Exxaro's Strategic Pivot: Diversification into Manganese and Renewable Energy
First manganese contribution, record export volumes, and improved rail logistics define a transformative half-year
EXX.JO · Earnings Call · 2026-08-20
From Coal to a Diversified Natural Resources Champion
Exxaro Resources (EXX.JO) reported its H1 2026 results against a backdrop of persistent cost inflation and geopolitical volatility. The company's headline earnings per share declined 20% to ZAR 13.77, yet the operational story is one of resilience and strategic transformation. As CEO Ben Magara noted, "for the first time, reflecting the contribution from manganese in our earnings and into the business and in these results today," the group has added a third pillar alongside coal and renewable energy. The renewable energy business grew 12% with the commissioning of the Lephalale Solar plant, while coal production rose 11% and export volumes surged 15%. The diversification is deliberate: management targets 50% of group earnings from non-coal businesses by 2030.
Manganese: A New Pillar Takes Shape
The acquisition of a 50% stake in the Tshipi Borwa manganese mine (completed in March 2026) is the centrepiece of Exxaro's diversification. The $10.6 billion investment (4 months of earnings contributed ZAR 242 million from the equity-accounted stake) adds a future-facing metal. The CFO, Riaan Koppeschaar, explained the cash outlay: "included in that cash flow was ZAR 1.5 billion for Jupiter, about ZAR 1.5 billion for the Hotazel, the 9% in Hotazel. And then the balance will be Tshipi mine." Management guides to a 20% return hurdle on mining investments, and with manganese production up 11% and strong pricing, the asset is already meeting expectations. This is a clear break from prior quarters, where manganese was only discussed as a future ambition. Indeed, the very keyword manganese asset has now surged to the top of the company's own keyword trajectory for the first time.
Coal Resilience and Logistics Improvements
Coal remains the bedrock, contributing ~75% of earnings. Despite a 25% jump in diesel costs and a stronger rand (which trimmed ZAR 740 million from EBITDA), the coal business saw EBITDA rise 5%. Export volumes hit a record 3.9 Mt, with price realisation falling from 96% to 91% because customers locked in fixed prices when the API4 index climbed. "Our price realisation improved to 91% on a higher realized price of $96/t," said Ben.The key operational win was the 50% improvement in direct rail from Grootegeluk to Richards Bay, lifting the industry's annualised run rate to 60 Mt. This is a long-running saga; as far back as 2025, the company was asked about Transnet's performance. In the prior call, Brian Morgan queried, "Has there been an extension to the time lines there?" Now, with better rail utilisation and increased use of alternative channels, Exxaro is 'extremely pleased' with progress. The company maintains its full-year export guidance of 8% growth, underpinned by these logistics gains.
Financial Discipline and Outlook
The balance sheet remains robust with net cash of ZAR 6.4 billion (excluding project finance). The new dividend policy (40-67% payout plus 100% SIOC pass-through) yielded an interim dividend of ZAR 7 per share, the 47th consecutive dividend. Capital allocation remains disciplined: ZAR 10.6 billion went to manganese, ZAR 864 million to renewable energy, and sustaining capital for coal. Looking ahead, Exxaro revised its renewable energy generation guidance down to 800-830 GWh due to weaker wind, but the solar contribution is offsetting. "We want them to account for over 50% of our group earnings by 2030," said Ben, but that ambition is tempered by near-term challenges: ongoing Middle East conflict, elevated diesel costs, and the still-incomplete rail system. The company expects to close the year within guidance, but the real story is the strategic pivot—a coal heavyweight evolving into a diversified natural resources player, with export volumes and Richards Bay rail performance finally translating into tangible results. Price realization remains a watch item as market dynamics shift, but the underlying operational execution is increasingly compelling.