Shares in Thungela Resources, which will kick-start a share buyback scheme for the 2024 second half, fell 1.7% in afternoon trade on the JSE yesterday after it reported declining interim dividends and earnings for the six months ended 30 June 2024.
The company advised though that it had noted progress in efforts to improve Transnet Freight Rail’s capacity. It traded firmer at around R128 per share early trading session, extending its 9.65% surge on the local bourse in the last 30 days before tipping into negative territory in the afternoon.
In the first half year to June, Thungela repurchased 3.3 million ordinary shares for R441 million, and yesterday the company said it had set its focus on the second instalment of its share buyback scheme.
Thungela said it would “implement share repurchases subject to favourable market conditions, in the period commencing 20 August 2024 and, unless revised or terminated earlier, ending 31 December.”
It has set the aggregate purchase price under the 2024 second half share buyback scheme at no more than R160m.
Although it flagged Transnet’s rail performance in the first half of the year as disappointing at 47.3 million tons compared to 47.9m tons, Thungela also hailed progress in interventions to prop up Transnet.
“The ongoing support from industry has enabled progress on some of the interventions already in place, such as the purchasing of critical locomotive spares and the provision of security on the rail line,” Thungela CEO, July Ndlovu said.
However, significant improvements in South Africa’s freight rail performance is only expected from next year, Ndlovu added.
Companies such as Thungela need rail capacity to be at a maximum to be able to move coal to the Richards Bay Coal Terminal at a time other coal players have resorted to hauling coal by road.
Vuslat Bayoglu, chairman of Menar, wrote on X that Transnet Freight Rail had been unable to “rail the bulk commodities at the pace South African mines” produced.
“There is only one solution. Government needs to implement the rail reform. They have to allow third parties to pay a fee to use Transnet’s rail infrastructure so that they invest to bring their own rolling stock,” added Bayoglu.
For Transnet, there has been some respite in the form of the existing contracted rail capacity as well as the continued use of third-party sidings.
“This supports incremental coal movement as a result of the wider train allocation distribution,” said Transnet.
As it monitors domestic market for revenue generating opportunities, Transnet said revenues for the interim period to the end of June 2024 had grown by 17% to R16.7 billion.
But with a softer price environment across the Richards Bay and Newcastle Benchmark coal prices, together with the continued underperformance by Transnet Freight Rail (TFR), the company’s financial performance for the period took a knock.
Interim headline earnings per share tumbled 61% to 952 cents for the period while the dividend declared for the half year narrowed by as much as 80% to 200 cents per share.
In South Africa, Thungela achieved an export saleable production of 6.2 million tonnes for the period at free on board (FOB) cost of R1 189 per export tonne excluding royalties for the first half of 2024.
Capital expenditure of R1.3bn was spent during the 2024 first half year under review. About R457m was allocated for sustaining capital and R799m set aside for expansionary capital.
“Our two life extension projects at Elders and the Zibulo North Shaft are key to improving our long-term competitiveness as some of our older mines naturally come to the end of their lives,” Ndlovu said.
“These projects will extend our life of mine for the South African operations, from the initial eight years at listing in 2021, to approximately 15 years.”
The Ensham operation in Australia attained export saleable production of 1.9m tons as the mine focuses on improving productivity. The free on board export cost per tonne for the Ensham mine excluding royalties amounted to R1 360, with the company spending R285m on sustaining capital.
Net cash for the period in Thungela halved to R6.6bn while adjusted earnings before interest, tax, depreciation and amortisation was also lower by 51% at R2.1bn.
BUSINESS REPORT