Thungela Resources Limited ((GB:TGA)) has held its Q4 earnings call. Read on for the main highlights of the call.
Thungela Resources Limited’s recent earnings call conveyed a mixed sentiment, characterized by strong operational performance and strategic execution. The company celebrated significant production achievements and safety milestones. However, the financial performance was tempered by a softer price environment and challenges in Asian markets, which impacted revenues and costs. Despite these hurdles, Thungela remains confident in its long-term strategy and market fundamentals.
Fatality-Free Operations
Thungela Resources has achieved a commendable milestone by operating a fatality-free business for over two years. The company’s total recordable case frequency rate has improved to 1.93, underscoring its commitment to safety and operational excellence.
Exceeded Production Guidance
The company exceeded market expectations by recording 17.7 million tonnes of export saleable production. This achievement was notable in both South Africa and at the Ensham operations, highlighting Thungela’s robust production capabilities.
Net Profit and Shareholder Returns
Thungela reported a net profit of ZAR 3.5 billion, alongside a declared final ordinary cash dividend of ZAR 11 per share. Additionally, the company announced a share buyback program of up to ZAR 300 million, reflecting its commitment to delivering value to shareholders.
Improvement in Rail Performance
The performance of Transnet Freight Rail showed improvement, with an 8.4% increase from 2023. The rail network transported 51.9 million tonnes for the industry in 2024, supporting Thungela’s logistics and distribution efforts.
Significant Production Improvement at Ensham
Ensham operations in Australia saw a substantial production improvement, achieving 4.1 million tonnes of export saleable production in 2024. This marks a significant increase from a previous run rate of 2.7 million tonnes.
Softer Price Environment Impact
The financial results were adversely affected by a softer coal price environment, with realized prices down 12% in South Africa and 20% in Australia. This price decline across the Richards Bay and Newcastle benchmarks posed challenges to revenue generation.
Challenges in Asian Markets
Thungela faced lower demand in Asian markets, driven by low economic activity and high coal inventories. Geopolitical tensions further pressured coal prices, complicating the company’s market positioning.
Increased Costs and Inflation
Inflationary pressures remained high, leading to a 6.5% increase in on-site cash costs in South Africa. This rise in costs underscores the broader economic challenges impacting operational expenses.
Potential Cash Burn at Ensham
Concerns were raised regarding potential cash burn at Ensham due to volatile spot prices and cost challenges. This situation necessitates careful financial management to mitigate risks.
Forward-Looking Guidance
Looking ahead to 2025, Thungela’s CEO, July Ndlovu, provided guidance with a production range of 12.8 to 13.6 million tonnes of export saleable production in South Africa, contingent on Transnet rail performance. The cost per tonne is anticipated to be between ZAR 1,220 and ZAR 1,300, including royalties. Sustaining capital expenditure is projected at ZAR 1.4 to 1.7 billion, with expansionary CapEx set at ZAR 1.1 to 1.2 billion. For Ensham operations in Australia, production guidance ranges from 3.7 to 4.1 million tonnes, with costs expected between ZAR 1,650 and ZAR 1,780 per tonne.
In conclusion, Thungela Resources Limited’s earnings call reflected a balance of operational successes and financial challenges. While the company celebrated significant production achievements and maintained a strong safety record, it faced headwinds from softer coal prices and market challenges in Asia. Looking forward, Thungela remains optimistic about its strategic direction and market fundamentals, with clear guidance for the upcoming year.