Thungela Resources expects to return to profitability in 2021; shares rally

By Samuel Indyk

Investing.com – Thungela Resources (JO: TGAJ ) (LON: TGAT ) has announced it expects to return to profitability in respect of Earnings Per Share and Headline Earnings Per Share for the 2021 financial year, following a loss in 2020.

Coal Demand

The dual-listed company said demand for energy, including thermal coal, has continued to improve as the global economy recovers from the pandemic. Benchmark export coal prices have averaged $123/t in the year to date, with October seeing the official settlement price of $210/t before a moderation to $141/t in November.

The group, which was spun off from Anglo American (JO: AMSJ ) (LON: AAL ) earlier in 2021, said export saleable production for FY 2021 is expected to be 14.9mt, subject to no further deterioration in Transnet Freight Rail (TFR) performance or more stringent COVID-19 restrictions in December.

The company had previously cut its annual coal forecast due to disruptions on the coal export line largely due to copper cable theft and other acts of vandalism on the line.

Shareholder returns

The company said it remains committed to delivering attractive shareholder returns while maintaining disciplined capital allocation.

Thungela said it may declare additional returns above the targeted minimum payout ratio of 30% of adjusted operating free cash flow, subject to the board being satisfied that, subsequent to the dividend declaration, the company will have adequate balance sheet flexibility and sufficient funding available to withstand market and coal price volatility.

At 30^th November, Thungela said it had a cash position of approximately ZAR 8 billion.

Thungela’s first dividend will be a final dividend for the six months ending 31^st December and will be declared at the time of the group’s 2021 full year results announcement.

“Since listing, Thungela has delivered on its purpose of responsibly creating value together for a shared future,” said Thungela Chief Financial Officer Deon Smith. “Strong cash generation since listing means that we enter FY2022 in a position of strength and we are excited about the opportunities to create value for our shareholders, our host communities as well as our employees. We look forward to presenting the FY2021 financial results, as well as an update on our priorities, in March 2022.”

At 09:13BST, shares in Thungela Resources were trading higher by 15.7% at 386.00 pence per share.