Thungela Resources Ltd on Monday reported that its interim profit plunged by over two-thirds, prompting the coal producer to slash its dividend as it battled against depressed coal prices and crippling rail constraints in South Africa.

The Rosebank-based coal miner on Monday also raised the top-end of its annual export saleable production guidance for 2023 to a range of between 11.5 million tonnes and 12.5 million tonnes, compared to between 10.5 million tonnes and 12.5 million tonnes estimated in March.

In 2022, output totalled 13.1 million tonnes.

For the six months that ended June 30, Thungela posted a 69% drop in profit to R 3.00 billion, around £123.8 million, from R 9.63 billion a year earlier, while pretax profit totalled R 4.29 billion tumbling from R 11.76 billion.

Earnings per share dived 67% to R 22.45 from R 67.23, while headline EPS also slumped by 67% to R 22.46 from R 67.23.

Revenue for the first half declined by a quarter to R 14.36 billion from R 26.18 billion, dragging earnings before interest, taxes, depreciation and amortisation lower with it.

Adjusted Ebitda, a measure of profit, plummeted to R 4.4 billion from R 16.7 billion as the coal miner grappled with softer coal prices and persistent poor performance by Transnet SOC Ltd’s Transnet Freight Rail. Transnet is South Africa’s state-owned transport and logistics utility.

The seaborne benchmark coal price has receded from its historic highs of 2022, when it averaged $276.54 per tonne in the first half of 2022, to an average of $129.50 per tonne for the first half of 2023.

By June 2023, the benchmark coal price had decreased to an average of $99.65 per tonne for the month.

‘This decline comes on the back of global economic pressures, a redirection of coal flows following the EU ban on Russian coal, and a milder European winter and the resultant record stock levels across most energy fuel sources,’ Thungela said.

China’s disappointing economic recovery from tough Covid-19 lockdown restrictions led to reduced demand for energy in the world’s second-largest economy.

On rail, the coal producer said continued underperformance on the part of Transnet Freight Rail had again hampered its ability to operate optimally.

The state-owned rail group achieved an annualised run rate of 48 million tonnes per annum for the local coal industry as a whole in the first half of 2023, down 13% from 55 million tonnes a year in the first half of 2022.

Transnet Freight Rail suffered two derailments in May, which cost Thungela at least 340,000 tonnes in rail capacity.

For the first half, export saleable production was flat at 6.1 million tonnes.

Thungela declared an interim dividend of R 10, down 83% from R 60 a year before.

Thungela said efforts to curb inflation through monetary tightening policies globally had resulted in a growth slowdown, with reduced economic activity and demand for energy.

Shares in Thungela shed 1.9% to 540.61 pence early Monday in London. They were flat at R 131.05 in Johannesburg.

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