Kumba warns of lower interim earnings on the back of lower production, sales

16th July 2020 By: Tasneem Bulbulia - Senior Contributing Editor Online

Iron-ore output by JSE-listed Kumba Iron Ore, a subsidiary of Anglo American, decreased by 11% year-on-year to 17.9-million tonnes in the first six months of this year.

Kumba’s operational performance for the period reflects lower workforce levels in the second quarter, as guided by the South African government in response to the Covid-19 pandemic.

Having shut down operations in response to the lockdown, Kumba re-opened its operations on March 27, following approval from the Department of Mineral Resources and Energy to operate at 50% of workforce levels. With opencast mines permitted to return in phases to 100% of operations from May 1, Kumba started with the ramp-up to 100% in June.

In line with these operating conditions and significantly reduced workforce levels, waste stripping for the period declined by 17% to 68-million tonnes year-on-year at the Sishen mine, and by 15% to 26-million tonnes at Kolomela.

The mining industry in South Africa was, from May, allowed to start ramping up, in phases, to 100% capacity.

"While our operational performance reflects the impact of the lockdown and subsequent re-opening with a reduced proportion of our workforce, we successfully ramped up to close to full capacity in June.

"Our focus is on maintaining flexibility and performance along our value chain to protect run rates and capture the benefits of healthy demand for our quality products,” CEO Themba Mkhwanazi said on July 16.

The lower production, along with the impact of severe coast weather conditions, resulted in a 13% year-on-year. Export sales decreased by 8% year-on-year to 18.3-million tonnes, while domestic sales decreased by 1.1-million tonnes to 400 000 t.

Kumba said production and sales were being closely managed in line with State-owned Transnet's logistical capacity, which increased to about 80% in June.

Kumba, along with industry peers, and Transnet, are working together to ensure optimal use of the rail network and ports. At the same time, initiatives are under way to increase workforce levels, including the provision of training support, Kumba said.

Kumba is finalising its interim financial results, but expects its basic earnings and its headline earnings for the period to be between 15% and 19% lower year-on-year at between R8.14-million and R8.56-million.

Headline earnings a share (HEPS) are likely to be between R25.37 and R26.68, while basic earnings a share are expected to be between R25.40 and R 26.71.

The decrease in earnings for the period is largely attributable to lower sales volumes and lower average realised free on board export prices, partially offset by the weaker rand:dollar exchange rate, relative to the comparative period.


Meanwhile, Kumba in May marked four years of fatality free operations, underlining its commitment to improving safety and health.

"We have been responding to the Covid-19 pandemic with the same focus and rigour. Our comprehensive WeCare lives and livelihoods response programme is aimed at safeguarding the physical and mental health, wellbeing and safety of our people at work and at home, as well as that of our local communities.

"As part of this focus, Kumba has implemented extensive measures to combat the spread of the virus in the workplace and in our host communities. These measures include the implementation of extensive health screening measures, our own testing facilities,

securing isolation and quarantine facilities for employees and their families, and appointing additional medical support staff in the Northern Cape region,” said Mkhwanazi.