RBCT) to mitigate the impact of Transnet's capacity constraints. These alternative routes, although more expensive, allowed Exxaro to continue operations and maintain its export volumes. Despite the setbacks, Exxaro remains focused on diversifying its business and achieving carbon neutrality by 2050. The company's energy division performed well, with revenues growing by 16% during the period under review. However, Exxaro did face challenges in its diversification efforts, such as the loss of the Botswana deal to Chinese competitors. Dr. Tsengwa emphasized that Exxaro is actively exploring opportunities in the copper and manganese markets, looking for strategic acquisitions to expand its minerals portfolio. In conclusion, despite the challenges and uncertainties in the market, Exxaro Resources is optimistic about its future prospects. The company's commitment to returning value to its shareholders through dividends and strategic investments demonstrates its confidence in navigating the current economic landscape. As Exxaro continues to pursue growth opportunities and diversification, the mining industry will be closely watching its next moves.