Our opinion on the current state of EXXARO(EXX)Exxaro (EXX) is a BEE coal company with interests in iron and heavy minerals. It has interests in Australia, America, and Europe. It is a provider of coal to Eskom's Medupi power station. The company is trying to improve coal production from 48 million tons presently to about 60 million tons by 2022, but this policy might be changed due to the lower demand for coal on the world market. This is an immensely cash-generative operation that is usually profitable depending on what happens to the price of coal.
The demand for coal both locally and in the export market has been strong, but the shift towards renewable energy is seen as a long-term threat to the business. It is becoming increasingly difficult to obtain funding for new coal-fired power stations as banks feel the pressure from environmental groups. On 9th April 2021, the company announced that it had sold its interest in Exxaro Coal Central (Pty) Ltd and Leeuwpan Coal Mine operation.
Obviously, the Ukraine conflict initially had a beneficial impact on this share through higher commodity prices, but that effect has now disappeared. The company announced that, with the lower price of coal, it was no longer viable to transport coal to port by truck—something it had been forced to do because of the inefficiency of the South African rail and port systems.
In its results for the six months to 30th June 2024, the company reported revenue up 1% and headline earnings per share (HEPS) down 37%. Operationally, the company produced 19.3 million tons of coal and sold 18.9 million tons. Group revenue was static at about R19bn. The company said, "Group EBITDA decreased by 33% to R5 118 million (1H23: R7 660 million), mainly attributable to the 27% decrease in Coal EBITDA discussed in more detail under the coal business performance."
Exxaro remains a volatile commodity play. Technically, the share is volatile but has been in a volatile upward trend since November 2015.
