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Dr Nombasa Tsengwa, CEO, Exxaro, 0
2024 continues to present the mining industry with a complex operating landscape that is influenced by fluctuating commodity prices, geopolitical tensions, and evolving regulatory frameworks. The industry is navigating a period marked by moderate economic recovery, with varying growth rates across regions. In the first half of the year, global economic growth prospects have improved, although some commodities such as coal remain volatile, a volatility that is largely driven by demand and imperatives from the green energy transition, and supply chain disruptions. According to the World Economic Forum, 2024 is a historic year because over fifty percent of the world’s population will be or has been going to the polls, and this could potentially contribute to a landscape of change, uncertainty and yet another ‘new normal’ for global populations to contend with.
By comparison 2023, saw a slowdown in global economic growth amongst other things, characterized by declining coal prices due to a decrease in high calorific value coal demand, and this was further informed by sufficient gas and coal stocks in Europe, Japan, Korea and Taiwan. Coal demand reductions were further exacerbated by warmer than usual winter temperatures, robust performance in renewable and nuclear energy generation, and significantly lower gas prices.
Global inflation rates continue to trend down, enabling central banks to consider cutting interest rates. The expectation is for the Federal Reserve, the European Central Bank, the Bank of England, and the South African Reserve Bank, amongst others, to start lowering official policy interest rates during the remainder of this year. This will also influence our floating rates and long-term borrowings.
The normative development of Environmental, Social and Governance (ESG) considerations and their growing criticality have become something of a biological necessity for our industry. Mining companies often face high levels of scrutiny from investors, governments, NGOs and community stakeholders regarding their environmental footprint, the sincerity with which they operationalize their social responsibility, and the material ethics behind their governance practices. This, in turn, is driving the responsible mining practices is driving the adoption of cleaner technologies, better waste management systems, and more transparent reporting mechanisms.
We continue to improve our ESG global ranking including the FTSE Russell ESG rating, which improved to 4.0/5 underpinned by our leading carbon initiatives and relatively strong governance initiatives compared to our global peers. Exxaro also currently sits at the top 20 percent of ESG performers convened by the FTSE Russell. Additionally, this reporting period saw us qualify for inclusion onto the S&P Global Dow Jones Sustainability Index (DJSI) due to our increased disclosure particularly on climate strategy, business ethics and corporate governance.
Furthermore, our environmental performance achievements demonstrate our dedication to sustainability. In the first half of 2024, we achieved a five percent improvement in carbon intensity due to our
energy efficiency projects, with a continued commitment to achieve our 2026 target of reducing scope 1 and scope 2 emissions by 40percent. For the same period, water intensity improved tonne, staying below our target of 180 liters per run of mine tonne and well below the coal mining benchmark of 380 liters per run of mine tonne. As a miner of high calorific coal, the improved product quality further contributes to lower scope 3 emissions, which is a positive development for the business. We have developed research partnerships to reduce the impact of scope 3 emissions and are working towards diversifying our mining portfolio into low carbon minerals. Our decarbonization strategy is supported by a strong balance sheet, technological advancement, and sound expertise.
Exxaro continues to have a strong track record for delivering on shareholder value. Our Sustainable Impact and Growth strategy has given us the flexibility to be able to navigate our complex operating environment consistently delivering results.
During 2023-year end, operated at 42.5 Mtpa, often with full stockpiles, at 5 Mtpa of exports, some by rail to RBCT and more tons than before trucked to Maputo. Exxaro’s coal export sales increased by 21.8percent to 3.2 million tonnes during the first half of 2024, a clear sign of the operation team’s ability to respond with agility to market volatility.
Our energy business operates with strong seasonality dependence, and as a result the first half of the year is always weaker than the second half. In the first half of 2024 Cennergi operations have delivered 339GWh of wind energy, a decrease of 13.5percent compared to the second half of 2023. However, when we compare first half of 2024 to first half 2023, we can see that there has been an increase of 1.2percent in wind energy delivered.
We saw a decrease in our Group EBITDA of 10.5percent to R5.1 billion, mainly because of lower export prices and lower sales volumes for the domestic market in the first half of the year. The Coal business’ EBITDA margin however was stable at 28percent whilst the Cennergi EBITDA margin decreased marginally by 1percent to 79 percent.
We achieved headline earnings per share of R15.28, down 31.7percent from second half of 2023 including a contribution from SIOC interests and a price realization of 95 percent which is in line with our set target. As a result of our high basket price performance, but also to our disciplined strategy execution and operations efficiency programs that have ensured the resilience of the business, our Return on Capital Employed is 27 percent for the first half of 2024.
In light of this performance and taking into account our growth aspirations as well as the uncertainty of our operating environment, we announced an interim dividend is declared by the Board of R7.96 per share. As ever – our operational and financial performance is made possible by our people, the heart of Exxaro. The success of Exxaro is their success.
The global mining industry in 2024 is facing lots of uncertainty – having to balance the need for the continued support of current energy needs and that of the future projected demand. As mining companies, we have to maneuver market dynamics whilst creating lasting and sustainable impact in the communities we operate in and providing continued value to all our stakeholders.
Exxaro continues to have a strong track record for delivering on shareholder value. Our Sustainable Impact and Growth strategy has given us the flexibility to be able to navigate our complex operating environment consistently delivering results.
During 2023-year end, operated at 42.5 Mtpa, often with full stockpiles, at 5 Mtpa of exports, some by rail to RBCT and more tons than before trucked to Maputo. Exxaro’s coal export sales increased by 21.8percent to 3.2 million tonnes during the first half of 2024, a clear sign of the operation team’s ability to respond with agility to market volatility.
Our energy business operates with strong seasonality dependence, and as a result the first half of the year is always weaker than the second half. In the first half of 2024 Cennergi operations have delivered 339GWh of wind energy, a decrease of 13.5percent compared to the second half of 2023. However, when we compare first half of 2024 to first half 2023, we can see that there has been an increase of 1.2percent in wind energy delivered.
As mining companies, we have to maneuver market dynamics whilst creating lasting and sustainable impact in the communities we operate in and providing continued value to all our stakeholders.
We saw a decrease in our Group EBITDA of 10.5percent to R5.1 billion, mainly because of lower export prices and lower sales volumes for the domestic market in the first half of the year. The Coal business’ EBITDA margin however was stable at 28percent whilst the Cennergi EBITDA margin decreased marginally by 1percent to 79 percent.
We achieved headline earnings per share of R15.28, down 31.7percent from second half of 2023 including a contribution from SIOC interests and a price realization of 95 percent which is in line with our set target. As a result of our high basket price performance, but also to our disciplined strategy execution and operations efficiency programs that have ensured the resilience of the business, our Return on Capital Employed is 27 percent for the first half of 2024.
In light of this performance and taking into account our growth aspirations as well as the uncertainty of our operating environment, we announced an interim dividend is declared by the Board of R7.96 per share. As ever – our operational and financial performance is made possible by our people, the heart of Exxaro. The success of Exxaro is their success.
The global mining industry in 2024 is facing lots of uncertainty – having to balance the need for the continued support of current energy needs and that of the future projected demand. As mining companies, we have to maneuver market dynamics whilst creating lasting and sustainable impact in the communities we operate in and providing continued value to all our stakeholders.