Due to a challenging market environment and two properties nearing the end of their production, Thungela Resources Ltd forecasted a half-year profit decline due to restructuring costs on Friday. For some of the biggest energy producers in South Africa, the winds of change have been especially powerful this year. The reality has changed after a time of high prices and robust demand, resulting in slower sales, weaker margins, and a growing apprehension among industry leaders. The data for one big producer are unmistakable: profits have suffered, and the causes are not under their direct control.
Due to decreased coal prices and export restrictions, Thungela sees a sharp decline in profits
South Africa’s Thungela Resources TGAJ.J expects its half-year profit to fall by as much as 85%, mainly due to lower thermal coal prices as global economic uncertainty impacts energy demand, the coal miner said on Friday. Thungela said it expects headline earnings per share (HEPS) to be between 1.40-2.10 rand ($0.0789-$0.1184) in the six months to June 30, compared to 9.52 rand during the same period last year.
Thungela is South Africa’s biggest thermal coal exporter, and along with peers, it has been forced to cap output to match limited freight rail and port capacity provided by South Africa’s struggling state-owned logistics firm Transnet. Thermal coal demand has also slowed in key markets, China and India, after increases in domestic coal production.
Mine closures and declining coal prices increase Thungela’s profit pressures
Average coal prices through Richards Bay, South Africa’s main coal export terminal, were 14% lower during the six months compared to last year, as tariff-induced instability in global trade impacts major economies and energy demand. The average export price in Australia, where Thungela owns the Ensham mine, was 11% lower compared to the same period last year, it said.
Thungela said it also incurred 285 million rand in restructuring costs related to its Goedehoop and Isibonelo operations, which reach the end of their lives this year. The company will release its half-year results on August 18.
Cost pressures, export barriers, and a changing market and perhaps Trump’s tariffs
In addition to pricing, Thungela has encountered operational and logistical difficulties. Coal exporting is still a vital component of the company’s economic strategy, although the amount of shipments to important foreign markets has decreased due to transportation infrastructure delays, such as rail capacity problems. Stockpiles expand, cash flow slows, and financial strain rises when export constraints emerge.
The main demands on manufacturers are:
- Low thermal coal prices internationally.
- Increased expenses for operations and transportation.
- Exports are restricted by infrastructure limitations.
- Demand is being impacted by shifting global energy trends.
- The global trends are also being highly influenced by the global Donald Trump tariffs. It is a whole packaged situation.
Notwithstanding these obstacles, the business is nevertheless committed to cost control, operational effectiveness, and finding new prospects in its current markets. The management team has stated that they are still dedicated to long-term sustainability even though the short-term outlook is challenging. Although South Africa unveiled tariff relief for exporters, it does not take away the reduction of profits happening now.
At the right moment, the company’s approach seems to be to weather the current downturn by practising prudent financial management. The lessons learnt this year might encourage Thungela and its contemporaries to innovate and diversify as the world’s markets continue to change. Adaptability has always been the key to surviving a market downturn or falling behind in the resource industry. Ultimately, even though the difficulties are substantial, there is precedent for them. The energy industry has had numerous boom-bust cycles, but now, Trump expands tariffs, triggering global market losses.
GCN.com/Reuters