Exxaro Resources Limited · JSE:EXX
Exxaro Resources — H1 2009 Earnings Presentation
50 slides from Exxaro Resources's earnings presentation, Aug 20, 2009
Slide 1: Reviewed Group Interim Results and Interim Dividend Declaration
REVIEWED GROUP INTERIM RESULTS AND INTERIM DIVIDEND DECLARATION Six-month period ended 30 June 2009 Presentation Sipho Nkosi : Chief Executive Officer Wim de Klerk : Finance Director 20 August 2009
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: Programme
Programme • Welcome and overview Sipho Nkosi • Financial and operational review Wim de Klerk • Business focus and outlook Sipho Nkosi • Questions and answers Team 3
Slide 4: Overview
OVERVIEW Sipho Nkosi - Chief Executive Officer
Slide 5: Overview
Overview • Solid performance on all fronts in the midst of an unprecedented economic downturn • Safety – No reportable fatalities – 33% decrease in lost time injury frequency rate • Operations – Stable production from all commodities – Record steam coal exports • Financials – 18% increase in net ope
Slide 6: Safety
Safety Reportable fatalities LTIFR* 3 0,45 0,39 2 2 0,36 0,33 0,30 Target: 0.21 1 Zero 1H07 2H07 1H08 2H08 1H09 1H07 2H07 1H08 2H08 1H09 First CEO safety summit in February identified various focus areas resulting in positive outcomes: • No reportable fatalities in 1H09 • 33% decrease in LTIFR when
Slide 7: Financial and Operational Review
FINANCIAL AND OPERATIONAL REVIEW Wim de Klerk - Finance Director
Slide 8: Financial highlights
Financial highlights • 23% increase in revenue from R5,8bn to R7,1bn • 18% increase in net operating profit from R806m to R953m • 8% increase in headline earnings per share from 377c to 406c • Interim dividend declaration of 100 cents per share Revenue (Rm) Net operating profit (Rm) 1 661 8 061 7 11
Slide 9: Financial overview
Financial overview R million 1H09 1H08 % Change 2H08 Revenue 7 111 5 782 23 8 061 Operating expenses (6 158) (4 976) (24) (6 400) Net operating profit 953 806 18 1 661 Operating margin (%) 13 14 21 Post-tax equity accounted income 885 753 18 912 Effective tax rate (%) (1) 30 31 Attributable earnings
Slide 10: Revenue
Revenue R million 1H09 1H08 % Change 2H08 Coal 4 797 3 597 33 5 443 – Tied operations 1 276 1 106 15 1 386 – Commercial operations 3 521 2 491 41 4 057 Mineral Sands 1 550 1 035 50 1 741 – KZN Sands 273 460 (41) 514 – Namakwa Sands 644 491 – Australia Sands 633 575 10 736 Base Metals 674 1 063 (37)
Slide 11: Coal production
Coal production • Total production up 3% to 22,6Mt • 7% increase from commercial operations to meet demand • 3% decrease from tied collieries due to production difficulties • Increased steam coal production from Inyanda, NBC and Mafube • Coking coal production decline in line with lower demand Power
Slide 12: Coal markets
Coal markets Steam coal and market coke prices (USD/t-FOB) 180 800 1H09 • Eskom demand marginally higher 600 120 • Record steam coal exports 400 • Significant decline in demand from metals market 60 Forecast 200 • Export prices remain under pressure • Significant decline in 2H09 domestic steam and 2
Slide 13: Mineral Sands production
Mineral Sands production Slag tapped • F2 at KZN commissioned in December 2008 • New slag tapped record at KZN on the back of various changes to technology • F1 down at Namakwa Sands as a result of market demand Zircon • Stable production at all sites Pigment • Back to full capacity after various ou
Slide 14: Mineral Sands markets
Mineral Sands markets Prices (USD/t – FOB)* 1H09 950 2 500 • Global economic crisis severely impacted on demand for most products during 2Q09 750 1 500 • Historic low levels of sales on feedstock and zircon • Management decision to build stock levels 550 Forecast 500 • Continued pressure on demand 3
Slide 15: Base Metals production
Base Metals production Zinc and lead concentrate at Rosh Pinah: • Stable production • Logistics chain to Zincor remains a challenge • Replacement of flotation circuit 2H09 Zinc metal production at Zincor lower due to: • Acid plant availability resulting from plant maintenance and shutdown • Constrai
Slide 16: Base Metals markets
Base Metals markets Zinc metal price US$/t R/t 1H09 5 000 30 000 • 27% increase in realised zinc price (2Q09 compared to 1Q09) 20 000 3 000 • Global zinc consumption declined by 7,6% • Zinc concentrate deficit of 51kt in 2Q09 10 000 Forecast 1 000 • Metal oversupply expected with further downward pr
Slide 17: Net operating profit
Net operating profit R million 1H09 1H08 % Change 2H08 Coal 1 032 935 10 1 719 – Tied operations 71 72 (1) 11 – Commercial operations 961 863 11 1 708 Mineral Sands (67) (166) 60 270 – KZN Sands (110) (27) (307) 58 – Namakwa Sands 24 155 – Australia Sands 19 (139) 114 57 Base Metals 9 89 (90) (261)
Slide 18: Net operating profit: 1H08 vs 1H09
Net operating profit: 1H08 vs 1H09 R million 241 (93) (332) 332 (25) 24 953 806 1H08 Price Volume Exchange Inflation Cost Namakwa 1H09 Coal 935 266 156 145 (30) (440) 1 032 Mineral Sands (166) 77 (227) 126 (29) 128 24 (67) Base Metals 89 (11) 43 14 (34) (92) 9 Other (52) 3 (44) 72 (21) Total 806 332
Slide 19: Production costs: 1H08 vs 1H09
Production costs: 1H08 vs 1H09 R million 1H08 Materials Labour Exchange General Railage & Stock Inflation Namakwa 1H09 differences charges transport movement 6 158 (4 976) (171) (58) (417) (278) (73) (200) (199) 417 (620) (6 158) 19
Slide 20: Project Siyaya
Project Siyaya R million Realised Target 1H09 2009 Cost savings 229 541 Operational efficiency 105 217 334 758 Capital savings 400 1 000 Cash flow from initiatives 734 1 758 • Siyaya project commenced towards the end of 2008 targeting cash flow preservation • Cost focus: vacancies, overheads and con
Slide 21: Attributable earnings
Attributable earnings R million 1H09 1H08 % Change 2H08 Net operating profit 953 806 18 1 661 Net financing costs (242) (87) (178) (154) Income from investments 1 1 Post-tax equity income 885 753 18 911 - Sishen Iron Ore Company (SIOC) 868 735 18 1 121 - Black Mountain 15 (188) - Chifeng 2 18 (89) (
Slide 22: Dividend: cash flows
Dividend: cash flows • Interim cash dividend declared of 100 cents per share • Dividend cover of 4 times earnings Interim Interim Total dividend dividend dividend 30 June ‘09 30 June ‘08 31 December ‘08 Attributable earnings per share (cent) 403 363 993 Dividend declared (cent per share) 100 175 375
Slide 23: Net debt variance: 1H09
Net debt variance: 1H09 R million Net Opening Cash financing Investing Dividend Closing balance retained costs Tax Dividends Capex activities received Other balance (192) (488) (2 381) 832 (2 455) 205 (700) (686) (169) 1 124 23
Slide 24: Capital expenditure and commitments
Capital expenditure and commitments Capex: ESTIMATE ACTUAL R million FY10 2H09 1H09 2H08 1H08 Sustaining and environmental 1 067 466 339 903 244 Expansion 2 301 948 347 249 221 – Coal 2 154 613 175 132 205 – Mineral Sands 131 298 167 103 1 – Base Metals 11 21 4 12 14 – Other 5 16 1 2 1 Total capex 2
Slide 25: Capital structure
Capital structure Ratios for 6-month periods: 1H09 1H08 2H08 Net financing cost cover (times) - EBITDA 6 15 14 Return on equity - attributable income (%) 10 12 18 Return on capital employed (%) 13 16 21 Maturity profile of debt Rm Drawn Undrawn Repayment year Rm Long-term 4 918 572 2009 250 – Corpor
Slide 26: Business Focus and Outlook
BUSINESS FOCUS AND OUTLOOK Sipho Nkosi - Chief Executive Officer
Slide 27: Business focus
Business focus • Committed to zero harm at all sites • Continuous focus on cash preservation • Coal – Remain a major reliable supplier to Eskom – Increase exports and de-bottleneck logistics chain • Sands – Increase sales and decrease stock levels – Engage with new JV partner at Tiwest • Base Metals
Slide 28: Outlook
Outlook • Slow recovery in world economy could negatively affect volumes on all fronts • Long-term fundamentals for all commodities still sound • Strengthening Rand and Australian Dollar will negatively impact on earnings • Iron Ore – Decrease of some 40% in prices and lower dividend payments by SIO
Slide 29: Questions?
Questions ? 29
Slide 30: Additional Slides
XX ADDITIONAL SLIDES
Slide 31: Net operating profit: 1H08 vs 2H08 vs 1H09
Net operating profit: 1H08 vs 2H08 vs 1H09 R million 630 (60) (923) 403 155 1 661 (318) 650 (428) 591 (131) (389) 953 806 (33) 1H08 Price Volume Exchange Inflation Cost Namakwa 2H08 Price Volume Exchange Inflation Cost Namakwa 1H09 Coal 935 631 409 274 (35) (495) 1 719 (365) (253) (129) 5 55 1 032 M
Slide 32: Net operating profit margins
Net operating profit margins % 1H09 1H08 Change 2H08 Coal 22 26 (15) 32 – Tied operations 6 7 (14) 1 – Commercial operations 27 35 (23) 42 Mineral Sands (4) (16) 75 16 – KZN Sands (40) (6) (567) 11 – Namakwa Sands 4 32 – Australia Sands 3 (24) 113 8 Base Metals 1 8 (88) (34) – Rosh Pinah 17 23 (26)
Slide 33: EBITDA
EBITDA R million 1H09 1H08 2H08 Coal 1 264 1 142 1 942 – Tied operations 92 94 32 – Commercial operations 1 172 1 048 1 910 Mineral Sands 181 56 481 – KZN Sands (27) 59 194 – Namakwa Sands 110 185 – Australia Sands 98 (3) 102 Base Metals 66 130 (224) – Rosh Pinah 67 79 (47) – Zincor 28 86 (138) – Ot
Slide 34: Depreciation and amortisation per segment
Depreciation and amortisation per segment R million 1H09 1H08 2H08 Coal 230 198 214 – Tied operations 21 22 20 – Commercial operations 209 176 194 Mineral Sands 230 168 202 – KZN Sands 82 86 84 – Namakwa Sands 71 32 – Australia Sands 77 82 86 Base Metals 55 40 47 – Rosh Pinah 30 22 23 – Zincor 25 18
Slide 35: Headline earnings
Headline earnings R million 1H09 1H08 2H08 Attributable earnings 1 390 1 244 2 161 Adjustments: – Impairment of Property, Plant and Equipment (PPE) 7 14 – Gains or losses on disposal of PPE 18 58 8 – Gains or losses on disposal of subsidiaries (7) – Share of associate’s gains on disposal of PPE (4)
Slide 36: Cash flow
Cash flow R million 1H09 1H08 2H08 Cash retained from operations 832 1 523 2 051 Net financing costs (192) (45) (148) Taxation (488) (216) (271) Dividends (700) (348) (636) Net cash from operating activities (548) 914 996 Fixed assets (686) (465) (1 152) Investments acquired (50) (69) (110) Acquisit
Slide 37: Net financing cost
Net financing cost R million 1H09 1H08 2H08 Interest expense and loan costs 245 67 216 Finance leases 33 31 32 Interest income (86) (54) (99) Net interest expense 192 44 149 Interest adjustment on non-current provisions 50 43 5 Net financing cost as per income statement 242 87 154 37
Slide 38: MPower trust
MPower trust As at 30 June 2009 Number of beneficiaries 9 266 Share of total dividends paid or declared to date (R’000) 33 716 – Paid on 10 September 2007 3 186 – Paid on 17 March 2008 5 310 – Paid on 22 September 2008 9 292 – Paid on 30 March 2009 10 619 – Declared on 19 August 2009 5 309 38
Slide 39: Physical information: Coking coal
Physical information: Coking coal ‘000 tonnes 1H09 1H08 1H07 FY08 FY07 Production 922 1 370 1 479 2 560 2 962 - Grootegeluk 793 1 199 1 237 2 233 2 499 - Tshikondeni 129 171 242 327 463 Sales 600 1 405 1 423 2 524 2 997 - ArcelorMittal 448 1 131 1 113 2 116 2 307 - Export 129 228 262 316 592 - Other
Slide 40: Physical information: Power station coal
Physical information: Power station coal ‘000 tonnes 1H09 1H08 1H07 FY08 FY07 Production 18 583 18 118 16 830 36 700 34 246 - Grootegeluk 7 686 7 435 7 128 14 581 14 510 - Leeuwpan 633 584 417 1 188 956 - Matla 6 044 6 846 6 547 13 230 13 030 - Arnot 2 660 2 116 1 805 4 865 3 702 - NCC 45 92 115 156
Slide 41: Physical information: Steam coal
Physical information: Steam coal '000 tonnes 1H09 1H08 1H07 FY08 FY07 Production 3 061 2 427 2 016 5 574 4 111 - Grootegeluk 568 762 766 1 387 1 485 - Leeuwpan 524 778 680 1 801 1 421 - NCC 456 539 324 984 814 - NBC 430 223 246 561 391 - Inyanda (1) 977 125 841 - Mafube 106 Sales 3 709 2 484 1 961 6
Slide 42: Physical information: KZN Sands
Physical information: KZN Sands '000 tonnes 1H09 1H08 1H07 FY08 FY07 Production - Ilmenite 185 133 187 229 367 - Zircon 18 16 19 34 34 - Rutile 10 7 9 19 17 - Pig iron 54 29 48 50 90 - Scrap iron 7 8 9 16 20 - Slag tapped 100 63 95 112 186 - Chloride slag 51 56 77 95 150 - Sulphate slag 9 10 14 18 2
Slide 43: Comparable physical information: Namakwa Sands
Comparable physical information: Namakwa Sands '000 tonnes 1H09 1H08 1H07 FY08 FY07 Production (1) - Ilmenite 141 159 140 315 300 - Zircon 64 65 48 130 115 - Rutile 15 13 10 27 24 - Pig iron 41 52 44 103 91 - Scrap iron 2 6 6 11 - Slag tapped 71 86 74 166 151 - Chloride slag 53 64 63 135 126 - Sulph
Slide 44: Physical information: Australia Sands
Physical information: Australia Sands(1) '000 tonnes 1H09 1H08 1H07 FY08 FY07 Production - Ilmenite 98 85 111 174 216 - Zircon 15 13 19 29 36 - Rutile 8 6 8 13 17 - Synthetic rutile 54 56 48 113 100 - Leucoxene 7 6 8 16 16 - Pigment 25 22 26 43 54 Sales - Zircon 6 14 16 35 29 - Rutile 5 5 2 14 16 -
Slide 45: Comparable physical information: Base Metals
Comparable physical information: Base Metals ‘000 tonnes 1H09 1H08 1H07 FY08 FY07 Zinc Concentrate (RP) - Production 47 47 53 94 95 - Sales: inter company 47 45 55 86 97 Lead concentrate (RP) - Production 12 12 11 20 22 - Sales: export 6 7 7 22 19 Zinc metal (Zincor) - Production 44 47 51 87 101 - S
Slide 46: Base metal hedging: July 2009 - December 2011
Base metal hedging: 01 July 2009 - 31 December 2011 Tonnes Average USD Average Year hedged price ZAR price Zinc 2009 13 200 2 244 19 249 2010 26 400 2 216 19 944 2011 26 700 2 061 19 976 66 300 2 174 19 723 Lead 2009 3 325 1 463 12 655 2010 5 172 1 713 15 690 2011 5 500 1 967 19 065 13 997 1 714 15
Slide 47: Project details
Project details Estimated Status Estimated Ownership Approval Scope Capex start-up Diepspruit Nov 2007 0,9Mtpa R139m Commissioning 2H09 Committed Kwinana expansion (Australia 100%) Feb 2008 40ktpa AUD100m Construction 1Q10 Medupi May 2006 14.6Mtpa R9bn Detail 4Q11 engineering Dry mine replacement (A
Slide 48: Projects under construction
Projects under construction Rbn Medupi Mt 10,0 20 Medupi 8,0 8,8 8,5 15 • Project on track 7,8 6,0 • First coal supply anticipated in 4Q11 6,0 10 • Full production from 2014 4,0 5 2,0 2,4 0,6 2008 2009 2010 2011 2012 2013 2014 Cumulative capex Production Kwinana Kt AUDm Kwinana expansion 100 45 • Co
Slide 49: Salient dates
Salient dates Last day to trade cum dividend 17 September 2009 Shares trade ex-dividend 18 September 2009 Record date 25 September 2009 Payment date 28 September 2009 49
Slide 50: Index
Index Item Page no. Item Page no. Commodities MPower Trust 38 – Base Metals Net debt variance 24 Hedging 14 Net financing cost 37 Markets 16 Net operating profit Production 15, 45 – Per commodity 17 – Coal – Margins 32 Markets 12 – 1H08 vs 1H09 18 Production 11, 39 - 41 – 1H08 vs 2H08 vs 1H09 31 – M