Thungela profits plunge on Transnet collapse

South African coal exporter Thungela saw profits plunge by 69% in the first half of the year on weaker coal prices and logistical constraints. 

The company, which is the country’s largest shipper of coal for electricity generation, posted record income last year as European demand for the fuel surged after Russia’s invasion of Ukraine, causing prices to reach $450 a ton. Coal is now trading at less than a third of that peak.

Thungela and other miners have also faced severe bottlenecks in rail services run by state-owned Transnet, with poor management, idle locomotives, cable theft and ageing equipment among the issues weighing down coal shipments.

Those logistical problems are “the most significant issue we face” domestically and are preventing companies from raising exports, Thungela CEO July Ndlovu told reporters on a call on Monday. 

“This is an industry issue. We cannot afford not to improve Transnet,” Ndlovu said. “The consequences for South Africa are dire.”

While the second quarter brought an improvement on “a catastrophic decline in performance” during the first three months of the year, operations by Transnet are still “short of where we want them to be,” the CEO said.

Profits in the first half fell to R3 billion from R9.6 billion the prior year.

Thungela expects to produce between 11.5 to 12.5 million tons of coal for export this year.

If Transnet were to remove bottlenecks, the company would want to add an additional 2 to 3 million tons in annual output, CFO Deon Smith said.

The company expects to finalize the acquisition of its first asset outside South Africa by the end of the month. Thungela announced a R4.1 billion plan to buy the Ensham coal mine in Australia in February.