Exxaro (EXX) is a BEE coal company with interests in iron and heavy minerals, operating in Australia, America, and Europe. It is a significant provider of coal to Eskom's Medupi power station. The company aims to increase coal production from 48 million tons presently to about 60 million tons by 2022, although this plan might be revised due to the lower demand for coal on the global market. The price of export coal has declined from $100 per tonne at the end of 2018 to as little as $60 per tonne.
Despite fluctuations in coal prices, Exxaro is a cash-generative operation, usually profitable depending on coal price movements. However, the long-term viability of the coal business is challenged by the shift towards renewable energy. Obtaining funding for new coal-fired power stations has become increasingly difficult as banks face pressure from environmental groups.
On 9th April 2021, the company announced the sale of its interest in Exxaro Coal Central (Pty) Ltd and Leeuwpan Coal Mine operation. In its results for the year to 31st December 2023, Exxaro reported a 17% decrease in revenue and a 22% decrease in headline earnings per share (HEPS). The company attributed the decline in EBITDA to a 36% decrease in Coal EBITDA, despite a 16% increase in revenue contribution from its energy operations.
The share price of Exxaro has been declining since the beginning of 2023. While the Ukraine conflict initially boosted the share price due to higher commodity prices, this effect has since dissipated. The company announced that, due to the lower price of coal, it was no longer economically viable to transport coal to port by truck, highlighting challenges with the inefficiency of the South African rail and port systems.
Exxaro remains a volatile commodity play, currently experiencing a downward trend, but there are indications it may be bottoming out. However, ongoing shifts in the energy landscape and global market dynamics continue to pose challenges to the company's long-term prospects.
Despite fluctuations in coal prices, Exxaro is a cash-generative operation, usually profitable depending on coal price movements. However, the long-term viability of the coal business is challenged by the shift towards renewable energy. Obtaining funding for new coal-fired power stations has become increasingly difficult as banks face pressure from environmental groups.
On 9th April 2021, the company announced the sale of its interest in Exxaro Coal Central (Pty) Ltd and Leeuwpan Coal Mine operation. In its results for the year to 31st December 2023, Exxaro reported a 17% decrease in revenue and a 22% decrease in headline earnings per share (HEPS). The company attributed the decline in EBITDA to a 36% decrease in Coal EBITDA, despite a 16% increase in revenue contribution from its energy operations.
The share price of Exxaro has been declining since the beginning of 2023. While the Ukraine conflict initially boosted the share price due to higher commodity prices, this effect has since dissipated. The company announced that, due to the lower price of coal, it was no longer economically viable to transport coal to port by truck, highlighting challenges with the inefficiency of the South African rail and port systems.
Exxaro remains a volatile commodity play, currently experiencing a downward trend, but there are indications it may be bottoming out. However, ongoing shifts in the energy landscape and global market dynamics continue to pose challenges to the company's long-term prospects.
Top 3 & 4 companies on our winning shares list.
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Snapshot: 4/2024
#3 - MIXTEL- MIX- Added 2023-12-28 - 86.44% Gain since added
#4 - HARMONY - HAR- Added 2023-11-16 - 70.15% Gain since added
Full list available to PDSnet subscribers only.