FD Riaan Koppeschaar provides insight into Exxaro Resources’ year-end results

Riaan explains that liquidity management and the health and safety of employees remains top priority.

In a letter to stakeholders, FD Riaan Koppeschaar outlined Exxaro Resources’ expected business performance for the financial year ended 31 December 2021, explaining that the group saw continued Covid-19 impact on its results.

“During 2021, continued Covid-19 flare-ups coupled with increased vaccination rates, high commodity prices, supply chain disruptions, economic recovery with inflationary pressures, and a shift in energy transition policy, characterised the world’s economy,” Riaan said.

Overall, he explained, commodity market fundamentals remained tight over the period under review. In respect of Exxaro’s key commodities for the financial year, the API4 coal export price index is expected to average US$115 per tonne, free on board, and the iron ore fines price US$156 per dry metric tonne, cost and freight China.

“Total coal production, excluding buy-ins and sales volumes are both expected to decrease by eight percent, mainly due to logistical constraints and the disposal of Exxaro Coal Central operations on 3 September 2021 being earlier than anticipated,” Riaan added.

In terms of Exxaro’s capital allocation programme, Riaan explained that the group expects the capital expenditure for the financial year in its coal business to be about 22 percent lower when compared to the 2020 financial year, mainly due to key projects reaching completion as well as the disposal of Exxaro Coal Central.

“We have concluded our share repurchase programme of R1.5 billion with the last trade executed on 2 November 2021,” he said, adding that the total number of shares repurchased was approximately 9.4 million, representing 2.62 percent of Exxaro’s issued share capital at an average gross price of R159.55 per share.

“The shares bought back between July and November will be cancelled and delisted by the JSE, resulting in issued share capital of 349.3 million shares projected for the year ending 31 December 2021.”

As at 31 October 2021, the group had net cash of R0.5 billion, excluding Cennergi’s net debt of R4.5 billion, Riaan said. “The group therefore has sufficient liquidity and will remain a going concern for the foreseeable future.”

He explained that the health and safety of Exxaro’s employees and communities has also remained the group’s priority. “In line with our Health and Wellness Strategy, which focuses on diagnosis, management and prevention of diseases, our response to the Covid-19 pandemic has prioritised avoiding, reducing and managing Covid-19 infections.”

As at 17 November 2021, the group has had 5,140 confirmed cases and a recovery rate of 99 percent. “We remain committed in our fight to prevent further loss of life and continue to implement Covid-19 preventative measures in line with government regulations and recommendations,” Riaan said.

He added that Exxaro’s target is to vaccinate 80 percent of employees and contractors and, to date, a total of 62 percent have been vaccinated.