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HARARE (Reuters) -South Africa’s Kumba Iron Ore said on Tuesday it will focus on making its operations more efficient and containing costs to fight inflation, after a 46% profit rise in 2021.
Kumba’s headline earnings per share (HEPS) - the main profit measure for South African companies - was 103.65 rand ($6.83) for the year ended Dec. 31, compared with 71.07 rand in 2020.
Shares in Kumba, whose executives faced several questions about costs during a call with analysts after the results were released, were down 4% at 1315 GMT, against a broader index fall of 0.37%.
Kumba plans to save up to 1 billion rand this year, with half of that expected to come from operational improvements, its CEO Mpumi Zikalala said, after it failed to achieve a cost saving target of 1.1 billion rand for 2021.
While iron ore ended 2021 around 20% lower, prices hit an all-time high of around $220 per dry metric tonne (dmt) in July on the back of a pent up steel demand from various industries, led by China, which benefited iron ore miners.
But inflationary pressures also increased the cost of labour and transportation and logjams at ports added to cost pressures.
In South Africa, companies were further hit by bad weather and local transportation disruptions, bringing the focus back to their ability to shave costs to protect margins.
“Our efficiency drive continues. That will see improvement in our unit costs (per tonne production cost) and will go a long way towards offsetting those inflationary pressures,” Bothwell Mazarura, Kumba’s chief financial officer, said on a call.
Kumba, among the world’s top five iron ore producers, had been on a margin improvement drive since 2018 through a raft of cost cutting measures and focusing on mining high value ore.
($1 = 15.1829 rand)
