Thungela forecasts sharp half-year profit fall on weaker coal prices

(Reuters) – South African thermal coal exporter Thungela Resources on Monday said it expects its half-year profit to fall by as much as 75% on weaker coal prices, higher costs and persistent rail logistics problems.

In a trading update, Thungela said its headline earnings per share, South Africa’s most common profit measure, is expected to be between 17 rand and 23 rand ($0.9103 and $1.23) in the six months to June 30, compared to 67.23 rand during the same period last year.

Thermal coal prices have come off the record highs of 2022, when surging demand from Europe fired up coal miners’ earnings after a ban was imposed on Russian coal over Moscow’s invasion of Ukraine.

Thungela said coal prices had softened after Europe experienced a milder winter than expected, leaving many utilities with high stocks of coal and natural gas and leading to the redirection of coal volumes to Asia.

“This added significant supply to Asian markets which also showed signs of weaker demand, especially from China. Russian coal also continued to flow into the region at discounts,” Thungela said.

Its average realised export price for the year so far was $112.40 per metric ton, compared to $229.21 per metric ton last year, it said.

Production costs are expected to be 25% higher due to lower output and increases in energy input costs.

Thungela says coal export sales from its own production for the half-year will decline 5% to 6.2 million metric tons, as South Africa’s state-owned freight rail operator Transnet’s performance continues to decline due to locomotive shortages as well as cable theft and vandalism of its infrastructure.

The coal miner, which was spun off from Anglo American Plc in 2021, in February announced plans to diversify away from South Africa’s infrastructure challenges with the purchase of the Ensham coal mine in Australia in a deal worth $230 million.

Thungela said it hopes to complete the Ensham transaction by September 2023.

($1 = 18.6756 rand)

($1 = 1.4815 Australian dollars)

(Reporting by Nelson Banya; Editing by Tom Hogue)