Coal miner Thungela Resources released its maiden set of results since listing on the JSE and the LSE on the 7th June 2021.
Revenue was up 601% year-over-year to R26.28 billion. Adjusted EBITDA came in just under R10 billion, with the associated margin sitting at 38%. Profit for the period was R6.9 billion from a loss of R362 million in the prior comparable period. HEPS rose to 6657c from a HLPS of 531c a year earlier.
Thanks to operational efficiencies and higher coal prices the company ended the period with a net cash position of R8.66 billion from net debt of R388 million in the same period a year ago.
Robust cash flow generation and the financial strength of the business allowed it to declare a maiden dividend of R18.00 per share, slightly lower than the market was expecting.
However, the R2.5 billion it returned to shareholders, representing a pay-out of 63% of 2021 Adjusted operating free cashflow, was well above the minimum pay-out of 30% as per Thunegla’s dividend policy.
Thungela remains cautiously optimistic that the challenges experienced in exporting coal due to issues with Transnet Freight Rail are transient. The company expects to export 16 million tonnes this year (13.9 million tonnes: 2021).
Continued strong demand coupled with shrinking global thermal coal supply (and war in Eastern Europe), which has driven thermal coal prices to record levels, will continue to benefit the company going forward.
The market expressed concern over talk of potential diversification, which we feel management should avoid. If management do choose to go this route, I will likely sell the stock. But Thungela has clarified that it meant geographic diversification firstly, and secondly that asset diversification could possibly be an option much further down the line. So until then, I will continue to hold the share in portfolios. The share still trades at a massive discount relative to price movements in the underlying commodity, and trades on a PE ratio of around 2.5x with an 11% dividend yield.