Exxaro Resources Limited · JSE:EXX
Exxaro Resources — H1 2010 Earnings Presentation
50 slides from Exxaro Resources's earnings presentation, Aug 11, 2010
Slide 1: Reviewed group interim financial results for the six months ended 30 June 2010
Reviewed group interim financial results presentation for the six-month period ended 30 June 2010
Slide 2: Disclaimer
Disclaimer Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties. Changing information or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited (the “Company”) to differ materially from those expressed or implied in the
Slide 3: Overview
Overview Sipho Nkosi Chief Executive Officer
Slide 4: So far, 2010 has been an excellent year
Overview LTIFR down from 0,30 to 0,26 10% increase in revenue 43% increase in net operating profit So far, 2010 has been an 85% increase in equity income excellent year in 69% increase in headline earnings Exxaro’s Significant decrease in net debt young life! Disciplined cost control 200 cents inter
Slide 5: Safety
Safety Reportable fatalities LTIFR* 0,45 2 0,39 0,33 3 0,30 0,26 Target: 0,21 2 1 2008 2009 2010 2008 2009 2010 1H 2H • Regrettably, one fatality was reported at Tshikondeni • LTIFR has decreased to 0,26 • 28 LTIs were recorded – 2 less than in the corresponding period in 2009 • 6 business units wer
Slide 6: Financial and operational overview
Financial and operational overview Wim de Klerk Financial Director
Slide 7: Financial highlights
Financial highlights Revenue (Rm) Healthy financial metrics 8 061 7 898 7 852 7 111 – 10% increase in revenue 5 782 – 43% increase in net operating profit – 73% increase in attributable earnings Disciplined cost control 1H08 2H08 1H09 2H09 1H10 – Decrease in cost in real terms Strong cash flow and b
Slide 8: Financial overview
Financial overview % Change % Change R million 1H10 1H09 2H09* 1H10 vs 1H09 1H10 vs 2H09 Revenue 7 852 7 111 10 7 898 (1) Operating expenses (6 489) (6 158) (5) (7 112) 9 Net operating profit 1 363 953 43 786 73 Operating margin (%) 17 13 31 10 70 Post-tax equity accounted income 1 635 885 85 1 013
Slide 9: Revenue
Revenue % Change % Change R million 1H10 1H09 2H09 1H10 vs 1H09 1H10 vs 2H09 Coal 4 730 4 797 (1) 4 934 (4) – Tied operations 1 320 1 276 3 1 405 (6) – Commercial operations 3 410 3 521 (3) 3 529 (3) Mineral Sands 2 130 1 550 37 1 958 9 – KZN Sands 535 273 96 432 24 – Namakwa Sands 893 644 39 690 29
Slide 10: Coal production
Coal production • Total production up 2% to 23Mt • 2% decrease in power station production mainly at tied mines due to production difficulties • 15% increase in steam coal production due to Mafube (included for the full 1H10) and Grootegeluk • 29% increase in coking coal production due to higher dom
Slide 11: Coal markets and sales
Coal markets and sales Steam coal and market coke prices (USD/t-FOB) 1H10 180 800 • Eskom demand stable 600 • Domestic demand 21% higher at lower prices 120 • Exports lower due to logistics - offset by higher 400 prices 60 200 Outlook • Export prices expected to remain at similar levels - dependent
Slide 12: Mineral sands production
Mineral sands production Slag tapped • Lower production affected by shaft failure of overhead crane at KZN Sands • Furnace 2 at Namakwa Sands back on line during May 2010 Zircon • Stable production in line with head grade Pigment • Stable synthetic rutile and pigment production Slag tapped (kt) Zirc
Slide 13: Mineral sands markets and sales
Mineral sands markets and sales 1H10 Prices (USD/t – FOB)* • Global economic recovery visible 1 000 2 200 • Increase in demand for zircon and pigment 900 2 150 • Zircon and pigment prices increased Outlook 800 2 100 • Demand to improve further 700 2 050 • Upward zircon, TiO2 and pigment price trends
Slide 14: Base metals production
Base metals production Rosh Pinah • Increased zinc concentrate production as result of higher grades • Low lead concentrate production due to high in situ fluctuations • Logistical chain to Zincor remains a challenge Zincor • Stable production • Production negatively affected by acid plant downtime
Slide 15: Base metals markets and sales
Base metals markets and sales Zinc metal price 3 000 30 000 1H10 • Prices decreased 33% since USD2 634 peak in January 2010 2 000 20 000 • Oversupply of metal • Tight concentrate market 1 000 10 000 Outlook • Lower zinc prices and high metal stock levels • Average zinc price for 2010 forecast at low
Slide 16: Financial overview
Financial overview % Change % Change R million 1H10 1H09 2H09* 1H10 vs 1H09 1H10 vs 2H09 Revenue 7 852 7 111 10 7 898 (1) Operating expenses (6 489) (6 158) (5) (7 112) 9 Net operating profit 1 363 953 43 786 73 Operating margin (%) 17 13 31 10 70 Post-tax equity accounted income 1 635 885 85 1 013
Slide 17: Net operating profit
Net operating profit % Change % Change R million 1H10 1H09 2H09* 1H10 vs 1H09 1H10 vs 2H09 Coal 1 199 1 032 16 873 37 – Tied operations 97 71 37 4 – Commercial operations 1 102 961 15 869 27 Mineral Sands 148 (67) 321 (57) 360 – KZN Sands 61 (110) 155 98 (38) – Namakwa Sands 33 24 38 (134) 125 – Aus
Slide 18: Net operating profit: 1H09 vs 1H10
Net operating profit: 1H09 vs 1H10 R million 1 699 (348) (378) (120) 1 363 953 (443) 1H09 Price Volume Exchange Inflation Cost 1H10 Coal 1 032 (541) 1 145 (126) (204) (107) 1 199 Mineral Sands (67) 14 547 (277) (108) 39 148 Base Metals 9 82 1 25 (48) (57) 12 Other (21) 2 6 30 (18) 5 4 Total 953 (443
Slide 19: Net operating profit: 2H09 vs 1H10
Net operating profit: 2H09 vs 1H10* R million 308 1 363 38 8 (184) 407 786 2H09 Price Volume Exchange Inflation Cost 1H10 Coal 873 314 (8) (79) (74) 173 1 199 Mineral Sands (57) 57 104 88 (84) 40 148 Base Metals (17) 32 (53) 11 (20) 59 12 Other (13) 4 (5) (12) (6) 36 4 Total 786 407 38 8 (184) 308 1
Slide 20: Financial overview
Financial overview % Change % Change R million 1H10 1H09 2H09* 1H10 vs 1H09 1H10 vs 2H09 Revenue 7 852 7 111 10 7 898 (1) Operating expenses (6 489) (6 158) (5) (7 112) 9 Net operating profit 1 363 953 43 786 73 Operating margin (%) 17 13 31 10 70 Post-tax equity accounted income 1 635 885 85 1 013
Slide 21: Attributable earnings
Attributable earnings % Change % Change R million 1H10 1H09 2H09* 1H10 vs 1H09 1H10 vs 2H09 Net operating profit 1 363 953 43 786 73 Net financing cost (239) (242) 1 (173) (38) Income from investments 1 1 1 Post-tax equity income 1 635 885 85 1 013 61 - Sishen Iron Ore Company (SIOC) 1 624 868 87 89
Slide 22: Dividend
Dividend • Interim cash dividend of 200 cents per share declared • Dividend covered 3,5 times by attributable earnings Interim Interim Total dividend dividend dividend 30 June 2010 30 June 2009 31 December 2009* Attributable earnings per share (cent) 696 403 712 Dividend declared (cent per share) 20
Slide 23: Financial overview
Financial overview % Change % Change R million 1H10 1H09 2H09* 1H10 vs 1H09 1H10 vs 2H09 Revenue 7 852 7 111 10 7 898 (1) Operating expenses (6 489) (6 158) (5) (7 112) 9 Net operating profit 1 363 953 43 786 73 Operating margin (%) 17 13 31 10 70 Post-tax equity accounted income 1 635 885 85 1 013
Slide 24: Net debt variance: 1H10
Net debt variance: 1H10 R million 3 731 (1 930) 1 042 (37) (638) 1 2 874 352 189 164 Opening Cash Net Tax Dividends Capex Investing Dividend Other Closing balance retained financing activities received balance costs
Slide 25: Capital expenditure
Capital expenditure Estimate Actual R million FY11 2H10 1H10 2H09 1H09 Sustaining and environmental 2 180 916 361 653 339 – Coal 1 383 450 143 312 120 – Mineral Sands 447 278 135 204 136 – Base Metals 179 94 56 97 30 – Other 171 94 27 40 53 Expansion 5 646 1 123 681 643 347 – Coal 543 237 98 106 110
Slide 26: Capital structure
Capital structure Ratios: 1H10 2H09 1H09 Net financing cost cover (times) - EBITDA 8 8 6 Return on equity - attributable income (%) 17 (3) 10 Return on capital employed (%) 19 2 13 Maturity profile of debt R million Drawn Undrawn Repayment year Rm Long term 4 717 4 920 2010 507 - Corporate 4 034 355
Slide 27: Strategy, projects and outlook
Strategy, projects and outlook Sipho Nkosi Chief Executive Officer
Slide 28: Strategic intent and business focus
Strategic intent and business focus • Safety • Exxaro will remain a diversified resources group • Coal – Remain a major reliable supplier to Eskom – Consider mega-mine opportunities to grow the coal business – Increase export allocation and de-bottleneck logistical chain – Develop downstream value-a
Slide 29: Major projects
Major projects • Pre-feasibility studies to continue in 2010: - Thabametsi, Mafutha, Belfast and market coke - Moranbah South (Australia) - Clean energy projects • Feasibility studies - Char phase 2 - Fairbreeze • Project Siyaya • Conversion of mineral rights • Construction: - Medupi expansion proje
Slide 30: Medupi
Medupi • Project moved out by 6 months due to Medupi capital Eskom’s review of the coal supply (Rbn) (Mt) agreement 10,0 16 9,3 9,5 • Coal supply agreement secured 8,8 8,0 12 • Exxaro achieved financial close on a 6,0 6,2 R4,5bn funding facility in 2Q10 8 4,0 • First coal supply in 2Q12 4 • Full pro
Slide 31: Outlook
Outlook • Iron ore – Significant price increase forecast from 1 April 2010 – SIOC settlement with ArcelorMittal South Africa • Coal – High international steam coal price expected to continue – Increased export volumes due to commissioning of RBCT Phase 5 – Eskom volumes at similar levels – Higher pr
Slide 32: Additional slides
Additional slides
Slide 33: Production costs: 1H09 vs 1H10
Production costs: 1H09 vs 1H10 R million Exchange General Railage & Stock 1H09 Materials Labour differences charges transport movement Inflation 1H10 (118) 110 (50) 435 (470) (6 158) 140 (378) (6 489)
Slide 34: Net operating profit margins
Net operating profit margins % 1H10 1H09 % Change 2H09* Coal 25 22 14 18 – Tied operations 7 6 17 – Commercial operations 32 27 19 25 Mineral Sands 7 (4) 275 (3) – KZN Sands 11 (40) 128 23 – Namakwa Sands 4 4 (19) – Australia Sands 8 3 167 (3) Base Metals 1 1 (2) – Rosh Pinah 17 17 19 – Zincor (2) 1
Slide 35: EBITDA
EBITDA R million 1H10 1H09 2H09 Coal 1 437 1 264 1 156 – Tied operations 117 92 24 – Commercial operations 1 320 1 172 1 132 Mineral Sands 430 181 250 – KZN Sands 183 (27) 187 – Namakwa Sands 108 110 (5) – Australia Sands 139 98 68 Base Metals 68 66 41 – Rosh Pinah 77 67 99 – Zincor 9 28 (21) – Othe
Slide 36: Depreciation and amortisation per segment
Depreciation and amortisation per segment R million 1H10 1H09 2H09 Coal 292 230 279 – Tied operations 20 21 20 – Commercial operations 272 209 259 Mineral Sands 282 230 250 – KZN Sands 122 82 89 – Namakwa Sands 76 71 76 – Australia Sands 84 77 85 Base Metals 56 55 53 – Rosh Pinah 29 30 25 – Zincor 2
Slide 37: Headline earnings
Headline earnings R million 1H10 1H09 2H09 Attributable earnings 2 408 1 390 (367) Adjustments: – Impairment of property, plant and equipment (PPE) 5 1 435 – Gains or losses on disposal of PPE (53) 18 70 – Share of associate’s gains on disposal of PPE (4) (4) – Tax and non-controlling interest effec
Slide 38: Cash flow
Cash flow R million 1H10 1H09 2H09 Cash retained from operations 1 930 832 1 285 Net financing cost (164) (192) (189) Tax (189) (488) (404) Dividends (352) (700) (350) Net cash from operating activities 1 225 (548) 342 Fixed assets (1 042) (686) (1 296) Investments acquired (59) (50) 42 Acquisition
Slide 39: Net financing cost
Net financing cost R million 1H10 1H09 2H09 Interest expense and loan cost 184 245 215 Finance leases 33 33 33 Interest income (53) (86) (59) Net interest expense 164 192 189 Interest adjustment on non-current provisions 75 50 (16) Net financing cost as per income statement 239 242 173
Slide 40: MPower trust
MPower trust As at 30 June 2010 Number of beneficiaries 9 422 Share of total dividends paid or declared to date (R'000) 49 644 Paid on: 3 186 – 10 September 2007 – 17 March 2008 5 310 – 22 September 2008 9 292 – 30 March 2009 10 619 – 28 September 2009 5 309 – 19 April 2010 5 309 Declared on 11 Augu
Slide 41: Physical information: power station coal
Physical information: power station coal '000 tonnes 1H10 1H09 1H08 FY09 FY08 Production 18 269 18 583 18 118 36 562 36 700 - Grootegeluk 7 413 7 686 7 435 15 324 14 581 - Leeuwpan 745 633 584 1 247 1 188 - Matla 6 225 6 044 6 846 11 273 13 230 - Arnot 2 140 2 660 2 116 5 213 4 865 - NCC 45 115 - NB
Slide 42: Physical information: steam coal
Physical information: steam coal '000 tonnes 1H10 1H09 1H08 FY09 FY08 Production 3 518 3 061 2 427 6 638 5 574 - Grootegeluk 707 568 762 1 207 1 387 - Leeuwpan 627 524 778 1 259 1 801 - NCC 384 456 539 822 984 - NBC 301 430 223 691 561 - Inyanda (1) 909 977 125 1 843 841 - Mafube (2) 590 106 816 Buy
Slide 43: Physical information: coking coal and char
Physical information: coking coal '000 tonnes 1H10 1H09 1H08 FY09 FY08 Production 1 187 922 1 370 2 020 2 560 - Grootegeluk 1 063 793 1 199 1 752 2 233 - Tshikondeni 124 129 171 268 327 Sales 994 600 1 405 1 500 2 524 - ArcelorMittal 932 448 1 131 1 232 2 116 - Export 129 228 211 316 - Other 62 23 4
Slide 44: Mineral Sands: production
Mineral Sands: production(1) (2) '000 tonnes 1H10 1H09 1H08 FY09 FY08 - Ilmenite 367 424 377 819 718 - Zircon 94 97 94 185 193 - Rutile 28 33 26 62 59 - Synthetic rutile 51 54 56 109 113 - Pig iron 81 95 81 181 153 - Scrap iron 8 7 10 15 22 - Slag tapped 141 171 149 331 278 - Chloride slag 84 104 12
Slide 45: Mineral Sands: sales
Minerals Sands: sales (1) (2) '000 tonnes 1H10 1H09 1H08 FY09 FY08 - Ilmenite (external sales) 20 40 - Zircon 124 47 100 146 206 - Rutile 35 19 26 51 55 - Synthetic rutile 23 24 27 50 62 - Pig iron 107 64 97 138 146 - Scrap iron 1 4 6 6 8 - Chloride slag 98 67 126 144 246 - Sulphate slag 7 14 11 44
Slide 46: Comparable physical information: Base Metals
Comparable physical information: Base Metals '000 tonnes 1H10 1H09 1H08 FY09 FY08 Zinc concentrate (Rosh Pinah) - Production 52 47 47 94 94 - Sales: inter company 49 47 45 96 86 Lead concentrate (Rosh Pinah) - Production 9 12 12 20 20 - Sales: export 7 6 7 19 22 Zinc metal (Zincor) - Production 43 4
Slide 47: Base metal hedging: July 2010 - December 2011
Base metal hedging: 01 July 2010 - 31 December 2011 Tonnes Average USD Average ZAR Year hedged price price Zinc 2010 13 200 2 207 20 061 2011 26 700 2 061 19 976 39 900 2 134 20 019 Lead 2010 2 575 2 211 20 528 2011 5 500 1 967 19 065 8 075 2 089 19 797
Slide 48: Project details
Project details Estimated Status Estimated Ownership Scope capex start-up Committed Coal Medupi 14,6Mtpa R9,5bn Construction 2Q12 Energy Co-generation Namakwa Sands 14MW TBD Feasibility 2012 Sands Fairbreeze mine 300ktpa TBD Feasibility 2013 Sands Dry mine replacement (Australia 100%) 100-200ktpa TB
Slide 49: Salient dates
Salient dates Last day to trade cum dividend : Thursday 23 September 2010 Shares trade ex-dividend : Monday 27 September 2010 Record date : Friday 1 October 2010 Payment date : Monday 4 October 2010
Slide 50: Index
Index Item Page Item Page Business focus 26 Headline earnings 35 Commodities Mpower trust 38 – Base Metals Net debt variance 22 Hedging 45 Net financing cost 37 Production 12, 44 Net operating profit Markets and sales 13, 44 – Per commodity 15 – Coal – 1H09 vs 1H10 16 Production 8, 39- 41 – 2H09 vs