Kumba (KIO) is a highly successful iron mining operation that is 79% owned and controlled by Anglo American. The share price saw a significant drop to R223 in March 2020 due to COVID-19 but recovered to R668 before falling again after the March 2022 quarterly results. Notably, exports account for 94% of the company's total sales, making it less reliant on local sales but more vulnerable to the strengthening of the rand and the efficiency of rail transport to ports.
To mitigate its reliance on Eskom, Kumba plans to build a 100MW solar park over the next three years. The company has faced challenges such as heavy rain and poor rail performance. On 10th October 2022, Kumba announced that due to the force majeure at Transnet, it would lose about 50,000 tons of production per day, increasing to 90,000 tons after seven days. This would result in a loss of approximately 120,000 tons of exports, costing the company about $8.5 million per day in production and $11.7 million in lost export revenue.
In its results for the year ending 31st December 2023, Kumba reported revenue up 16% and headline earnings per share (HEPS) up 26%. The company noted, "Average realised FOB export price of US$117/tonne, 15% above benchmark - Cost savings of R1.0 billion, underpins C1 unit costs of US$41/tonne - Resilient EBITDA* margin of 53%, up from 50% - Closing net cash* of R13.2 billion." The company is considering 490 retrenchments.
In an update for the three months ending 31st March 2024, Kumba reported total production down 2% and sales down 10%, largely driven by a 12% decrease in Kolomela's production to 2.7Mt, while Sishen's production increased by 4% to 6.6Mt.
In a production and sales update for the six months ending 30th June 2024, the company reported volumes down 2% and sales down 5%. The company stated, "The iron ore market pulled back strongly in the first half and the reconfiguration of our business to a lower production and cost profile is helping to build greater resilience in the challenging market environment. Weak steel demand in China and Europe coupled with robust iron ore supply contributed to the Platts IODEX 62% Fe CFR benchmark iron ore price falling by 26% since the start of the year."
The share trades at a multiple of 5.89 and offers a dividend yield (DY) of 8.97%, which compensates investors to some extent for the commodity risk in this rand-hedge share. However, it remains volatile and hence risky. The offer by BHP to buy Anglo includes the unbundling of Kumba. At this stage, it is not certain that the deal will go ahead.
To mitigate its reliance on Eskom, Kumba plans to build a 100MW solar park over the next three years. The company has faced challenges such as heavy rain and poor rail performance. On 10th October 2022, Kumba announced that due to the force majeure at Transnet, it would lose about 50,000 tons of production per day, increasing to 90,000 tons after seven days. This would result in a loss of approximately 120,000 tons of exports, costing the company about $8.5 million per day in production and $11.7 million in lost export revenue.
In its results for the year ending 31st December 2023, Kumba reported revenue up 16% and headline earnings per share (HEPS) up 26%. The company noted, "Average realised FOB export price of US$117/tonne, 15% above benchmark - Cost savings of R1.0 billion, underpins C1 unit costs of US$41/tonne - Resilient EBITDA* margin of 53%, up from 50% - Closing net cash* of R13.2 billion." The company is considering 490 retrenchments.
In an update for the three months ending 31st March 2024, Kumba reported total production down 2% and sales down 10%, largely driven by a 12% decrease in Kolomela's production to 2.7Mt, while Sishen's production increased by 4% to 6.6Mt.
In a production and sales update for the six months ending 30th June 2024, the company reported volumes down 2% and sales down 5%. The company stated, "The iron ore market pulled back strongly in the first half and the reconfiguration of our business to a lower production and cost profile is helping to build greater resilience in the challenging market environment. Weak steel demand in China and Europe coupled with robust iron ore supply contributed to the Platts IODEX 62% Fe CFR benchmark iron ore price falling by 26% since the start of the year."
The share trades at a multiple of 5.89 and offers a dividend yield (DY) of 8.97%, which compensates investors to some extent for the commodity risk in this rand-hedge share. However, it remains volatile and hence risky. The offer by BHP to buy Anglo includes the unbundling of Kumba. At this stage, it is not certain that the deal will go ahead.
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