Kumba Iron Ore Limited

Kumba reported first-half production down 3% and sales down 2% (rail volumes to port were 2% lower). Realized iron ore price was $90 per tonne, down from $91 in the prior period, while EBITDA fell to ZAR 10.9 billion from about ZAR 16 billion last year; management said external factors accounted for more than 90% of a ZAR 5.1 billion EBITDA impact. Headline earnings per share were ZAR 0.24. The interim cash dividend was ZAR 7.90 per share, with ZAR 2.5 billion declared for shareholders and ZAR 0.5 billion for empowerment partners. Full-year 2026 guidance remains production of 31 million to 33 million tonnes, sales of 35 million to 37 million tonnes, C1 unit cost of $45 per tonne, and capex of ZAR 13.2 billion to ZAR 14.2 billion. Management also said 2027 production should rise by about 12% to 13% to 35 million to 37 million tonnes.

The CEO emphasized that the period was dominated by external headwinds, especially unusually heavy rainfall, higher diesel and other input costs, and currency strength, but said the team controlled what it could and kept safety strong. She highlighted more than 10 years fatality-free production at Sishen and just over 3 years at Kolomela, plus the successful completion of additional logistics maintenance and strong preparedness for the UHDMS tie-in. Her tone was confident but pragmatic, repeatedly stressing discipline, recovery plans, and the longer-term value of UHDMS and the full potential program.

The CFO said first-half results were mainly hit by a stronger rand, softer iron ore pricing, inflation in Kumba costs, and lower sales volumes tied to Transnet maintenance. He cited EBITDA of ZAR 10.9 billion versus almost ZAR 16 billion last year, headline EPS of ZAR 0.24, and an interim dividend of ZAR 7.90 per share, which he said implied a 60% payout ratio. He also noted first-half capex of ZAR 5.2 billion, net cash of ZAR 8.7 billion after dividends and project spend, Sishen unit cash cost of ZAR 549 per tonne, Kolomela unit cash cost of 24 per tonne, and reiterated full-year capex guidance of ZAR 13.2 billion to ZAR 14.2 billion.

Analysts focused on Transnet rail rehabilitation, the impact of high freight rates, UHDMS execution risk, the working-capital and cash flow effects of the planned shutdown, higher breakeven costs, and Kolomela stripping. Management said 101 kilometers of rail were replaced in H1 but the broader rehabilitation remains a multi-year effort toward more than 500 kilometers needing replacement; they also said they do not hedge freight, though they have some vessel flexibility. On UHDMS, they said the project is 45% complete with procurement done, engineering 96% complete, and the biggest risk is still the August tie-in, which they are trying to derisk by doing more work ahead of time. On cash flow, they said working capital should be roughly square if timelines are met because WIP will build while finished stock is drawn down.