Kumba’s Profit Warning: Iron Ore Prices and Rail Disruptions Take a Toll
Kumba’s Profit Warning: Iron Ore Prices and Rail Disruptions Take a Toll

Kumba’s Profit Warning: Iron Ore Prices and Rail Disruptions Take a Toll

  • 03-Feb-2023 12:45 PM
  • Journalist: Jacob Kutchner

Johannesburg [South Africa]: Kumba Iron Ore issued a warning on Thursday that their projected 2022 profit could take a major hit of up to 44%. The cause of this massive decrease was attributed to declining Iron ore prices and logistical difficulties with their South African rail network.

Kumba Iron Ore has projected a 2021 headline earnings per share (HEPS) of between 58.29-64.49 rand ($3.41-$3.77). This is significantly lower than the 103.65 rand estimated for the previous year. The Anglo-American unit plans to export 37.7 million tonnes of Iron ore to China, Japan, South Korea, Europe, and the Middle East in 2022, which is 3.2 million tonnes fewer than last year's production total.

Sales of Iron ore from South Africa's Kumba Mining Group dropped by 9% in the quarter to 36.6 million tonnes due to operational problems with the country's freight rail operator Transnet. Locomotive shortages, poor maintenance, a lack of spare parts and an increase of copper cable theft are hampering Transnet's operations, resulting in billions of rands in lost revenue for Iron ore and coal exporters.

Transnet's operations were severely disrupted by a 12-day strike in October of 2022, as its workers demanded a wage increase. These constraints had a devastating impact on Kumba’s exports, leading to sales falling 35% to 6.9 million tonnes in the fourth quarter of 2022 compared to the same period of 2021 and 31% from the previous quarter.

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