Our opinion on the current state of EXXARO(EXX)Exxaro (EXX) is a BEE coal company with interests in iron and heavy minerals. It has operations in Australia, America, and Europe and is a provider of coal to Eskom's Medupi power station.
The company has been working to increase coal production from 48 million tons to about 60 million tons by 2022, but this strategy might be reconsidered due to lower global demand for coal. Exxaro is a highly cash-generative operation that is usually profitable, depending on the price of coal. While demand for coal has been strong both locally and in the export market, the shift toward renewable energy is seen as a long-term threat to the business. The difficulty of obtaining funding for new coal-fired power stations is growing, as banks face pressure from environmental groups.
On 9th April 2021, the company announced that it had sold its interest in Exxaro Coal Central (Pty) Ltd and the Leeuwpan Coal Mine operation. The Ukraine conflict initially had a beneficial impact on Exxaro due to rising commodity prices, but that effect has now disappeared. The company announced that, with lower coal prices, it was no longer viable to transport coal to port by truck, a measure it had been forced to take due to inefficiencies in South Africa’s rail and port systems.
In its results for the year to 31st December 2024, the company reported revenue up 5% and headline earnings per share (HEPS) down 36%. The company said, "In line with our production guidance, overall coal production volumes, excluding buy-ins, reduced by 7% to 39.5Mt in FY24, from 42.3Mt in FY23. The decrease in production volumes was largely driven by lower Eskom demand at Grootegeluk mine. Belfast mine production improved by 21% to 3.5Mt in FY24 compared to 2.9Mt in FY23, after operating for the full year."
Exxaro remains a commodity play. Technically, the share is volatile but has been in a volatile upward trend since November 2015. Within that, it has been moving sideways and downwards since April 2022.
