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Exxaro's profits plunge 39% on a lower coal price

by , 22 August 2013

Earlier today, Exxaro Resources released its interim results. And they didn't make good reading. The company hasn't had a good six months. Let's take a closer look at what the results reveal…

Exxaro reported “a 39% drop in first-half headline earnings,” reports Fin24. The results reflect a write down of R292 million on “a coal mine that could cease production”.

The company’s headline earnings per share was 712 cents from January to June, reports IOL. That’s vastly down on last year’s 1,162 cents for the same period.

Operating costs rose R320 million compared to the same period last year, reports Bloomberg.

One of Exxaro’s biggest customers is Eskom, says MoneyWeb. Despite the bad numbers, Exxaro said that coal production “remained stable at 19 million tonnes”.

So what hurt the company’s profits so badly?

Exxaro put the blame firmly at the door of “lower prices” and the massive write down of assets at the New Clydesdale Mine, says Bloomberg. The mine in trouble, which employs over 400 people in Mpumalanga, ate into profits.

Due to the poor performance of the mine, Exxaro is thinking about closing it down, adds Bloomberg. With “negative margins taking their toll,” the company has begun talks with “unions over layoffs”.

Exxaro cautions about earnings for the next three years

And if 2013 hasn’t been bad enough for the company, Exxaro cautioned on its future earnings all the way through to 2016, notes BDLive. The company’s earnings are “sensitive to major capital expansions” that are under way.

But looking over the nearer term, “the coal producer with interests in iron ore and base metals” expects its second half results also to take a battering, says Fin24. This is down to a low coal price, the volatility of the rand and “the availability of trains for coal exports”.

So not a great set of results for Exxaro, and it looks like it’s going to be tough for the next few years.

Exxaro's profits plunge 39% on a lower coal price
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