Exxaro Resources Ltd (JSE: EXX) recently unveiled its full-year earnings for 2023, painting a picture of resilience amidst a backdrop of economic fluctuations. Despite reporting a 17% decline in revenue to R38.7 billion and a 34% drop in operating profit to R10.6 billion compared to the prior year, the diversified resources giant remains steadfast in its commitment to shareholders, declaring a dividend of R10.10 per share, albeit reduced from the previous period.
While overall performance faced headwinds, glimmers of positivity emerged from select operating segments. Notably, the energy business exhibited remarkable resilience, with revenue soaring by 16% on the back of favourable wind conditions. The stability of the earnings before interest, taxes, depreciation, and amortization (EBITDA) margin at 80% underscores the robustness of the long-term offtake agreements supporting the business’s operations. Coal production and sales volumes dipped slightly, and revenue dropped 18% to R37 billion. This decrease was due to a combination of factors, including lower demand from South Africa’s power utility, Eskom and subdued global export prices.
Despite challenges in its coal division, Exxaro’s energy arm shines as a beacon of growth, generating 8% more electricity than the previous year. As Exxaro navigates the ever-evolving landscape of the resources sector, its ability to weather storms while harnessing opportunities for growth remains a testament to its resilience and strategic foresight.
Technical
Exxaro Resources’ price action reveals a compelling narrative of market dynamics within a downtrend. With the share price positioned below the 100-day moving average and confined within a descending channel pattern, bearish sentiment prevails.
A notable downturn from the R186.18 resistance level, fuelled by increased selling pressures and bearish volumes, breached the channel’s lower boundary. However, amidst oversold RSI conditions, downward momentum halted near the R160.04 support level, triggering a rebound.
Currently, the share price has retraced to the 61.80% Fibonacci Retracement Golden Ratio, signalling a critical juncture for traders. A continuation of upside momentum could see a retest of the R186.18 resistance level, while a resurgence of bearish pressures might stall the share price at the Golden Ratio level, potentially leading to a reversal towards the R160.04 support.
Summary
Amidst revenue and profit declines, Exxaro Resources (JSE: EXX) resiliently declared dividends, showcasing its commitment to shareholders. While the coal sector challenges persist, the energy arm’s robust performance underlines growth potential. Exxaro’s strategic resilience in a volatile market is evident with the share price navigating key technical levels.
Sources: Exxaro Resources LTD, MoneyWeb, IOL, African Mining Market, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
