interim financial results - exxaro · • ferroalloys energy ## • underground coal gasification...
TRANSCRIPT
INTERIM FINANCIAL RESULTS for the six months ended 30 June 2014
Exxaro group
OWNER-CONTROLLED OPERATIONS
NON-CONTROLLED
OPERATIONS
Enabled by human resources, sustainable development and innovation
Coal • Second largest coal
producer in RSA
• Three tied operations
• Six commercial
operations
• Acquisition of TCSA*
• GMEP**
commissioned
Ferrous • Mayoko Project
• AlloyStream™ project
• FerroAlloys
Energy • Underground coal
gasification
• 19,98% in SIOC##
• 44,18% in Tronox
• 26% in Black Mountain
• 50:50 JV^ :
- Mafube JV with
Anglo
- Cennergi JV with
Tata Power
• Secure supply to Eskom
• Increase domestic supply
• Manage mines in closure
responsibly
• Increase exports
• Increase productivity
• Optimise the operating
model
• Review Mayoko Project
• Review alloy business
• Apply UHDMS# in lower
grade iron ore
beneficiation
• Explore and
integrate
opportunities in
Africa’s energy
markets
• Manage emerging
carbon related risks
• Maintain SIOC
investment
• Analyse and review the
long-term fundamentals
of the titanium dioxide
industry
• Divest from Black
Mountain and Chifeng
* Total Coal South Africa Pty Ltd ** Grootegeluk Medupi Expansion Project #Ultra high dense medium separation ## Sishen Iron Ore Company Pty Ltd ^ Joint venture
0
2
0 0 0
1H12 2H12 1H13 2H13 1H14
* Lost time injury frequency rate per 200 000 hours worked ** Lost time injury
Safety
• Record 20 months without fatalities
• Regrettably a fatality occurred on
5 July at Arnot
• LTIFR* of 0,22
• 8 business units LTI** free
Health
HIV/Aids
• Prevalence rate stable at 12%
• Enrolment on HIV/AIDS programme
increased by 46%
• 521 employees on antiretroviral
treatment
Accepted occupational disease cases
• 1 tuberculosis case
• Zero noise induced hearing loss or
pneumoconiosis cases
0,26
0,29
0,21 0,19
0,22
1H12 2H12 1H13 2H13 1H14
LTIFR
Reportable fatalities
3
Safety and health
2H14 • TCSA acquisition
• GMEP ramp-up continues
• Grootegeluk backfill phase 1
• Tshikondeni closure
• Thabametsi mine phase 1 BFS*
• Semi-coke BFS for two retorts
• NCC disposal
• Mayoko mining convention extension
• FerroAlloys expansion
• UCG**
2015 • Belfast construction
• Inyanda closure
• Thabametsi mine phase 2 PFS#
• Grootegeluk backfill phase 2
• Conditions precedent for TCSA acquisition
• Semi-coke two retorts investment decision and
construction
2016 • Thabametsi mine phase 1 construction
• Thabametsi mine phase 2 BFS
2017 • Semi-coke two retorts commissioning
• Grootegeluk backfill phase 2 commissioning
• Belfast commissioning
• UCG pilot plant construction
* Bankable feasibility study ** Underground Coal Gasification # Pre-feasibility study
Portfolio improvement: Exxaro group
4
Portfolio improvement: TCSA
* Richards Bay Coal Terminal ** Based on 91Mt 5
TCSA acquisition rationale
Increase exports
• Increase our export allocation by
4,1Mtpa (4,5%)
• Increase control over entitlement
Improve our portfolio
• Long life of mine with multi-products
• Expedite developments in Waterberg
Secure Eskom supply
• Potential to increase supply to Eskom
from Eloff mine
Unlock synergies
• Increased flexibility
• Market knowledge
• Management expertise
RBCT* allocation (%)**
25,3
21,7 19,7
11,5
7,0 4,5 4,0
17,8
GlencoreXstrata
AngloAmerican
BHPBiliton
ExxaroAfter
ExxaroBefore
TCSA Sasol Other
Portfolio improvement: owner-controlled operations coal
Belfast
• Board approval of R3,8 billion for the
implementation of Belfast project
• Awaiting the approval of IWUL*
GMEP
• Ramp-up continues
• Coal deliveries re-commenced in June 2014
• Optimisation and performance testing in
progress until full ramp-up
• Addendum to be signed in August 2014
Grootegeluk backfill project
• Phase 1 of the Grootegeluk backfill project
to be commissioned during 2H14
• Phase 2 commissioning scheduled
for 2017
* Integrated Water Use License 6
Portfolio improvement: owner-controlled operations coal (continued)
Thabametsi phase 1
• BFS to commence in 2H14
• Construction planned to commence
in 2016
Semi-coke expansions
• BFS for two additional retorts
• Completion planned for 2015 and 2017
NCC
• In process to fulfil conditions precedent
Moranbah South
• Environmental impact study ongoing
• Timing of project to be determined
7
Portfolio improvement: owner-controlled operations ferrous
Mayoko
Impairment of entire investment
Recent developments
• Continuous engagement with government of the
Republic of the Congo
• Mining convention extended by two years
• Port and rail definitive agreements outstanding
• Consider PFS upon finalisation of agreements
AlloyStreamTM
• Second demonstration campaign was ended
• Assmang exercised right to exit
• Review of other partners and opportunities
FerroAlloys
• Doubling of capacity planned for 4Q14
• Continued engagement with SIOC to exploit
UHDMS application
8
9
Portfolio improvement: non-controlled operations
SIOC
• Maintain investment
Tronox
• Investment decision by June 2015
Mafube
• Maintain investment
Cennergi
• Construction of two projects
Base metals
• Consider divestment from Black Mountain
and Chifeng
• Zincor sale completed
Expected project timeline
2H14 • Cennergi to start constructing
Tsitsikamma and Amakhala wind
projects
2015 • Tronox investment decision
• Tsitsikamma project construction
complete
2016 • Black Mountain and Chifeng
divestment
• Amakhala project construction
complete
• Wind farms commissioning at
Cennergi
* North Block Complex ** Including operations held-for-sale # Black Economic Empowerment ## Carbon performance leadership index
Responsibility and accountability
Environmental stewardship
• Water treatment plants at Matla and NBC*
to be delivered in 3Q14
• Rehabilitation trust fund of R724 million
in place for the group**
• Electricity intensity in line with 2013
despite expansion projects
Key considerations
• Sustainable BEE# structure
• Mining Charter review
• Diligent group-wide cost management
• Operating model optimisation
Achievements
• Top 10 global leaders of CPLI##
• Top 10 of EY integrated report awards
10
Leadership and people
* Historically disadvantaged South Africans
Transformation
• Mining Charter performance above
compliance targets
Training interventions
• 615 employees signed up for learnerships
and skills programmes:
– HDSA* at 87%
– Women at 30%
• R30 million spent in 1H14 on talent pipeline
Mpower 2012
• Dividends of R7,6 million paid out in 1H14
• 7 263 employees benefitted from the payout
60
33
57
66
18
1,2
60
35
58
67
19
1,3
Top Snr Middle Jnr Women Disabled
1H13 1H14 Target
HDSA statistics (%)
11
2 057
409
160
546
26
1 913
596
170
1126
55
Employees Government Financingcosts
Dividends Community
1H13 1H14
Direct economic value add
R6,2 billion value generated through:
• Mining
• Beneficiation
• Trading and investing operations
R3,9 billion value distributed:
• R1,9 billion as salaries, wages and
share-based payments down 7%
• R596 million tax and royalty payments
up 46 %
• R1,1 billion return to shareholders up
106%
• R55 million corporate social investment
initiatives up 111%
• Financing costs of R170 million up 6%
R2,3 billion re-invested:
• Asset replacement
• Development of operations
Economic value distributed (Rm)*
* Defined on slide 53
Employees Government Financing costs
Dividends Community
15%
2%
4%
29%
50%
12
Economic value distributed (%)*
Overview: operational and financial excellence
* Net operating profit ** Headline earnings per share 13
LTIFR* AT 0,22
UP 16%
REVENUE FROM COAL
R7,3 BILLION UP 1%
COAL PRODUCED
18,8MT
COAL HEPS
CONTRIBUTION TO GROUP
415 CENTS UP 20%
CORE NET OPERATING
PROFIT
R1,8 BILLION UP 22%
HEPS OF 793 CENTS
UP 6%
INTERIM DIVIDEND OF 260 CENTS PER SHARE UP 11% ON 2013 INTERIM
Financial and operational performance
* Domestic Medium Term Note ** Cents per share # Core numbers
Operational and financial excellence: highlights (1H14 vs 1H13)
Owner-controlled operations
Coal
• Revenue of R7,3 billion, up 19%
• Core NOP at R1,8 billion, up 40%
• Stable coal production at 18,8Mt
• Lower rand and dollar prices realised on exports
Non-controlled operations
SIOC
• R1,4 billion dividend declared, down 22%
• R1,7 billion post-tax equity-income, down 16%
Tronox
• Dividend declared of R271 million
• Post-tax equity loss of R304 million, up 81%
Dividend
• Interim dividend of 260 cents per share, up 11% at
a cover of 3,1 times core attributable earnings
Capital funding structure
• Net debt of R2,7 billion
• DMTN* programme raised R1 billion
• Net debt to equity ratio of 8%
250 142 225 346 415
912
97 487 405 378
1H12 2H12 1H13 2H13 1H14
Coal Other
5,9 6,2 6,1 7,2 7,3
3,9 0,2 0,1 0,1 0,1
1H12 2H12 1H13 2H13 1H14
Coal Other
Revenue (Rb)
350
150
235
315 260
1H12 2H12 1H13 2H13 1H14
Dividend (cps)
HEPS (cps**)
3,0 1,7 2,9 2,4 3,1 Dividend
cover #
15
Financial overview: IFRS*
R million 1H14 2H13**
% change
1H14 vs
2H13 1H13**
% change
1H14 vs
1H13
Revenue 7 412 7 323 1 6 245 19
Operating expenses (5 732) (5 885) 3 (5 036) (14)
Impairment (charges)/reversals (5 760) 247 (292)
Profit on sale of subsidiary 964
Net operating (loss)/profit (4 080) 2 649 917
Operating (loss)/profit margin (%) (55) 36 15
Post-tax equity-accounted income 1 515 1 616 (6) 2 015 (25)
Attributable (losses)/earnings: owners of parent (2 441) 3 973 (161) 2 244
Headline earnings^ 2 814 2 665 6 2 529 11
Cash generated from operations 1 555 1 557 602 158
Capital expenditure 1 578 2 361 33 2 403 34
Attributable (losses)/earnings per share (cents)# (688) 1 119 (161) 632
Headline earnings per share (cents)# ^ 793 751 6 712 11
Average ZAR/USD rate
– Realised 10,83 9,70 12 9,19 18
– Spot 10,67 10,04 6 9,20 16
* International Financial Reporting Standards ** Including discontinued operations # Based on weighted average number of shares of 355 million for all periods ^ Non-IFRS numbers 16
Non-core adjustments
R million 1H14 2H13 1H13
Coal (13) 135 (287)
– NCC partial impairment reversal/(impairment) 149 (292)
– (Loss)/profit on sale of assets (13) (14) 5
Ferrous (5 807)
– Mayoko Project impairment and write-off (5 807)
Base metals 109 1
– Zincor partial impairment reversal 98
– Profit on sale of non-core assets 11 1
Other (34) 953 (15)
– Profit on sale of Zincor 964
– (Loss)/gain on dilution of investment in Tronox (29) 1 (13)
– Loss on sale of other non-core assets (5) (12) (2)
Non-core adjustment impact on net operating profit (5 854) 1 197 (301)
Post-tax equity-accounted (loss)/income (4) 137 44
– SIOC (4) 1 75
– Tronox 139
– Cennergi (31)
– Black Mountain (3)
Tax 556 1 12
Total non-core adjustment impact on attributable earnings (after tax) (5 302) 1 335 (245)
17
Financial overview: core*
R million 1H14 2H13
% Change
1H14 vs
2H13 1H13
% Change
1H14 vs
1H13
Revenue 7 412 7 323 1 6 245 19
Operating expenses (5 638) (5 871) 4 (5 027) (12)
Net operating profit 1 774 1 452 22 1 218 46
Operating margin (%) 24 20 20 20 20
Post-tax equity-accounted income 1 519 1 479 3 1 971 (23)
Headline earnings 2 861 2 638 8 2 489 15
Headline earnings per share (cents) 806 743 8 701 15
Capital expenditure 1 578 2 361 33 2 403 34
Net debt 2 653 3 377 21 3 677 (28)
* Non-IFRS numbers 18
HEPS contribution
Cents 1H14
%
contribution 2H13
%
contribution
(Decrease)/
increase %
contribution
1H14 vs 2H13
1H13
%
contribution
(Decrease)/
increase in %
contribution
1H14 vs 1H13
JSE HEPS 793 100 751 100 712 100
Coal 415 52 346 46 6 225 32 20
Ferrous 447 57 568 76 (19) 576 81 (24)
TiO2 (86) (11) (164) (22) 11 (47) (7) (4)
Other 17 2 1 2 (42) (6) 8
CORE HEPS 806 100 743 100 701 100
Coal 415 52 346 47 5 225 32 20
Ferrous 460 57 567 76 (19) 557 80 (23)
TiO2 (86) (11) (172) (23) 12 (47) (7) (4)
Other 17 2 2 2 (34) (5) 7
19
Coal financial performance: core
R million 1H14 2H13
% Change
1H14 vs
2H13 1H13
% Change
1H14 vs
1H13
Revenue 7 312 7 213 1 6 149 19
– Tied operations 2 094 2 135 (2) 1 782 18
– Commercial operations 5 218 5 078 3 4 367 19
Net operating profit 1 849 1 603 15 1 318 40
– Tied operations 208 5 210 (1)
– Commercial operations 1 641 1 598 3 1 108 48
Operating margin (%) 25 22 14 21 19
Post-tax equity-accounted income* 109 51 114 80 35
Capital expenditure 1 045 1 511 (31) 1 485 (30)
Headline earnings contribution to group 1 473 1 229 20 798 85
HEPS contribution to group (cents) 415 346 20 225 84
Average export price $/tonne realised** 68 78 (13) 82 (17)
Average export price R/tonne realised 728 783 (7) 755 (4)
* Mafube and South Dunes Coal Terminal ** Prior years restated 20
12,0 12,6 12,1 12,7 11,6
6,1 6,9
5,6 6,1
6,0
0,5 0,6
0,5 0,9
1,0
1H12 2H12 1H13 2H13 1H14
Coal production volumes
Thermal coal production (Mt)
13,1 13,5 13,0 13,7 12,7
6,3 7,1
5,8 6,3
6,1
0,5 0,6
0,5 0,9
1,0
1H12 2H12 1H13 2H13 1H14
Commercial Tied Buy-ins
Total coal production (Mt)
1,1
0,9 0,9 1,0
1,1
0,2
0,2 0,2 0,2
0,1
1H12 2H12 1H13 2H13 1H14
Metallurgical coal production (Mt)
Main features
• Production tonnes down 6%, burnt 1Mt
less at Matimba
• Further Medupi delays
• NCC closure
• 43% increase in trains to Grootegeluk
21
10,6 11,1 10,7 11,6
10,2
6,1 6,9
5,6 6,1
6,0
1,5 1,7
1,6 2,3
2,2
1H12 2H12 1H13 2H13 1H14
0,7 0,6 0,6 0,6
0,7
0,2 0,2 0,2 0,2
0,2
0,3 0,3 0,3 0,3
0,5*
1H12 2H12 1H13 2H13 1H14
Coal market and sales volumes
Main features
• Thermal coal sales down 8%
• Domestic metallurgical coal sales stable
• Export coal sales volumes 7% higher
at 2% lower rand prices
• Low margins on buy-ins
Thermal coal sales (Mt)
Metallurgical coal sales (Mt)
11,3 11,7 11,3 12,2
10,9
6,3 7,1
5,8 6,3
6,2
1,8 2,0
1,9 2,6
2,7
1H12 2H12 1H13 2H13 1H14
Domestic Tied Export
Total coal sales (Mt)
* Exported as steam coal blended at Richards Bay Coal Terminal 22
0,3 0,3 0,3
0,8 1,0 0,7 0,7 0,7
0,9 0,7 0,5
0,7 0,6
0,6 0,5
0,4
0,4 0,3
0,3 0,5
1H12 2H12 1H13 2H13 1H14
Other Inyanda Mafube Grootegeluk
0
1
2
3
4
5
6
Actual Rail
Steam coal and market coke prices (USD/t)*
40
60
80
100
120
400
500
600
700
800
900
Coal market and sales trends
* Sources: Wood Mackenzie and CRU
0
100
200
300
400
Chinese market coke HCC RBCT steam
Grootegeluk export rail performance
API4 comparison*
2012 2014FC 2013 2015FC 2016FC
2012 2013 2014FC 2015FC 2016FC
Exports per mine (Mt)
USD/t FOB realised
USD/t FOB forecast
ZAR/t FOB realised
ZAR/t FOB forecast
900
800
600
Num
ber
of
train
s
1H13 average: 2,0 2H13 average: 2,3
1H14 average: 3,3
1H13 2H13 1H14
Average
23
400
700
500
0
20
40
60
1H12 2H12 1H13 2H13 1H14
0
90
180
270
360
450
1 603 88 (130) 159 (109) (61)
200 1 849
Core 2H13 Price Volume Exchange Inflation Cost GMEP NCC Core 1H14
Coal contribution: core
1,2
0,4
1,1
1,6 1,6
0,1
0,2
0,2
0,2
1H12 2H12 1H13 2H13 1H14
Commercial Tied
Net operating profit contribution (Rb)
Net operating profit variance analysis (Rm)
HEPS contribution to group
cents 250 142 225 346 415 % 24 57 32 47 52
Main features
• 15% increase in NOP
• Shortfall income of R888 million
• R159 million positive impact of ZAR/USD
exchange rate
• Inflationary cost pressures prevail: mainly
electricity and diesel
99
60
40
20
0
24
* Based on November 2013 off-take agreement (Addendum 8) 25
Coal capital projects: GMEP
Previous guidance: Addendum 8
• Commencement of offtake: 1 February 2014
• 6 Mt to be delivered in 2014
• Shortfall income R1,5 billion
• Capital expenditure: R10,2 billion
Update
• Notification by Eskom of delay: Addendum 9
– Off-take commenced in July 2014
– Tonnes will be lower
– Shortfall income remains unchanged
– Exxaro will be value neutral
– Addendum 9 to be signed in August
• Capital forecast remains at R10,2 billion
• Ramp-up continues
• Project capitalisation ceased at the end of
June 2014
• Grootegeluk now largest coal beneficiation
complex in the world based on a single resource
and single footprint
GMEP capital and production ramp-up*
Cumulative capital Ramp-up
2018
Rm Mt
0
4
8
12
16
0
3
6
9
12
2010 2011 2012 2013 2014 2015 2016 2017
Mt Addendum 8 Addendum 9 Delta
2014 6,2 3,1 3,2
2015 11,2 8,9 2,3
2016 14,1 7,1 7,0
2017 12,4 9,4 3,0
Total 44,0 28,5 15,5
2018 onwards a minimum of 255 MGJ
Ramp-up comparison
Coal capital expenditure
* Based on latest forecast ** Future sustaining capital for major truck and equipment replacement at Grootegeluk
Actual Estimate*
R million 1H13 2H13 1H14 2H14 FY15 FY16
Sustaining 400 508 434 971 2 688 3 153
– Grootegeluk projects 4 44 30 49 254 542
– Leeuwpan 91 177 749
– Plant, buildings, vehicles and equipment** 396 464 404 831 2 257 1 862
Expansion 1 085 1 003 611 783 1 800 4 119
– GMEP 820 832 134 359 72
– Grootegeluk backfill phase 1 237 122 60 84 55
– Grootegeluk backfill phase 2 512
– Thabametsi 7 41 158
– Grootegeluk 854 898
– Belfast 42 65 417 1 970
– Semi-coke 2 17 117 241
– Other 28 49 375 251 244 340
Total coal capital expenditure 1 485 1 511 1 045 1 754 4 488 7 272
TCSA investment USD472 million
26
TCSA transaction
27
• Purchase consideration of USD472 million
• Financed through cash and existing corporate
debt facilities
• Fulfil conditions precedent
• Integrate and align to a fit-for-purpose operating model
• Maximise synergies
• Guarantee to be provided
Indicator Measure 2011 2012 2013
Production
Total ROM production Mt 5,13 7,73 6,59
Total sales tonnes Mt 3,83 4,63 4,5
Revenue
Revenue Rb 2,7 2,8 2,9
Costs and margins
EBIT Rm 581 97 31
EBITDA Rm 778 421 347
EBITDA margin % 27 15 12
Profit/(loss) for the year* Rm 419 69 (55)
Investment drive
Capex Rm 769 756 278
Key historical indicators
* Attributable to owners of parent
1,8
1,0
1,8 1,7
1,4
1H12 2H12 1H13 2H13 1H14
Ferrous contribution: core
SIOC dividend declared (Rb)
SIOC post-tax equity contribution (Rb)
1,9
1,3
2,0 2,1
1,7
1H12 2H12 1H13 2H13 1H14
50
60
70
80
0
200
400
600
800
1 000
1 200
1H12 2H12 1H13 2H13 1H14
Ferrous HEPS contribution
cents 524 378 557 567 460
% 50 151 80 76 57
75
95
115
135
155
62% Fe Platts CFR China (USD/t FOB)*
2012 2014FC 2013 2015FC 2016FC
2012 average: 129 1H14 average: 111
2013 average: 136
1,2 1,2 1,2 1,2 1,3 Dividend
cover
28 * Sources: Wood Mackenzie and CRU
* Mayoko impaired and excluding interest capitalised ** Based on latest forecast
Ferrous capital expenditure
Actual* Estimate**
1H13 2H13 1H14 2H14 FY15 FY16
Total 859 771 464 65 15 9
Mayoko Project impairment
• Full pre-tax historical costs of R5,8 billion
– Acquisition goodwill and mineral
resource of R2,9 billion
– Carrying amount of PPE of R1,2 billion
– Qualifying project costs capitalised since
acquisition of R1,7 billion
– Write-off of financial assets of R47 million
• Deferred tax reversal of R552 million
• Mayoko Project impairment of R5,3 billion
• Approximately R300 million of costs forecast
for 2H14
Capital expenditure (Rm)
29
-45
-30
-15
0
15
30
45
-500
-300
-100
100
300
500
* Purchase price adjustments ** USD25 cents per quarter
Titanium dioxide contribution: core
Main features
• 50% reduction in share of losses to
R304 million
• Dividend declared per quarter remains at
USD25 cents: R271 million for 1H14
• Exxaro’s share of PPA* of R555 million
• Contribution to profit excluding the PPA of
R251 million
• Exxaro’s share of EBITDA of R841 million
HEPS contribution
Tronox dividend declared (Rm)
cents 342 (108) (47) (172) (86) % 32 (43) (34) (23) (11)
105
232
255 271 271
1H12 2H12 1H13 2H13 1H14
1H12 2H12 1H13 2H13 1H14
(100)
(300)
(500)
(15)
(30)
(45)
0
15
20
45
50 50 50 50 50 Fixed
dividend**
Analysis of contribution by Tronox (Rm)
Effective
share
Tronox (remainder)
Tronox
SA
Equity- accounted
(loss)/income (304) (383) 79
Add back PPA 555 390 165
Contribution
excluding PPA 251 7 244
30
Group net operating profit: core 2H13 vs 1H14
* Non-core
R million
(13)
2 649 (135) (1 062)
1 452 90 (147) 166 (111) 185 (61) 1 774 (5 807) 200
(34)
(4 080)
IFRS
2H13 Coal* Other*
Core
2H13 Price Volume Exchange Inflation Cost
GMEP
shortfall NCC
Core
1H14 Coal* Ferrous* Other*
IFRS
1H14
Coal 1 738 (135) 1 603 88 (130) 159 (109) 99 (61) 200 1 849 (13) 1 836
Ferrous (97) (97) 2 (2) (1) (6) (5) (109) (5 807) (5 916)
Other 1 008 (1 062) (54) (15) 8 4 91 34 (34)
Total 2 649 (135) (1 062) 1 452 90 (147) 166 (111) 185 (61) 200 1 774 (13) (5 807) (34) (4 080)
31
Attributable earnings: core
R million
1H14 2H13
% change
1H14 vs
2H13 1H13
% change
1H14 vs
1H13
Net operating profit 1 774 1 452 22 1 218 46
Net financing cost (43) (94) 54 (266) 83
Income from investments 7 10 (30) 2 250
Post-tax equity-accounted income 1 519 1 479 3 1 971 (23)
– SIOC 1 715 2 045 (16) 2 045 (16)
– Tronox Limited (304) (609) 50 (168) (81)
– Mafube 109 51 114 80 35
– Cennergi (47) (34) (38) (38) (24)
– Black Mountain 46 28 64 52 (12)
– South Dunes Coal Terminal (2)
Tax (396) (217) (82) (441) 10
Profit after tax 2 861 2 630 9 2 484 15
Non-controlling interest 8 5
Attributable earnings: owners of parent 2 861 2 638 8 2 489 15
Attributable earnings per share (cents) 806 743 8 701 15
Total dividend per share declared (cents) 260 315 (17) 235 11
32
Net debt
December
2013
Cash
generated
Net
financing
costs
Tax Dividends
paid
Capital
expenditure
Investing
activities
Dividends
received
Other Net debt
June
2014
3 377 (1 555)
136 31
1 126
1 578 20 (2 083)
23 2 653
Net debt variance
R million
33
Capital funding structure
Ratios* Target 1H14 2H13 1H13
Net financing cost cover (times): EBITDA >4 49 20 6
Return on equity: headline earnings (%) 8 8 9
Return on capital employed (%) >20 (7) 13 10
Total debt: market capitalisation exposure (%) 5 6 6
Net debt: equity (%) <40 8 9 12
Facilities available
R million Drawn Undrawn/
Unissued
Term loan and revolving facility 2 600 5 400
DMTN programme 1 000 4 000
Interest bearing borrowings 3 600 9 400
Capitalised transaction costs 2
Total interest bearing borrowings 3 602
Current 197
Non-current 3 405
Net cash and cash equivalents (949)
Net debt 2 653
Maturity profile of debt
Repayment year
2H14-1H15 197
2H15-1H16 324
2H16-1H17 1 406
After 2017 1 675
3 602
* Based on IFRS results 34
Dividend
* Adjusted for non-cash non-core items ** Declared on 20 August 2014
Interim
dividend**
30 June 2014
Interim
dividend
30 June 2013
Final
dividend
31 Dec 2013
Total
dividend
31 Dec 2013
Attributable earnings per share (cents) 806 692 752 1 444
Dividend declared per share (cents) 260 235 315 550
Dividend cover* (times) 3,10 2,94 2,39 2,63
Dividend declared (Rm) 931 841 1 128 1 969
– BEE Holdco 485 438 588 1 026
– Anglo 90 82 109 191
– Public 348 314 422 736
– Mpower 2012 8 7 9 16
35
Outlook
37
Outlook
Macro-economy
• Improved global economic growth with broad investment slowdown
• Economic activity in the United States expected to continue to rebound
• Higher European business and consumer confidence
Domestic economy
• Depressed economic growth
• Tighter monetary policy due to a weak currency and increased inflation
Our business
Coal
• Stable domestic coal demand and prices in the steam coal market
• Export coal prices expected to remain under pressure
• Final coal delivery from the Tshikondeni hard coking coal mine
• Power station coal demand expected to increase
• Strong Semi-coke demand with electricity security at risk
• Strong Transnet Freight Rail performance expected to continue
Ferrous
• Lower contribution from our SIOC investment
• Continued discussions with the government of the Republic of the Congo
Other
• Continued diligent group-wide cost-control
Additional information
Disclaimer
The financial information on which any outlook statements are based have not been reviewed
nor reported on by the external auditors. These forward-looking statements are based on
management’s current beliefs and expectations and are subject to uncertainty and changes in
circumstances. The forward-looking statements involve risks that may affect the group’s
operations, markets, products, services and prices. Exxaro undertakes no obligation to update or
reverse the forward-looking statements, whether as a result of new information or future
developments.
Key events
2014 2013
January
• NCC assets disposal agreement signed
• Mayoko mining convention signed
June
• Mayoko iron ore project impairment
• Dilution of Tronox shareholding from
44,40% to 44,18%
• NCC impairment
• Dilution of Tronox shareholding from
44,65% to 44,42%
July
• Exxaro’s offer to acquire TCSA announced
(subject to terms and conditions)
December
• Partial impairment reversal at:
‒ Zincor
‒ NCC
• Sale of Zincor
• Dilution of Tronox shareholding from
44,42% to 44,40%
39
Group cash flow
R million
1H14 2H13
% change
1H14 vs
2H13 1H13
% change
1H14 vs
1H13
Cash generated from operations 1 555 1 557 602 158
Net financing cost (136) (64) (113) (128) (6)
– Interest paid (170) (97) (75) (165) (3)
– Interest received 34 33 3 37 (8)
Tax paid (31) (41) 24 (117) 74
Dividends paid (1 126) (841) (34) (546) (106)
Net cash from operating activities 262 611 (57) (189)
Capital expenditure (1 578) (2 361) 33 (2 403) 34
Intangible assets (increase)/decrease (10) (178) 94 (23) 57
Decrease in non-current financial assets 51 189 (73) 33 55
Dividend income from investments 2 083 2 023 3 1 218 71
Proceeds from disposal of PPE* 6 11
Proceeds from disposal of subsidiaries 87
Increase in investments in joint ventures (61) (6) (76) 20
Net cash inflow/(outflow) 747 371 101 (1 429) 152
40 * Property, plant and equipment
1,5 0,8
1,6 1,6 0,6 1,0
2,0 2,0
2,0 2,0
2,0
4,0
4,5 5,2 4,4 4,4 5,4
Revolving facility Term loan Undrawn/unissued
DMTN programme
Bonds raised
• R5 billion programme
• R1 billion senior floating rate note issued:
– R480 million repayable in three years
– R520 million repayable in five years
• Five times over-subscribed
Debt facilities
• R5,4 billion undrawn
Subsequent event
• Separate guarantees to be raised for TCSA
acquisition
1H12 2H12 1H13 1H14 2H13
Unsecured floating rate note/bond
41
Capital expenditure: other
R million Estimate*
1H13 2H13 1H14 2H14 FY15 FY16
Sustaining 41 95 69 77 361 104
– Information management 36 68 35 73 247 102
– Research and development 5 6 8 4 14 2
– Buildings, vehicles and equipment 21 26 100
Expansion 1 2
– Other 1 2
Total other capital expenditure 42 97 69 77 361 104
* Based on latest forecast 42
Group depreciation and amortisation: core
R million 1H14 2H13
% change
1H14 vs
2H13 1H13
% change
1H14 vs
1H13
Coal 347 346 319 9
– Tied operations 21 23 (9) 18 17
– Commercial operations 326 323 1 301 8
Ferrous 13 14 (7) 2
– Mayoko 8 8
– FerroAlloys 2 2 1 100
– Other 3 4 (25) 1 200
Other 48 82 (41) 93 (48)
– Information management 38 53 (28) 73 (48)
– Vehicles and equipment 2 4 (50) 4 (50)
– Other 8
Total depreciation and amortisation 408 442 (8) 414 (1)
43
Group EBITDA: core
R million 1H14 2H13
% change
1H14 vs
2H13 1H13
% change
1H14 vs
1H13
Coal 2 198 1 949 (13) 1 637 34
– Tied operations 229 27 228
– Commercial operations 1 969 1 922 2 1 409 40
Ferrous (98) (82) (20) (42) (133)
– Mayoko (14) (18) 22 (1)
– FerroAlloys (96) (33) (191) (25)
– Other 12 (31) 139 (16) 175
Other 83 27 37 124
– Base metals 4 31
– Other 83 23 6
Total EBITDA 2 183 1 894 15 1 632 34
44
(13)
917 287 14 1 218 (45)
181 243 (254) 77 243 1 774 (5 807)
(34)
(4 080)
Group net operating profit: core 1H13 vs 1H14
R million
IFRS
1H13
Coal*
Other* Core
1H13
Price Volume Exchange Inflation Cost GMEP
shortfall
NCC Core
1H14
Coal* Ferrous*
Other*
IFRS
1H14
Coal 1 031 287 1 318 (52) 189 237 (242) 45 243 111 1 849 (13) 1 836
Ferrous (44) (44) 7 4 (76) (109) (5 807) (5 916)
Other (70) 14 (56) (12) 6 (12) 108 34 (34)
Total 917 287 14 1 218 (45) 181 243 (254) 77 243 111 1 774 (13) (5 807) (34) (4 080)
* Non-core
111
45
Titanium dioxide investment: US GAAP* reconciliation to IFRS
1H14 1H13 2013
USDm Rm USDm Rm USDm Rm
US GAAP loss after tax as reported by Tronox (52) (46) (90)
IFRS and PP Aadjustments (16) (26) (106)
– Reversal of amortisation on intangible asset 11 11 23
– PPA step-up adjustments (9) (37) (133)
– Change in fair value of the warrant liability (11) (7) (16)
– Translation differences and other adjustments 2 7 10
– Tax effect of adjustments (9) 10
IFRS loss after tax (68) (72) (196)
– Non-core adjustments** (25)
Core loss after tax (68) (72) (221)
– Remainder of Tronox (85) (165) (360)
– SA operations 17 93 139
Exxaro's share of core loss after tax (28) (304) (18) (168) (78) (780)
– Remainder of Tronox (38) (383) (72) (664) (160) (1 549)
– SA operations 10 79 54 496 82 769
Exxaro’s share of PPA adjustment 52 555 39 363 98 938
Exxaro’s share of core profit after tax (after PPA
adjustment)
24 251 21 195 20 158
– Remainder of Tronox 0,5 7 (56) (514) (187) (851)
– SA operations 23,5 244 77 709 107 1 009
* United States Generally Accepted Accounting Practice **As defined by Exxaro 46
Titanium dioxide investment: core
Tronox: US GAAP (Net loss of USD52m)
Exxaro: IFRS (Exxaro’s share of losses R304m)
1H14 2H13
% Change
1H14 vs
2H13 1H13
% Change
1H14 vs
1H13
Revenue USDm 908 927 (2) 995 (9)
US GAAP net loss USDm (52) (44) (18) (46) (13)
Adjusted net loss USDm (58) (103) 44 (66) 12
Adjusted net loss USD/share (0,51) (0,91) 44 (0,58) 12
EBITDA USDm 172 188 (9) 174 (1)
Tronox results (100%)
US GAAP vs IFRS adjustments USDm Rm PPA related adjustments USDm Rm
Fresh start accounting treatment of
owner generated intangibles
11 123 Additional inventory cost due to
recapitalisation of depreciation
18 196
Pension cost treatment (5) (51) Additional depreciation dependent on
asset life of mine
(55) (583)
Share-based payments accelerated
amortisation
(2) (23) Review of lower of cost or market
29 309
IFRIC 20 stripping costs (0,2) (2)
Warrants fair value (11) (119)
Asset retirement obligation discount
rates
0,2 2
Other (1) (11)
47
Thermal coal: production volumes
'000 tonnes 1H14 1H13 1H12 FY13 FY12
Production 17 561 17 704 18 171 36 553 37 641
– Grootegeluk 7 270 7 544 7 642 15 904 15 489
– Matla 5 189 4 805 5 088 10 133 10 948
– Leeuwpan 2 191 1 744 1 864 3 804 3 844
– NBC 1 227 1 505 1 167 2 668 2 717
– Inyanda 872 968 954 1 992 1 845
– Arnot 812 835 1 053 1 633 2 081
– NCC 303 403 419 717
Buy-ins 1 033 542 460 1 470 1 111
Total thermal production (buy-ins
included) 18 593 18 246 18 631 38 023 38 752
48
Thermal coal: sales volumes
'000 tonnes 1H14 1H13 1H12 FY13 FY12
Sales to Eskom 14 673 14 692 15 125 30 785 31 367
– Grootegeluk 6 389 6 780 6 943 14 513 14 174
– Matla 5 185 4 808 5 083 10 135 10 941
– Leeuwpan 1 088 890 962 1 933 1 922
– NBC 1 199 1 379 1 084 2 571 2 249
– Arnot 812 835 1 053 1 633 2 081
Other domestic sales 1 562 1 585 1 621 3 187 3 363
Exports 2 227 1 625 1 478 3 887 3 199
Total thermal coal sales 18 462 17 902 18 224 37 859 37 929
49
Metallurgical coal: production volumes and sales
'000 tonnes 1H14 1H13 1H12 FY13 FY12
Production 1 238 1 095 1 274 2 251 2 366
– Grootegeluk 1 130 916 1 125 1 908 2 027
– Tshikondeni 108 179 149 343 339
Sales 1 348 1 142 1 209 2 215 2 326
– Domestic 850 866 871 1 643 1 630
– Export 498 276 338 572 696
50
'000 tonnes 1H14 1H13 1H12 FY13 FY12
Production
– Zircon 91 78 37 183 149
– Rutile 33 31 24 70 62
– Synthetic rutile 88 109 12 233 157
– Chloride slag 160 163 137 312 305
– Pig iron (LMPI**) 124 115 66 213 217
Sales
– Zircon 98 145 74 236 92
– Rutile 43 27 32 67 46
– Synthetic rutile 92 112 54 232 113
– Chloride slag 151 159 134 314 334
– Pig iron (LMPI) 113 115 104 220 177
Mineral sands: production volumes and sales*
* 100% of South African and Australian mineral sands operations ** Low manganese pig iron 51
Salient dates
Last day to trade cum dividend Friday 5 September 2014
Shares trade ex-dividend Monday 8 September 2014
Record date Friday 12 September 2014
Payment date Monday 15 September 2014
52
Buy-ins (slides 21, 22 and 48) Inventory bought for re-sale purposes. Discontinued operation (slide 16) A component of an entity that either has been disposed of or is classified as held-for-sale. Economic value generated (slide 12) Gross revenue from the sale of products and services (including value-added tax), income from investments and interest received, net of operating costs. Economic value distributed (slide 12) Distribution of economic value generated, to employees, government, providers of finance, shareholders and communities in which we operate. Net financing cost cover – EBITDA (slides 27, 30, 34 and 44) Net operating profit (before interest, tax, depreciation, amortisation, impairment charges and net deficit/surplus on sale of investments and assets) divided by net financing cost. Net debt to equity ratio (slides 15 and 34) Interest-bearing debt less cash and cash equivalents as a percentage of total equity. Non-core (slides 17, 31, 35, 45 and 46) Items not part of normal operating activities of either the group or equity-accounted investments of the group as defined by management. Operating margin (slides 18 and 20) Net operating profit as a percentage of revenue. Return on equity – headline earnings (slides 13, 16, 18, 20 and 34) Headline earnings as a percentage of average equity attributable to owners of the parent (Exxaro). Return on capital employed (slide 34) Net operating profit plus income from non-equity-accounted investments plus income from investments in associates as a percentage of average capital employed.
Definitions
53
Index
Topic Slide number
Achievements 10
Adjustments (non-core) 17
Attributable earnings 32
Commodities 21-30
Coal 21-27
Ferrous 28-29
Titanium dioxide 30, 46, 47, 51
Cash flow 40
Capital expenditure 26, 29,42
Capital funding structure 34
Definitions 53
Depreciation 43
Dividend 35
DMTN programme 41
EBITDA 44
Economic value add 12
Topic Slide number
Financial overview 18
HEPS contribution 19
Key events 39
Leadership and people 11
Net debt variance 33
Net operating profit 31, 45
Operational and financial excellence 15
Outlook 37
Overview 2
Portfolio improvement 4-9
Production and sales volumes 48-51
Responsibility and accountability 10
Safety and health 3
Salient dates 52
Strategy 2
TCSA 5, 27
54