Thungela Resources interim results: stronger production, cash flow and a R5.50 dividend

Thungela Resources Limited has reported a stronger first half of 2026, with higher coal production, improved profitability and a substantial increase in cash generation.

The coal producer generated adjusted operating free cash flow of R1.9 billion and ended June with net cash of R6.1 billion. That financial position has supported an interim dividend of R5.50 per share, up from R2.00 a year earlier.

The headline numbers are encouraging, but they also show why Thungela remains sensitive to currencies, realised coal prices and logistics. Revenue increased by just 2%, despite stronger benchmark coal prices and higher sales volumes.

Investors can read the original company announcement for the full published details.

Thungela's key first-half figures

Metric	H1 2026	H1 2025	Change
Export saleable production	8.48Mt	8.01Mt	6%
Export equity sales	8.94Mt	8.32Mt	7%
Revenue	R15.17 billion	R14.81 billion	2%
Adjusted EBITDA	R1.32 billion	R691 million	91%
Adjusted EBITDA margin	8.7%	4.7%	4 percentage points
Adjusted operating free cash flow	R1.89 billion	R484 million	291%
Profit for the period	R1.39 billion	R248 million	461%
Headline earnings per share	R4.80	R1.92	150%
Net cash	R6.11 billion	R6.25 billion	down 2%
Interim dividend per share	R5.50	R2.00	175%

Adjusted EBITDA means earnings before interest, tax, depreciation and amortisation, with certain items removed. It provides a view of operating profitability, although it is not an IFRS accounting measure.

The 91% improvement in adjusted EBITDA is meaningful, particularly as revenue rose by only 2%. Thungela's adjusted EBITDA margin consequently increased from 4.7% to 8.7%.

Why revenue growth was relatively modest

Benchmark coal prices were 15% higher in South Africa and 25% higher in Australia than in the comparable period. However, Thungela faced a currency headwind because the South African rand traded on average 11% stronger against the US dollar.

Coal is generally priced in dollars, while much of Thungela's cost base and reporting are in rand. A stronger rand therefore reduces the value of dollar revenue when translated into the group's reporting currency.

Realised prices also remained below their respective benchmarks. Coal sold through the Richards Bay Coal Terminal achieved an average export price of US$89.18 per tonne, a 15.7% discount to the benchmark. Management attributed part of this discount to a lower-quality sales mix.

At the Australian Ensham operation, the average realised export price was US$110.92 per tonne, representing a 13.3% discount. Previously agreed fixed-price contracts affected the result, although Thungela expects this discount to narrow during the second half.

Cash generation supports the dividend

Cash flow from operating activities reached R2.6 billion. After R705 million of sustaining capital expenditure, adjusted operating free cash flow was R1.9 billion, compared with R484 million a year earlier.

That is a sizeable improvement, but investors should note that the figure included R1.1 billion generated from foreign exchange derivatives. These financial contracts are used to manage currency risk, and their contribution demonstrates the value of Thungela's hedging approach. It also means they accounted for a significant share of first-half adjusted free cash flow.

The board declared a R5.50 per share interim dividend, representing a total cash distribution of R773 million. This is above Thungela's policy of distributing at least 30% of adjusted operating free cash flow.

Payments are expected in September 2026 for Johannesburg-listed shareholders and October 2026 for London-listed shareholders. Exact payment and record dates, along with the sterling conversion applicable to UK shareholders, were not disclosed in this announcement.

Production improved across the group

Group export saleable production increased by 6% to 8.5Mt. South Africa produced 6.3Mt, broadly in line with the previous year despite the end of operations at Goedehoop North.

Khwezela benefited from improved water management, while Mafube continued to make a strong contribution. South African export sales of 7.4Mt, including 0.6Mt of third-party coal, exceeded production.

Improved performance from Transnet Freight Rail helped. The annualised industry rail run rate increased to 59.9Mt from 56.8Mt in 2025, allowing Thungela to take advantage of additional export capacity. This is important because unreliable rail infrastructure can prevent South African miners from getting coal to port, regardless of how well their mines perform.

Ensham delivered a particularly strong result. Export saleable production rose to 2.2Mt from 1.6Mt after the business improved its management of difficult geological conditions.

Ensham's free-on-board, or FOB, cost fell to R1,466 per export tonne. FOB costs cover getting coal to the point where it is loaded for export. The result was below Thungela's full-year guidance range and also benefited from currency translation.

Full-year guidance has been maintained

2026 guidance	South Africa	Ensham
Export saleable production	13.0Mt to 13.6Mt	3.9Mt to 4.2Mt
FOB cost per export tonne	R1,330 to R1,380	R1,650 to R1,740
Sustaining capital expenditure	R700 million to R1.0 billion	R500 million to R700 million

Thungela expects stronger South African production in the second half, consistent with its usual seasonal performance. However, Zibulo has experienced conveyor belt and support service problems in an area that will be retired once production moves fully to the new North Shaft.

The Annea Colliery and Zibulo North Shaft life-extension projects were completed on time and within budget and are continuing to ramp up. South African expansionary capital expenditure is now expected to be marginally above the previous R100 million guidance as the Zibulo project is closed out.

Safety and portfolio progress

Thungela remained fatality-free for three and a half years. Its total recordable case frequency rate, which measures work-related injuries relative to hours worked, improved to 2.62 from 3.21. Ensham delivered a significant safety improvement as its practices were brought closer to group standards.

The sale of the Kleinkopje mining right was also completed, producing a non-cash reduction of approximately R1.1 billion in environmental provisions associated with the disposed areas. The planned sale of Goedehoop North is expected to complete in the second half.

Management expects South African environmental liabilities to be fully backed by cash by the end of 2026. This would strengthen the funding position for future rehabilitation obligations.

What investors should watch next

The positives are clear: production increased, margins improved, Ensham recovered strongly and the balance sheet remained robust. The R5.50 dividend provides a tangible return while leaving Thungela with R6.1 billion of net cash.

The risks are equally visible. Coal prices remain volatile, the stronger rand is reducing translated revenue, and realised prices are below benchmarks. South African logistics have improved, but continued rail performance is essential. First-half free cash flow also received a major contribution from currency derivatives, which investors should not automatically assume will recur at the same level.

For the second half, the main tests will be whether South African production accelerates as planned, Zibulo's temporary issues are resolved and Ensham's realised-price discount narrows. Delivery within unchanged full-year guidance would add weight to management's claim that the business is becoming more resilient through the coal cycle.