JSE-listed iron-ore producer Kumba Iron Ore has advised that its headline earnings per share (HEPS) for the year ended December 31, 2024, are expected to be between R36.60 and R40.50, a decrease of between 43% and 48% from the previous year.

The company’s headline earnings for the period are expected to be between R11.7-billion and R12.9-billion, compared with headline earnings of R22.7-billion for 2023.

HEPS were R70.80 in 2023.

In a trading statement issued on February 6, the company said the decrease in earnings for the period is largely attributable to the lower average realised free-on-board (FOB) export ore price and a 2% decrease in sales volumes relative to the comparative period a year ago.

Basic earnings for the period include the reversal of an impairment on the asset value of the Kolomela cash-generating unit in 2022. The company said the impairment reversal was owing to a revision in the forecast production volume profile of Kolomela as part of the company's business reconfiguration plan to optimise value considering current rail capacity.

As a result, basic earnings for 2024 are expected to be between about R13.8-billion and R15.2-billion. Basic earnings per share (EPS) for the period are expected to be between R43.06 and R47.64, a decrease of between 33% and 39% from 2023, when EPS of R70.80 was reported. Reported basic earnings in 2023 amounted to about R22.7-billion.

“Kumba continued . . . working with government and [State-owned] Transnet to improve logistics performance. Consistent with our reconfigured business plan, we delivered production in line with Transnet's logistics capacity,” Kumba CEO Mpumi Zikalala said.

She noted that ore railed to the Saldanha Bay port in the fourth quarter decreased by 8% compared with the third quarter of 2024 owing to the planned 15-day yearly maintenance shutdown and train derailments following the reopening of the Ore Export Channel (OEC).

“To maintain a balanced and efficient value chain, finished stock at the mines was drawn down and production reduced by 17% compared to the third quarter of 2024, while sales increased by 1% to 9.1-million tonnes,” she said.

Zikalala explained that Kumba, as part of the Ore User's Forum (OUF), worked closely with Transnet to prepare for the yearly maintenance shutdown in October last year.

“Good progress was made in upgrading 90 km of rail infrastructure, which allowed speed restrictions to be lifted on approximately 50 km of the OEC.

“In parallel, work by the OUF and Transnet is under way to convert the outcomes of the independent technical assessment into a multi-year ore corridor restoration programme of focused projects to restore the OEC to full capacity,” she explained.

She pointed out that, for the full-year 2024, despite a 2% deterioration in rail performance, Kumba's production and sales were within the guidance range of 35-million to 37-million tonnes and 36-million to 38-million tonnes, respectively.

She also noted that production of 35.7-million tonnes was consistent with 2023 performance and closely matched the ore railed by Transnet of 35.6-million tonnes. However, owing to challenging rail performance throughout the year, sales ended at 36.3-million tonnes.

"Lower iron-ore prices continued to reflect subdued steel demand, coupled with an increase in iron-ore supply, with strong steel exports and economic stimulus support in China providing a partial offset.

“Lump premium remained relatively stable as lump iron ore utilisation rates improved on the back of decreasing metallurgical steelmaking coal prices. Kumba achieved an average realised price of $92 per wet metric tonne (wmt) for the year, 3% above the benchmark price of $89/wmt,” Zikalala said.

On the project front, she noted that the execution of the ultra-high-dense-medium-separation (UHDMS) technology project had restarted and was progressing according to plan.

“In line with our disciplined capital allocation approach, the balance of the UHDMS project will be implemented over a five-year period ending in 2029. The project is aligned to our premium product strategy and supports the optimal use of available rail capacity,” she explained.

Zikalala said the outlook for Kumba's production from 2025 to 2027 had been updated, subject to Transnet's logistics performance.

“We remain committed to the process of working in partnership with government and Transnet to restore the OEC and, while there are signs of progress, the logistics issues will take some time to resolve. As a result, in 2025, production is expected to be between 35-million and 37-million tonnes.”

“In 2026, due to the main shutdown of the dense media separation plant and tie-in of the UHDMS plant, production has been revised to 31-million to 33-million tonnes, with the balance of the saleable product expected to be supplemented by finished stock at Sishen. Thereafter, in 2027, production is expected to increase to 35-million to 37-million tonnes,” she explained.

Zikalala said that Kumba, as a member of the OUF, had strongly advocated for private-sector participation to potentially improve the performance of the OEC through concession models. She also pointed out that the company also continued to play an active role in the National Logistics Crisis Committee to collaborate on sustainable logistics solutions.

"The Network Statement released by Transnet at the end of 2024, which sets out the rules of engagement and the access charges, is a significant step forward in terms of the liberalisation of the South African railway industry. Kumba is engaging with Transnet on how the network statement will be implemented in relation to the current contractual agreements for both Sishen and Kolomela," Zikalala said.

PRODUCTION

Kumba’s full-year production in 2024 remained consistent at 35.7-million tonnes, aligned with OEC throughput. However, total production in the fourth quarter increased by 8% to 7.8-million tonnes compared to 7.2-million tonnes in the fourth quarter of 2023.

Sales decreased by 2% to 9.1-million tonnes in the fourth quarter of 2024 compared with 9.3-million tonnes a year prior and by 2% to 36.3-million tonnes for the full year 2024 compared with 37.2-million tonnes in 2023.

This was owing to constraints in the OEC, which led to low levels of finished stock at Saldanha Bay port following Transnet's yearly shutdown and train derailments during the fourth quarter.

Closing finished stock ended the fourth quarter of 2024 at 7.5-million tonnes compared with 8.6-million tonnes in the third quarter of 2024 and 7.1-million tonnes in the fourth quarter of 2023. Of this, 6.9-million tonnes were at the mines and 500 000 t at the Saldanha Bay port.

In line with Kumba's business reconfiguration to align production to logistical capacity and optimised mine plans, waste mining was reduced by 40% to 27.8-million tonnes in the fourth quarter of 2024 compared to 46-million tonnes in the fourth quarter of 2023. This decrease was driven by a 33% reduction in waste mining at Sishen to 25.1-million tonnes and a 68% reduction at Kolomela to 2.7-million tonnes.

Kumba reported that operational efficiency and productivity improvements continued during 2024, resulting in planned waste mining decreasing by 28% to 155.7-million tonnes compared to 216.8-million tonnes in 2023.

In terms of safety performance, for the fourth quarter of 2024 and the full-year, the company’s total recordable injury frequency rate improved to 0.76, the lowest rate ever recorded at Kumba, while Sishen achieved more than eight years of fatality-free production.

Production increased by 8% to 7.8-million tonnes in the fourth quarter of 2024 compared with 7.2-million tonnes in the fourth quarter of 2023.