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Kumba Iron Ore’s Sishen mine. Picture: GETTY IMAGES/WALDO SWIEGERS
Kumba Iron Ore’s Sishen mine. Picture: GETTY IMAGES/WALDO SWIEGERS

Kumba, SA’s largest iron producer, expects the independent technical assessment conducted by international experts into the condition of Transnet’s infrastructure to be concluded before the end of 2024, saying the outcomes of the assessment will go a long way in arresting the decline of the country’s logistics performance.

The assessment, jointly funded by Transnet and the Ore Users Forum (OUF), is being conducted by a global engineering firm with expertise in logistics networks.

“The assessment is critical as it identifies the critical work that needs to be done on the system to get both rail and port to full capacity,” Kumba said on Tuesday, after the release of its interim results.

“We continue to work with the OUF and the national logistics crisis committee to improve Transnet’s logistics performance. Further work is taking place to progress the independent technical assessment to gauge the condition of Transnet’s infrastructure, rolling stock and operating system. The technical assessment is expected to identify the actions needed to arrest the decline in logistics performance and expedite the delivery of critical projects.”

Kumba said the final report into the assessment was expected in the third quarter of 2024.

The logistics crisis committee was set up a year ago to respond to the country’s logistics bottlenecks, which have stymied economic growth and the movement of goods. In recent months, the freight logistics road map has been approved by the cabinet, enabling urgent reforms in the freight logistics sector.

“Overall, government and business collaboration is critical for the improvement of Transnet’s logistics network. We are encouraged by the increased emphasis on implementation and delivery by government while the commitment to continue the logistics reform under the leadership of the presidency and National Treasury supports private sector partnerships,” Kumba said.

Kumba reported lower earnings at the halfway stage, largely due to a lower average realised free-on-board (FOB) export iron ore price and a decrease in sales volumes.

Revenue for the six months to end-June was 6% lower at R35.8bn, while headline earnings per share (HEPS) declined 26% to R22.27, it said in a statement on Tuesday. 

Kumba’s earnings before interest, taxes, depreciation and amortisation (ebitda) of R15.6bn, down from R19.8bn a year ago, reflects the effect of lower realised FOB export prices and lower sales, partly offset by lower on-mine costs and a weaker rand.

An interim dividend of R18.77 a share was declared, representing a payout ratio of 85% of headline earnings.

The company, which Anglo American recently decided to keep after an extensive portfolio review, said its sales for the six months to end-June were down 5%.

Kumba Iron Ore CEO Mpumi Zikalala. Picture: FREDDY MAVUNDA/BUSINESS DAY
Kumba Iron Ore CEO Mpumi Zikalala. Picture: FREDDY MAVUNDA/BUSINESS DAY

Kumba CEO Mpumi Zikalala said that in line with the group’s business reconfiguration plan to align production to Transnet’s logistics performance, volumes were reduced by 2% to
18.5-million tonnes, matching a 2% decrease in ore railed to port compared with the first half of 2023.

“Sales decreased by 5%, with the benefit of the proactive mini-shut and port equipment repairs undertaken in April 2024 largely offsetting the impact of port equipment outages in the first quarter,” she said.

Kumba has maintained its full-year production and sales guidance of between 35-million and 37-million tonnes and between 36-million and 38-million tonnes, respectively. 

“Kumba achieved an average realised free-on-board export price of $97 per wet metric ton relative to the 62% Fe FOB export price of $96 per wet metric ton as the timing effect of provisionally priced volumes in a lower-price environment were largely offset by the lump and iron ore quality premium that our products attract,” Zikalala said.

Zikalala said the iron ore market pulled back strongly in the first half. Weak steel demand in China and Europe, coupled with robust iron ore supply, contributed to the Platts Iron Ore Index 62% Fe cost and freight benchmark iron ore price falling by 26% since the start of the year. An increase in steel exports provided some relief, while lump premium was supported by lump stock at multiyear lows.

Operational highlights include the successful completion of the Kapstevel South project at Kolomela, which delivered the first ore in June.

The group achieved R1.8bn of the targeted R2.5bn-R3bn of savings for the year and was on track to deliver the remainder of this by the end of 2024, it said.

“Despite several logistics challenges in the first half, Kumba is well on track to achieve its operational and cost guidance for the full-year 2024, subject to Transnet’s logistics performance.” 

mackenzeiej@arena.africa 
goban@businesslive.co.za

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