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Kumba delivers profit warning after rail problems hit exports

Kumba Iron Ore KIOJ.J warned on Thursday that 2022 profit could have slumped by as much as 44% due to weaker iron ore prices and rail logistics problems in South Africa.

Kumba said it expects headline earnings per share (HEPS) – the main profit measure used in South Africa – between 58.29-64.49 rand ($3.41-$3.77) in the full year to December 2022, compared to 103.65 rand the previous year.

The Anglo American unit, which exports iron ore mainly to China, Japan, South Korea, Europe and the Middle East, produced 37.7 million tonnes of the key steel ingredient in 2022, down from 40.9 million tonnes the previous year.

Sales were 9% lower at 36.6 million tonnes, as rail problems impacted Kumba’s capacity to move iron ore to port.

South Africa’s state-owned freight rail operator Transnet is operating below capacity due to locomotive shortages, poor maintenance, a lack of spare parts and massive copper cable theft, costing iron ore and coal exporters billions of rand in potential revenue.

Transnet’s operations were also disrupted by a 12-day strike last October as its workers pushed for a wage increase.

The impact of Transnet’s constraints on Kumba’s exports was particularly telling in the fourth quarter of 2022, when sales fell 35% to 6.9 million tonnes compared to the same period of 2021, and 31% from the previous quarter.

Kumba will release its 2022 financial results on Feb.21.
Source: Reuters (Reporting by Nelson Banya;Editing by Elaine Hardcastle)

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