Kumba H1 revenue down 11%

JSE-listed Kumba Iron Ore has reported a 17 per cent drop in headline earnings for the interim results ending on June 30, 2023. The decline comes amidst lower commodity prices and sustained transport and logistical challenges. Mpumi Zikalala, the CEO of Kumba, shared insights on the operating environment and the company's efforts to navigate through these challenges. The impact of Chinese steel production, supply chain disruptions, and logistical issues with Transnet were key points discussed. Despite the challenges, Kumba remains optimistic about the market outlook and is focused on leveraging quality iron ore production to drive sustainability and growth. In the interview with CNBC Africa, Zikalala highlighted the positive impact of Chinese steel production on Kumba's business. Chinese steel production showed an increase of approximately 1.2 per cent year on year, which has been beneficial for Kumba. This increase in production has supported the average Free on Board (FOB) prices for Kumba, which are currently around $115 per tonne. The CEO noted that the stock levels for both steel and iron ore are at five-year lows, indicating a supportive pricing environment. Zikalala expressed confidence in the economic stimulus initiatives and their potential to boost iron ore prices in the future. Supply chain disruptions, particularly as a result of the Ukraine war, were a concern for Kumba. However, the company has managed to access necessary resources through long-term agreements with original equipment manufacturers. Zikalala emphasized that there have been no quality restrictions affecting Kumba's production, which saw a 6% increase in the first half of the year compared to the previous year. Logistical challenges, including transportation issues with Transnet, have impacted Kumba's revenue. The company has collaborated with Transnet to address these challenges, focusing on maintenance and security measures to mitigate disruptions. Zikalala acknowledged the impact of copper cable theft on the I&O export channel and reiterated Kumba's commitment to working with Transnet and the government to improve logistics performance. Looking ahead, Zikalala expressed optimism about the market outlook, especially in light of potential economic stimulus measures. He anticipates iron ore prices to remain above $100 per tonne in the second half of the year. Kumba aims to leverage its high-quality iron ore production to meet customer demand and support sustainability efforts. The CEO also highlighted the company's efforts in managing costs internally, successfully reducing costs by approximately 900 million rands. One of the exciting initiatives at Kumba is the use of LNG-fueled ships for transportation, with eight out of ten ships already operational. These 'Ubuntu vessels' have contributed to a 35 percent reduction in carbon emissions, aligning with Kumba's focus on environmental sustainability. Zikalala mentioned the plans to add more ships to the fleet, aiming to further reduce carbon emissions and promote eco-friendly practices. Despite the challenges faced in the first half of the year, Kumba Iron Ore remains resilient and forward-thinking in its approach to addressing operational hurdles and driving growth. The company's commitment to quality production, cost management, and sustainable practices positions it well for the future.