Thungela Upholds Dividend Despite Sharp Decline in Profits

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JIMMY MOYAHA: This morning at 8:00 AM, Thungela Resources Limited announced its results for the six months ending June 2025, marking the commencement of their new financial year. The release offered insights into the company’s performance, alongside details about a share-repurchase initiative and the rationale behind it.

We’ll be diving into this topic with the outgoing CEO, who is currently in the transitional phase with the incoming CEO. Today, we have Chief Executive Officer Julu Ndlovu with us to share his insights.

July, it’s a pleasure to have you on the program… While this may be our last discussion around these figures together, it must bring some comfort to start a Sens announcement noting a “fatality-free business for the past two-and-a-half years.” In the mining industry, where safety is of utmost importance, that’s an impressive accomplishment.

Could you share what has unfolded in the first six months and your feelings about it?

JULY NDLOVU: Our mission is to responsibly create value, and nothing represents that better than ensuring everyone returns home safely each day, unharmed, while supporting their families. Reporting nearly three years without a loss of life under our stewardship is both humbling and fulfilling.

Read: Thungela experiences decline as earnings forecast plummets by up to 85%

JIMMY MOYAHA: July, let’s examine some figures that highlight the dedication of our employees and teams. From a sales standpoint, the production figures appear respectable. While profit margins are under pressure, could you share your insights on the overall business performance?

JULY NDLOVU: The business performance has been quite satisfactory. Despite facing challenges, we’ve focused on factors within our control. Safety continues to be our chief priority, ensuring no one is harmed, which is positively reflected in our results. Additionally, we’ve enhanced our productivity in South Africa, despite encountering some difficulties.

Our production is up 4% year-on-year, even with the challenges faced at two of our opencast mines, which speaks volumes about our operational teams’ dedication.

At Ensham, the results align with our expectations. We navigated some difficult geological features that impacted production and quality, but this was anticipated. I’m pleased with the progress made by the Ensham team.

Read: Upcoming leadership transition at Thungela and the complexities of coal company management

JIMMY MOYAHA: July, let’s tackle the issues you mentioned. You noted that some obstacles were outside your control. What significant challenges have impacted the business?

JULY NDLOVU: In reviewing our financial results, the key takeaway is prices, prices, prices. We’ve faced declining prices in both Australia and South Africa, as reflected in our earnings. However, our board has shown remarkable foresight in building a strong balance sheet, enabling us to withstand these downturns while continuing to invest in vital life-extension initiatives like Zibulo North Shaft and our gas projects in Lephalale.

We maintain a strategy to allocate capital where it’s most required, even amid fluctuations.

This robust balance sheet also allows us to return capital to shareholders, even in tough conditions. Overall, I’m pleased with our positioning despite the challenges with coal prices.

Thungela share price

JIMMY MOYAHA: July, regarding capital returns to shareholders, you announced updates on the share repurchase program. Can you elaborate on the reasoning behind this decision? You’ve already highlighted how a strong balance sheet permits this flexibility.

JULY NDLOVU: This strategic decision is based on recognizing that the market valuation of our business is significantly lower than its intrinsic value. Hence, we believe repurchasing our shares will enhance shareholder value. We’ve been investing diligently throughout our recent reporting cycles.

Moreover, our shareholder base consists of both local and international investors. Many prefer us to retain capital through share buybacks, so we’re responding to the varying preferences of our shareholders.

JIMMY MOYAHA: July, let’s explore the global landscape. How are international factors influencing your strategic decisions? With your international operations and exports from South Africa, what’s your take on the foreign landscape? Are there elements that concern or excite you at the moment?

JULY NDLOVU: Jimmy, our primary focus is on exports. Although we operate one mine that caters to the domestic market, our core business revolves around exporting high-quality coal to markets in Asia, including China, India, Japan, Korea, and Taiwan.

Given the market segments we address, let’s review both short-term and long-term scenarios…

In the long-term outlook, we remain optimistic as coal fundamentals continue to be bolstered by ongoing investments in steam-power generation in China, India, Vietnam, Bangladesh, and Pakistan.

New power stations are constantly being developed, resulting in a continuous rise in demand. IEA reports indicate that 2024 is predicted to set records, with 2025/2026 expected to maintain these levels. They suggest we are not at a peak but rather on a plateau concerning coal demand, which is encouraging given the lack of investment in new coal supply.

In the short term, though, we are encountering challenges reflected in lower prices. This situation isn’t unexpected. Prices soared following the onset of the Ukraine war, leading to substantial profits for our shareholders as importing countries aggressively sought coal.

Read: Addressing unemployment: Can South Africa reform promptly?

During that period, Europe scrambled for coal from various sources. Currently, the primary policy focus across Asia is on energy security, ensuring access to affordable and reliable energy, with coal remaining a vital solution. Notably, we’ve seen increases in domestic production in China, India, and Indonesia.

The emergence of uncertainties, especially due to Trump’s policies, has introduced instability in industrial production, affecting energy demand.

Ultimately, an increase in stock levels, particularly in import hubs, may occur until clarity is achieved regarding tariff settlement levels and their potential impact on economic growth and energy demand, which could redirect demand back on track. While we confront short-term pricing obstacles, the long-term fundamentals of coal remain robust.

JIMMY MOYAHA: The long-term fundamentals of coal remain promising. That’s the insight from July Ndlovu, CEO of Thungela Resources Limited, as we review the company’s performance over the last six months and its outlook for the future.