By Peroshni Govender
JOHANNESBURG – South African coal miner Exxaro reported 62 percent fall in half-year earnings on Thursday and said it would look to diversify local sales in the face of a global glut that threatens to further hurt profits.
Diluted headline earnings per share fell to 303 cents from 790 cents a year earlier. It had warned in May that it expected a fall of at least 20 percent.
Chief Executive Sipho Nkosi said Exxaro would focus on its coal business over the next three to five years, cash in on local demand and diversify sales to reduce its reliance on sales to power utility Eskom.
The cash-strapped utility, which uses mostly coal to produce power, said it was paying too much for the commodity and would review supply contracts.
“Eskom has their own views on how they want to contract in the future. Long-term contracts will always be secure,” Nkosi said at the company’s results presentation.
“We have said to the team, lets look at a strategy where we are not always reliant on Eskom. There are opportunities on the coal IPPs (Independent Power Producers) where we can find customers.”
In line with its plans to increase coal production, Exxaro finalised the purchase of Total SA’s South African coal unit last week.[pro_ad_display_adzone id=”70560″]
Coal companies could face strikes after wage talks with workers demanding pay rises of up to 15 percent were deadlocked. They are now headed for mediation.
Exxaro, which is exposed to swings in the prices of coal, iron ore and mineral sands, said it expects tough market conditions to continue.
It declared an interim dividend of 65 cents, down 75 percent from a year earlier.
Shares in the South Africa’s second-biggest coal miner, were up 8 percent as of 1209 GMT on the back of a resources rally after minutes from the U.S. Federal Reserve’s July 28-29 meeting showed only one Fed policymaker was ready to vote for an interest rate hike. (Reuters)