Exxaro Resources Limited · JSE:EXX
Exxaro Resources — FY2013 Earnings Presentation
49 slides from Exxaro Resources's earnings presentation, February 2014
Slide 1: Annual Results Presentation
ANNUAL RESULTS PRESENTATION For the year ended 31 December 2013
Slide 2: Overview: operational and financial excellence
Overview: operational and financial excellence Zero LTIFR** at 0,19 improvement fatalities of 34% 38,7Mt coal Coal exports production 4,5Mt down 3% up 15% Coal revenue Coal core R13,4b NOP# of R2,9b up 11% up 49% HEPS* Total dividend 1 463 cents of 550 cents per up 4% share up 10% * Headline earning
Slide 3: Exxaro group
Exxaro group COAL FERROUS TiO2** OTHER • Second largest coal • 19,98% in SIOC*, the • 44,4% in Tronox, the • Clean energy: producer in RSA fourth largest supplier in world’s largest fully 50:50 JV with Tata • Tied operations international iron ore integrated producer of Power in Cennergi • Commercia
Slide 4: Strategy
Strategy Resource to market business model • Invest in energy, metals and mineral resources • Develop and operate mines and secure markets for products • Apply own capabilities and relevant partnerships • Grow through acquisitions • Generate sustainable economic returns of 1,5 times WACC* Strategic
Slide 5: Responsibility and accountability
Responsibility and accountability Safety and health Reportable fatalities • Zero fatalities in 2013 • Record 14 months without fatalities • LTIFR of 0,19 3 3 • 6 business units LTI* free 2 • Good progress on safety improvement through audits, training and workshops 1 0 • HIV/AIDS prevalence rate sta
Slide 6: Develop leadership and people
Develop leadership and people Transformation HDSA statistics (%) • Mining Charter targets achieved and exceeded in most categories 60 64 57 55 Training interventions 40 40 • R200 million spent in 2013 32 27 • 36 employees enrolled in post-graduate 23 18 studies 1 1 • 372 employees enrolled in manage
Slide 7: Portfolio improvement: coal
Portfolio improvement: coal Strategy Expected project timeline • Secure supply to Eskom 2014 • Belfast BFS# • Increase domestic supply • GMEP ramp-up continues • Manage mines in closure responsibly • Tshikondeni closure • Increase exports • Thabametsi phase 1 BFS • Increase productivity • Semi-coke
Slide 8: Portfolio improvement: ferrous
Portfolio improvement: ferrous Strategy • Maintain investment in SIOC • Develop Mayoko in a phased approach • Review the alloy business • Apply UHDMS* in beneficiation of lower grade iron ore Developments Mayoko • Resource confirmed − 62% Fe hematite: 170Mt − 67% Fe magnetite: 583Mt • Mining convent
Slide 9: Portfolio improvement: energy
Portfolio improvement: energy Strategy Expected project timeline • Explore and integrate opportunities in Africa’s 2014 • UCG concept study energy markets with a focus on clean energy • CSA with GDF SUEZ • Manage emerging carbon related risks • Cennergi to start constructing 2 wind projects Developm
Slide 10: Portfolio improvement: other
Portfolio improvement: other Titanium dioxide Expected timeline • Consideration of long-term fundamentals of the industry during standstill period 2014 • Tronox investment assessment • Tronox three-year standstill period expires in June 2015 2015 • Tronox investment decision • Tronox three-year stan
Slide 11: Achievements and recognition
Achievements and recognition Sustainability • 2013 Frost and Sullivan Visionary Innovation Award Leadership and people • Top Employer Institute: first in mining industry Top Employer South Africa 2013/14 survey • Corporate Secretaries International Association: Group Company Secretary elected presid
Slide 12: Financial and operational performance
Financial and operational performance
Slide 13: Operational and financial excellence
Operational and financial excellence Owner-controlled operations Revenue (Rb) Coal 8,6 • Revenue of R13,4 billion, up 11% 6,5 4,0 5,2 0,2 • Core NOP at R2,9 billion, up 49% 12,4 13,4 • Stable coal production at 38,7Mt 9,8 10,5 12,1 • Impact of 19 days of industrial action • Lower US$ prices on expor
Slide 14: Financial overview: IFRS
Financial overview*: IFRS** R million FY13 FY12 % change Revenue 13 568 16 122 (16) Operating expenses 10 966 12 602 13 Profit on sale of subsidiaries/assets 964 4 037 (76) Net operating profit 3 566 7 557 (53) Operating margin (%) 26 47 (45) Post-tax equity-accounted income 3 631 3 602 1 Attributab
Slide 15: Non-core adjustments
Non-core adjustments R million FY13 FY12 Coal (152) 149 – NCC impairment 1H13 (292) – NCC partial impairment reversal 2H13 149 – (Loss)/profit on sale of assets (9) 149 TiO2 99 – Mineral sands 99 Base metals 110 568 – Rosh Pinah sale transaction and other 570 – Zincor partial impairment reversal 2H1
Slide 16: Financial overview: core
Financial overview: core* R million FY13 FY12 % change Revenue 13 568 16 122 (16) Operating expenses 10 898 13 178 17 Net operating profit 2 670 2 944 (9) Operating margin (%) 20 18 11 Post-tax equity-accounted income 3 450 3 128 10 Headline earnings 5 127 4 624 11 Headline earnings per share (cents
Slide 17: HEPS contribution
HEPS contribution Increase/(decrease) in Cents* FY13 % FY12 % % contribution JSE HEPS 1 463 100 1 401 100 − Coal 571 39 392 28 11 − Ferrous 1 144 78 902 64 14 − TiO2 (211) (14) 177 13 (27) − Other (41) (3) (70) (5) 2 CORE HEPS 1 444 100 1 306 100 − Coal 571 39 392 30 9 − Ferrous 1 124 78 902 69 9 −
Slide 18: Coal financial performance: core
Coal financial performance: core R million FY13 FY12 % change Revenue 13 362 12 064 11 – Tied operations 3 917 3 449 14 – Commercial operations 9 445 8 615 10 Net operating profit 2 921 1 956 49 – Tied operations 215 285 (25) – Commercial operations 2 706 1 671 62 Operating margin (%) 22 16 38 Capit
Slide 19: Coal production volumes
Coal production volumes* Main features Thermal coal production (Mt) • Production down 3% • 19 days of unprotected industrial action 0,7 1,3 1,6 1,1 1,5 16,5 16,5 • 50% of lost production recovered 12,4 13,0 11,7 25,2 25,5 25,3 24,6 24,8 2009 2010 2011 2012 2013 Total coal production (Mt) Metallurgic
Slide 20: Coal market and sales volumes
Coal market and sales volumes* Main features Thermal coal sales (Mt) • Thermal: stable volumes at higher prices • Metallurgical: stable volumes at lower prices 3,9 3,8 • Exports: 15% higher volumes at 16,4 16,5 4,5 3,2 3,9 2% higher Rand prices 12,4 13,0 11,8 22,1 22,4 22,3 21,7 22,2 2009 2010 2011
Slide 21: Coal market and sales trends
Coal market and sales trends Steam coal and market coke prices (US$/t)* GG export rail performance 6 400 300 4 200 2 100 0 0 2012 2013 2014FC 2015FC 2016FC Jan 2013 Jan 2014 RBCT steam HCC Chinese market coke Actual rail Trend API4 comparison Exports GG vs other mines (Mt) 900 900 120 0,5 0,8 0,6 0,
Slide 22: Coal contribution: core
Coal contribution: core Main features Net operating profit variance analysis (Rm) • 49% increase in NOP • Shortfall income of R1,6 billion 1 242 (202) 2 921 • Positive impact of weaker Rand 419 (484) 1 956 (271) 261 • Cost pressures prevail Core FY12 Price Volume Exchange Inflation GMEP Cost Core FY
Slide 23: Coal capital projects
Coal capital projects GMEP GMEP capital and production ramp-up* • 97% complete at 31 December 2013 Rm Mt • Project expenditure to date is R9,3 billion 12 16 • Total capital expenditure forecast at R10,2 billion 9 12 • Future delays on Medupi off-take to be determined 6 8 GG backfill 3 4 Phase 1 • Ca
Slide 24: Mayoko project: capital expenditure
Mayoko project: capital expenditure Previously reported • 730Mt resource confirmed • Phase 1: 2Mtpa • Phase 2: 10Mtpa • Project capex forecast: US$340 million for 2Mtpa • Contractual exposure limit 2013 update • 753Mt resource confirmed • Capex to date: – 2013: US$129 million – Since acquisition: US
Slide 25: Ferrous contribution: core
Ferrous contribution: core Ferrous HEPS contribution SIOC post-tax equity contribution (Rb) 80 1 200 4,5 1 000 4,1 70 3,6 800 3,2 600 400 60 1,8 200 0 50 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 cents 505 1 045 1 279 902 1 124 % 70 70 63 69 78 SIOC dividend declared (Rb) 62% Fe Platts CFR C
Slide 26: Titanium dioxide investment: core
Titanium dioxide investment: core Tronox results (100%) HEPS contribution % 500 30 FY13 FY12* Change 300 15 Revenue (US$m) 1 922 1 832 (5) 100 0 US GAAP: net (loss)/profit (US$m) (90) 1 133 (108) (100) -100 (15) -15 Adjusted net (loss)/profit (US$m) (169) 202 (184) (300) -300 (30) -30 Adjusted net (
Slide 27: Other investments
Other investments Divestment of Zincor • Closure in 2H11 and impairment of R516 million • Sale to Lebonix* for R183 million in 2H13 • Partial impairment reversal of R98 million • Rehabilitation liability of R914 million sold • Accounting profit on sale of R964 million Black Mountain • 26% investment
Slide 28: Group net operating profit: core FY13 vs FY12
Group net operating profit: core FY13 vs FY12 R million 7 557 (149) (99) (568) (3 797) 1 242 107 (1 631) 501 (524) 938 3 566 2 944 (257) 288 2 670 (152) 110 IFRS Coal* Mineral Base Core GMEP Discon- Core Base IFRS Other* Price Volume Exchange Inflation Cost Coal* Other* FY12 Sands* metals* FY12 shor
Slide 29: Attributable earnings: core
Attributable earnings: core R million FY13 FY12 % change Net operating profit 2 670 2 944 (9) Net financing cost (360) (353) (2) Income from investments 12 4 200 Post-tax equity-income 3 450 3 128 10 – SIOC 4 094 3 198 28 – Tronox Limited (780) (250) (212) – Mafube 130 144 (9) – Cennergi (72) (65) (
Slide 30: Net debt variance
Net debt variance R million 4 764 (42) (3 241) 119 3 377 2 199 (2 159) 1 387 192 158 Net debt Cash Net Tax Dividends Capital Investing Dividends Other Net debt Dec 2012 retained financing paid expenditure activities received Dec 2013 costs 30
Slide 31: Capital funding structure
Capital funding structure Ratios* FY13 FY12 Net financing cost cover (times): EBITDA 10 11 Return on equity: attributable income (%) 20 37 Return on capital employed (%) 23 45 R million Facilities available Maturity profile of debt Drawn Undrawn Repayment year Long-term interest-bearing 2014 31 3 60
Slide 32: Dividend
Dividend Total Final Interim dividend dividend dividend 31 Dec 2013 31 Dec 2013 30 June 2013 Attributable earnings per share* (cents) 1 444 752 692 Dividend declared per share (cents) 550 315 235 Dividend cover* (times) 2,63 2,39 2,94 Dividend declared (Rm) 1 969 1 128 841 – BEE Holdco 1 026 588 438
Slide 33: Outlook
Outlook
Slide 34: Outlook
Outlook Overall • Continue improvement of safety performance • Cost management and savings to be embedded • Uncertainty ahead – Global growth outlook fragile – Positive but low local growth prospects – Inflationary pressure – Socio Socio-economic economic challenges will prevail – Infrastructure cap
Slide 35: Additional information: Disclaimer
Additional information Disclaimer The financial information on which any outlook statements are based have not been reviewed or reported on. These forward-looking statements are based on management’s current beliefs and expectations and are subject to uncertainty and changes in circumstances. The fo
Slide 36: Key events
Key events 2013 2012 Restatement of prior year and revised financial results due to the early adoption of January new accounting standards (IFRS* 10, 11 and 12 as well as IAS 27 and 28) African Iron acquisition – consolidated February subsidiary March Cennergi JV – equity-accounted joint venture May
Slide 37: Group cash flow
Group cash flow R million FY13 FY12 Cash retained from operations 2 159 3 969 Net financing cost (192) (137) – Interest paid (262) (345) – Interest received 70 208 Tax (158) (277) Dividends paid (1 387) (3 012) Net cash from operating activities 422 543 Fixed assets (4 764) (5 333) Intangible assets
Slide 38: Capital expenditure
Capital expenditure Estimate* Actual R million FY16 FY15 FY14 FY13 FY12 Sustaining and environmental 2 564 2 039 1 825 1 257 1 571 – Coal 2 493 1 920 1 668 1 107 1 009 – Ferrous 4 33 23 14 11 – Other 67 86 134 136 551 Expansion 2 918 1 854 1 553 3 507 3 762 – Coal (excl GMEP) 2 918 1 854 585 77 224
Slide 39: Group depreciation and amortisation: core
Group depreciation and amortisation: core R million FY13 FY12 Coal 665 611 – Tied operations 41 39 – Commercial operations 624 572 Ferrous 16 6 – Mayoko 8 4 – FerroAlloys 3 2 – Other 5 Other 175 394 Total 856 1 011 39
Slide 40: Group EBITDA: core
Group EBITDA: core R million FY13 FY12 Coal 3 586 2 567 – Tied operations 255 324 – Commercial operations 3 331 2 243 Ferrous (124) (26) – Mayoko (19) (2) – FerroAlloys (58) (23) – Other (47) (1) Other 64 1 414 – Mineral sands 2 109 – Base metals 35 (118) – Other 29 (577) Total EBITDA 3 526 3 955 40
Slide 41: Group net operating profit: 1H13 vs 2H13
Group net operating profit: 1H13 vs 2H13 R million 953 2 649 78 305 (239) 135 56 (191) 386 48 1 483 287 (32) 15 1 187 (69) 917 IFRS Coal* Base Other* Core Price Volume Exchange Inflation GMEP Cost Discon- Core Coal* Base Other* IFRS 1H13 metals* 1H13 shortfall tinued# 2H13 metals* 2H13 Coal 1 031 28
Slide 42: Titanium dioxide investment: US GAAP reconciliation to IFRS
Titanium dioxide investment: US GAAP* reconciliation to IFRS FY13 FY12# US$m Rm US$m Rm US GAAP: (loss) after tax as published by Tronox (90) (43) IFRS adjustements (106) (22) – Reversal of amortisation on intangible asset 23 14 – PPA-Step-up adjustments (133) (56) – Change in fair value of the warr
Slide 43: Thermal: production volumes
Thermal: production volumes '000 tonnes FY13 FY12 FY11 Production 36 553 37 641 37 731 – Grootegeluk 15 904 15 489 16 369 – Matla 10 133 10 948 10 150 – Leeuwpan 3 804 3 844 4 029 – NBC 2 668 2 717 2 346 – Inyanda 1 992 1 845 1 918 – Arnot 1 633 2 081 2 291 – NCC 419 717 628 Buy-ins 1 470 1 111 1 63
Slide 44: Thermal: sales volumes
Thermal: sales volumes '000 tonnes FY13 FY12 FY11 Sales to Eskom 30 785 31 367 31 681 – Grootegeluk 14 513 14 174 14 668 – Matla 10 135 10 941 10 152 – Leeuwpan 1 933 1 922 2 311 – NBC 2 571 2 249 2 209 – Arnot 1 633 2 081 2 291 – NCC* 50 Other domestic 3 187 3 363 3 088 Exports 3 887 3 199 4 461 To
Slide 45: Metallurgical coal: production volumes and sales
Metallurgical coal: production volumes and sales '000 tonnes FY13 FY12 FY11 Production 2 251 2 366 2 161 – Grootegeluk 1 908 2 027 1 862 – Tshikondeni 343 339 299 Sales 2 215 2 326 2 190 – Domestic 1 643 1 630 1 753 – Export 572 696 437 45
Slide 46: Mineral sands: production volumes and sales
Mineral sands: production volumes and sales* '000 tonnes FY13 FY12 FY11 Production – Zircon 183 149 195 – Rutile 70 62 67 – Synthetic rutile 233 157 110 – Chloride slag 312 305 281 – Pig iron (LMPI) 213 217 160 Sales – Zircon 236 92 173 – Rutile 67 46 66 – Synthetic rutile 232 113 37 – Chloride slag
Slide 47: Salient dates
Salient dates Last day to trade cum dividend Friday 04 April 2014 Shares trade ex-dividend Monday 07 April 2014 Record date Friday 11 April 2014 Payment date Monday 14 April 2014 47
Slide 48: Definitions
Definitions Buy-ins Inventory bought in for re-sale purposes. Net financing cost cover – EBITDA 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 rati
Slide 49: Index
Index Topic Slide number Topic Slide number Achievements and recognition 11 HEPS contribution 17 Adjustments (non-core) 15 Key events 36 Attributable earnings 29 Leadership and people 6 Commodities Net debt variance 30 Coal 18-23 Net operating profit 28,41 Ferrous 24-25 Operational and financial exc