Exxaro Resources Ltd. (Exxaro) reported positive results for the six-month period ended June 30. The group’s performance reflects continued resilience amid tough trading conditions, notable in the face of a stubborn pandemic and logistics constraints. Consolidated group revenue was up 8% mainly due to higher realized commodity prices driving an increase in coal revenue and increased income from investment in iron ore. Additionally, the inclusion of the renewable energy business for the full six months was a positive contributor.

“Despite sustained global and domestic economic challenges, compounded by logistical constraints and COVID-19 restrictions, Exxaro maintained a resilient financial and operational performance, continuing our positive trajectory year-on-year,” Exxaro CEO Mxolisi Mgojo said.

Coal revenue increased by 6% due to an increase in economic activity following the pandemic lockdown restrictions observed throughout the first half of 2020 and higher coal prices, offset partly by lower sales volumes and a strong exchange rate.

Cash flow generated by operations of ZAR 3.97 billion ($266 million) and dividends from investments of ZAR 3.68 billion ($247 million) were sufficient to cover capital expenditure and ordinary dividends paid during the period.

“Improved revenue was mainly due to higher commodity prices achieved in the period and a higher proportion of RB1 in the export sales mix,” Mgojo said. “The positive swing in EBITDA from the Mpumalanga mines made a notable positive contribution against a backdrop of disruptive distribution channel issues.”

The company announced earlier this year it will not be investing in new growth in thermal coal and it has entered a strategic phase of harvesting recent capex programs. Capex for its coal business decreased by 3% compared to the first half of 2020, mainly due to the completion of the Belfast project. This was also partially offset by higher expenditure on Grootegeluk 6, a project delayed by past contractor challenges, as well as higher sustaining capex due to delays experienced in 2020.

Coal production volumes (excluding buy-ins) decreased by 2.8 million metric tons (mt), or 12%, attributed to lower production across all mines except at ECC. Total sales volumes decreased by 2.4 million mt (-10%) due to lower sale volumes at all mines.

Combined, the commercial Mpumalanga mines’ thermal coal production decreased by 661,000 mt (-12%). While coal production and sales were lower than the comparative period, a 47% increase in the average benchmark API4 export price provided a positive offset to the pandemic and Transnet Freight Rail (TFR) challenges. While production was impacted in Mpumalanga, EBITDA from these operations had a notable positive swing.

South African exporters as a whole lost at least 9 million mt of coal exports during the first half of 2021 caused by locomotive unavailability, coal line shutdowns disruptions, derailments and other similar operational challenges faced by TFR. Exxaro’s commercial export sales in particular decreased by 35%.

The company expects the seaborne and domestic thermal coal market to remain steady during the second half of 2021. Strong thermal coal demand from the Northern Hemisphere, rising gas prices along with the slow recovery of both seaborne and China domestic supply will support the seaborne price.