Market cheers Thungela Resources's robust 2024 results despite coal market challenges

Coal producer Thungela Resources kicked off its 2024 results with a strong message from CEO July Ndlovu, who said, “Full-year export saleable production exceeded guidance in both South Africa and Australia. Notably, South African production grew for the first time in three years due to increased productivity and improved rail performance.”

The market responded positively to the better-than-forecast results, with Thungela’s shares on the JSE climbing 6.36% to R114.64 by noon.

The rally was spurred after a final dividend of R11 per share was declared, taking total dividend to R13 per share. The board has also approved a share buyback of up to R300 million. Total returned to shareholders, including share buybacks of R460 million, is 64% of adjusted operating free cash flow for 2024, the firm said.

Greg Davies, the head of wealth at Cratos Capital, said on X (@the_gregdavies) that Thungela reported a strong operational performance with a fatality-free business for 25 consecutive months. Export saleable production increased year-on-year in both South Africa and Australia, exceeding full-year guidance.

Revenue for 2024 rose 16% to R35.6 billion from the prior year, driven by a full year’s contribution from the Ensham Business in Australia, acquired in 2023. Net profit, however, declined 29% to R3.5bn, reflecting persistent pressure on coal prices. Headline earnings per share fell 27% to R25.59, within the company’s guided range of R24 to R26.50, though this marked a 24% to 31% year-on-year decrease.

Ndlovu attributed the performance to operational excellence and strategic execution, “Our 2024 results demonstrate continued operational excellence and underscore the disciplined execution of our strategic priorities. Full-year export saleable production exceeded guidance in both South Africa and Australia,” Ndlovu said in a statement.

Export saleable production in South Africa reached 13.6 million tonnes (Mt), an 11% increase from 12.2 Mt in 2023, surpassing the upper end of the company’s guidance of 11.5 Mt to 12.5 Mt. In Australia, Ensham’s production soared to 4.1 Mt (on a 100% basis), a 52% jump from the 2.7 Mt annualised run rate at acquisition, beating full-year expectations.

The Free on Board cost per export tonne excluding royalties in South Africa hit R1 130, below the guidance low end of R1 170, while Ensham recorded R1 433, under its R1,590 target. Adjusted operating free cash flow stood at R3.6 billion, with net cash at R8.7 billion after R3.4 billion in capital expenditure.

Thungela said, "While the impact of a softer price environment across the Richards Bay and Newcastle Benchmark coal prices continues to impact our financial results, it is encouraging to note the improvement in the performance of Transnet Freight Rail (TFR) post the annual maintenance shutdown period, which was completed in July 2024."

TFR achieved a run rate of 51.9 Mt per annum in 2024, up 8.4% from 2023. Adjusted Ebitda dropped 26% to R6.3bn, reflecting a coal price slump, with Richards Bay and Newcastle benchmarks under pressure.

Coal grades and commodity prices faced challenges, with Thungela selling at a discount to benchmarks as global demand softened. 

"The softer thermal coal price environment continued throughout the year. Milder winter conditions in the Northern Hemisphere led to subdued demand in Europe, where coal and gas stock levels remained elevated, impacting the South African coal market. The market for high calorific value product from Australia was shaped by high stock levels brought upon by sluggish seaborne demand in the main Asian coal markets, such as China, India, Japan and South Korea. We remain confident in the long-term fundamentals of the role of coal in the energy mix in support of global energy demand," it said.

Thungela completed two key acquisitions in early 2025, raising its Ensham stake to 100% for $1.7 million upfront and up to $15.5m deferred. Capital expenditure for 2024 totalled R3.4 bn focused on life-extension projects. The company’s prospects hinge on these initiatives, with Elders targeting 4 Mt annually by 2026 and Zibulo North Shaft aiming for 8 Mt. The Lephalale Coal Bed Methane project saw a planned R400m investment for 2025.

Looking ahead, it said, "Our focus remains on operating a fatality-free business and delivering operational excellence by controlling the controllables. As we position the business to take advantage of the long-term fundamentals supporting coal demand globally, we remain committed to productivity improvements and to enhancing the cost competitiveness of our operations, driven by the Elders and Zibulo North Shaft projects. We are confident that executing our strategic priorities will create meaningful shareholder value."

BUSINESS REPORT