Exxaro Resources Limited · JSE:EXX
Exxaro Resources — FY2009 Earnings Presentation
51 slides from Exxaro Resources's earnings presentation, February 2010
Slide 1: Overview
Overview Sipho Nkosi: Chief Executive Officer
Slide 2: Overview
Overview 15% decrease in lost time injury frequency rate to 0,33 8% increase in revenue to R15 billion 1% increase in coal production to 45Mt 50% increase in steam coal exports to 4,5Mt Significant cost savings and capital reduction targets realised 31% decrease in headline earnings Strategic intent
Slide 3: Safety
Safety Reportable fatalities LTIFR* 1 2 0,39 0,36 0,33 3 3 2 2007 2008 2009 2007 2008 2009 1H 2H • A gas explosion at Zincor during 2H09 regrettably resulted in 3 fatalities • 4 sites were without any lost time injury • Second CEO Safety Summit in October 2009 adopted the slogan “Safety always, all
Slide 4: Financial and operational overview
Financial and operational overview Wim de Klerk: Finance Director
Slide 5: Financial highlights
Financial highlights • 8% increase in revenue from R13,8bn to R15bn • 30% decrease in net operating profit from R2,5bn to R1,7bn, excluding impairment • However, net operating profit down by 88%, including impairment of R1,4bn • 31% decrease in headline earnings per share from 1 058c to 729c • Final
Slide 6: Financial overview
Financial overview Including Excluding impairment impairment R million FY09 FY09 FY08 % Change Revenue 15 009 15 009 13 843 8 Operating expenses 14 705 13 270 11 376 (17) Net operating profit 304 1 739 2 467 (30) Operating margin (%) 2 12 18 (33) Post-tax equity accounted income 1 898 1 898 1 663 14
Slide 7: Revenue
Revenue R million FY09 FY08 % Change Coal 9 731 9 040 8 – Tied operations 2 681 2 492 8 – Commercial operations 7 050 6 548 8 Mineral Sands 3 508 2 776 26 – KZN Sands 705 974 (28) – Namakwa Sands 1 334 491 172 – Australia Sands 1 469 1 311 12 Base Metals 1 582 1 829 (14) – Rosh Pinah 566 436 30 – Zi
Slide 8: Coal production
Coal production • Total production up 1% to 45Mt • 8% increase from commercial operations to meet power station demand • 9% decrease from tied operations due to production difficulties • Increased steam coal production from Mafube, Inyanda and NBC • Reduced coking coal production due to lower domest
Slide 9: Coal markets and sales
Coal markets and sales Steam coal and market coke prices (USD/t-FOB) 2009 180 800 • Eskom demand marginally higher • Coal export record of 4,7Mt 600 – steam coal: 4,5Mt 120 – coking coal: 0,2Mt 400 • Significant decline in demand from metals market 60 200 Outlook • Export prices improving • Increase
Slide 10: Mineral sands production
Mineral sands production Slag tapped • New record for slag tapped at KZN Sands • Change to technology at KZN Sands has led to significant cost savings and production improvements • F1 at Namakwa Sands down since end of March due to market demand Zircon • Stable production at all sites • Namakwa Sand
Slide 11: Mineral sands markets and sales
Mineral sands markets and sales Prices (USD/t – FOB)* 2009 950 2 500 • Recessionary conditions impacted negatively on 850 2 000 demand 750 • Demand improved significantly in 2H09 1 500 • Year-on-year CP slag, zircon and pigment prices 650 1 000 increased 550 Outlook 450 500 • Demand should recover 3
Slide 12: Base metals production
Base metals production Rosh Pinah • Stable zinc and lead production • New flotation circuit fully commissioned during 2H09 • Logistical chain to Zincor remains a challenge Zincor • Low uptime on the acid plant • Explosion in September 2009 negatively affected production • Various initiatives underwa
Slide 13: Base metals markets and sales
Base metals markets and sales Zinc metal price US$ ZAR 2009 5 000 30 000 • Lower realised zinc metal price 25 000 • Global demand for zinc metal declined by 9% 4 000 Outlook 20 000 3 000 • Structural imbalance, possibility of correction 15 000 • Prices are forecast to soften in 2H10 2 000 10 000 • 2
Slide 14: Financial overview
Financial overview Including Excluding impairment impairment R million FY09 FY09 FY08 % Change Revenue 15 009 15 009 13 843 8 Operating expenses 14 705 13 270 11 376 (17) Net operating profit 304 1 739 2 467 (30) Operating margin (%) 2 12 18 (33) Post-tax equity accounted income 1 898 1 898 1 663 14
Slide 15: Net operating profit
Net operating profit* R million FY09 FY08 % Change Coal 1 905 2 654 (28) – Tied operations 75 83 (10) – Commercial operations 1 830 2 571 (29) Mineral Sands (124) 104 (219) – KZN Sands* (12) 31 (139) – Namakwa Sands (110) 155 (171) – Australia Sands (2) (82) 98 Base Metals (8) (172) 95 – Rosh Pinah
Slide 16: Net operating profit: FY08 vs FY09
Net operating profit: FY08 vs FY09* R million 2 467 (367) 228 (498) 355 (264) (182) 1 739 FY08 Price Volume Exchange Inflation Cost Namakwa FY09 Coal 2 654 (464) 369 (260) (41) (353) 1 905 Mineral Sands 104 61 (183) (132) (72) 362 (264) (124) Base Metals (172) 36 46 (77) (54) 213 (8) Other (119) (4)
Slide 17: Production costs: FY08 vs FY09
Production costs: FY08 vs FY09* R million 1 107 13 270 256 (376) 182 578 70 11 376 (76) 153 (3 730) FY08 Materials Labour Exchange General Railage & Stock Inflation Namakwa FY09 differences charges transport movement *Excludes impairment of R1 435 million at KZN Sands 17
Slide 18: Financial overview
Financial overview Including Excluding impairment impairment R million FY09 FY09 FY08 % Change Revenue 15 009 15 009 13 843 8 Operating expenses 14 705 13 270 11 376 (17) Net operating profit 304 1 739 2 467 (30) Operating margin (%) 2 12 18 (33) Post-tax equity accounted income 1 898 1 898 1 663 14
Slide 19: Attributable earnings
Attributable earnings Including Excluding impairment impairment R million FY09 FY09 FY08 % Change Net operating profit 304 1 739 2 467 (30) Net financing cost (415) (415) (241) (72) Income from investments 2 2 2 Post-tax equity income 1 898 1 898 1 663 14 - Sishen Iron Ore Company (SIOC) 1 762 1 762
Slide 20: Dividend
Dividend • Final cash dividend declared of 100 cents per share • Total dividend covered 3,5 times by attributable earnings* Total Final Interim dividend dividend dividend 31 Dec 2009 31 Dec 2009 30 June 2009 Attributable earnings per share (cent)* 712 309 403 Dividend declared (cent per share) 200 1
Slide 21: Financial overview
Financial overview Including Excluding impairment impairment R million FY09 FY09 FY08 % Change Revenue 15 009 15 009 13 843 8 Operating expenses 14 705 13 270 11 376 (17) Net operating profit 304 1 739 2 467 (30) Operating margin (%) 2 12 18 (33) Post-tax equity accounted income 1 898 1 898 1 663 14
Slide 22: Net debt variance: FY09
Net debt variance: FY09 R million 1 185 (1 754) 1 982 (269) 3 731 1 050 2 381 (2 117) 892 381 Opening Cash Net Tax Dividends Capex Investing Dividend Other Closing balance retained financing activities received balance costs 22
Slide 23: Capital expenditure
Capital expenditure R million ESTIMATE ACTUAL FY10 FY09 FY08 Sustaining and environmental 1 445 992 1 147 – Coal 760 432 404 – Mineral Sands 386 340 467 – Base Metals 167 127 202 – Other 132 93 74 Expansion 1 708 990 470 – Coal* 1 513 492 337 – Mineral Sands 187 486 104 – Base Metals 8 12 26 – Other
Slide 24: Capital structure
Capital structure Ratios: FY09 FY08 Net financing cost cover (times) - EBITDA 7 14 Return on equity - attributable income (%) 8 30 Return on capital employed (%) 15 36 Maturity profile of debt Rm Drawn Undrawn Repayment year Rm Long-term 4 754 736 2010 407 – Corporate 4 144 555 2011 827 – Australia
Slide 25: Medupi
Medupi (Rbn) (Mt) • Project delayed by 6 months due to 10,0 20 Eskom’s review of the coal supply 9,1 9,5 8,0 agreement 8,0 15 • Capital to be re-estimated as a result of 6,0 6,5 delay 10 4,0 4,3 • First coal supply anticipated in 2Q12 5 • Full production from 3Q14 2,0 1,5 • New funding agreement 200
Slide 26: Strategic intent, business focus and outlook
Strategic intent, business focus and outlook Sipho Nkosi: Chief Executive Officer
Slide 27: Strategic intent
Strategic intent • Exxaro will remain a diversified mining company • Coal – Develop more mega mines such as Medupi to supply Eskom and/or independent power producers as well as Mafutha for coal-to-liquid plant in Waterberg – Increase export allocation – Develop down stream value-adding products such
Slide 28: Business focus
Business focus • Safety • Coal – Remain a major reliable supplier to Eskom – Finalise agreement with Richards Bay Coal Terminal (RBCT) – Increase allocation at RBCT and de-bottleneck logistical chain – Char ramp-up to nameplate capacity • Mineral Sands – Increase sales and decrease stock levels – Al
Slide 29: Outlook
Outlook • Uncertainty about the rate of recovery from global recession • Relative strength of the Rand and Australian Dollar will impact on earnings • Iron ore – Significant price increase forecast from 1 April 2010 • Coal – Increase in international prices expected – Lower export volumes due to log
Slide 30: Questions
Slide 31: Additional slides
Additional slides
Slide 32: Net operating profit: 2H08 vs 1H09 vs 2H09
Net operating profit: 2H08 vs 1H09 vs 2H09 R million 1 661 (318) 1 281 (231) (147) (428) (409) 591 (131) (389) 953 (614) (1 482) (33) (649) 2H08 Price Volume Exchange Inflation Cost Namakwa 1H09 Price Volume Exchange Inflation Cost Other 2H09 Coal 1 719 (365) (253) (129) 5 55 1 032 (734) 982 (113) (
Slide 33: Net operating profit margins
Net operating profit margins % Including Excluding impairment impairment FY09 FY09 FY08 Coal 20 20 29 – Tied operations 3 3 3 – Commercial operations 26 26 39 Mineral Sands (44) (4) 4 – KZN Sands (205) (2) 3 – Namakwa Sands (8) (8) 32 – Australia Sands (6) Base Metals (1) (1) (9) – Rosh Pinah 19 19
Slide 34: EBITDA
EBITDA R million FY09 FY08 Coal 2 420 3 084 – Tied operations 116 126 – Commercial operations 2 304 2 958 Mineral Sands 431 537 – KZN Sands 160 253 – Namakwa Sands 105 185 – Australia Sands 166 99 Base Metals 107 (94) – Rosh Pinah 166 32 – Zincor 7 (52) – Other (66) (74) Other 5 (84) Total EBITDA 2
Slide 35: Depreciation and amortisation per segment
Depreciation and amortisation per segment R million FY09 FY08 Coal 509 412 – Tied operations 41 42 – Commercial operations 468 370 Mineral Sands 480 370 – KZN Sands 171 170 – Namakwa Sands 147 32 – Australia Sands 162 168 Base Metals 108 87 – Rosh Pinah 55 45 – Zincor 53 42 Other 39 29 Total 1 136 8
Slide 36: Headline earnings
Headline earnings R million FY09 FY08 Attributable earnings 1 023 3 405 Adjustments: – Impairment of property, plant and equipment (PPE) 1 435 21 – Gains or losses on disposal of PPE 88 66 – Gains or losses on disposal of subsidiaries (7) – Share of associate’s gains on disposal of PPE (8) 2 – Share
Slide 37: Cash flow
Cash flow R million FY09 FY08 Cash retained from operations 2 117 3 574 Net financing cost (381) (193) Tax (892) (487) Dividends (1 050) (984) Net cash from operating activities (206) 1 910 Fixed assets (1 982) (1 617) Investments acquired (8) (179) Acquisition of subsidiaries, associates and other
Slide 38: Net financing cost
Net financing cost R million FY09 FY08 Interest expense and loan cost 460 283 Finance leases 66 63 Interest income (145) (153) Net interest expense 381 193 Interest adjustment on non-current provisions 34 48 Net financing cost as per income statement 415 241 38
Slide 39: Mpower trust
Mpower trust As at 31 December 2009 Number of beneficiaries 9 341 Share of total dividends paid or declared to date (R’000) 39 025 – 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 – Paid on 28 September 2009 5 309 – Decl
Slide 40: Physical information: power station coal
Physical information: power station coal ‘000 tonnes FY09 FY08 FY07 Production 36 562 36 700 34 246 - Grootegeluk 15 324 14 581 14 510 - Leeuwpan 1 247 1 188 956 - Matla 11 273 13 230 13 030 - Arnot 5 213 4 865 3 702 - NCC 115 156 - NBC 2 822 2 721 1 892 - Mafube 683 Sales 36 299 36 255 34 226 - Gro
Slide 41: Physical information: steam coal
Physical information: steam coal '000 tonnes FY09 FY08 FY07 Production 6 638 5 574 4 111 - Grootegeluk 1 207 1 387 1 485 - Leeuwpan 1 259 1 801 1 421 - NCC 822 984 814 - NBC 691 561 391 - Inyanda (1) 1 843 841 - Mafube 816 Buy-ins 759 733 Sales 7 802 6 233 4 061 - Domestic 3 297 3 273 2 832 - Export
Slide 42: Physical information: coking coal and char
Physical information: coking coal ‘000 tonnes FY09 FY08 FY07 Production 2 020 2 560 2 962 - Grootegeluk 1 752 2 233 2 499 - Tshikondeni 268 327 463 Sales 1 500 2 524 2 997 - ArcelorMittal 1 232 2 116 2 307 - Export 211 316 592 - Other 57 92 98 Physical information: char '000 tonnes FY09 FY08 FY07 Pr
Slide 43: Physical information: KZN Sands
Physical information: KZN Sands '000 tonnes FY09 FY08 FY07 Production - Ilmenite 368 229 367 - Zircon 36 34 34 - Rutile 20 19 17 - Pig iron 108 50 90 - Scrap iron 15 16 20 - Slag tapped 205 112 186 - Chloride slag 104 95 150 - Sulphate slag 24 18 26 Sales - Ilmenite (external sales) 40 50 - Zircon 2
Slide 44: Comparable physical information: Namakwa Sands
Comparable physical information: Namakwa Sands '000 tonnes FY09 FY08 FY07 Production (1) - Ilmenite 244 315 300 - Zircon 116 130 115 - Rutile 26 27 24 - Pig iron 73 103 91 - Scrap iron 6 11 - Slag tapped 126 166 151 - Chloride slag 97 135 126 - Sulphate slag 20 24 27 Sales (1) - Zircon 95 135 115 -
Slide 45: Physical information: Australia Sands
Physical information: Australia Sands(1) '000 tonnes FY09 FY08 FY07 Production - Ilmenite 207 174 216 - Zircon 33 29 36 - Rutile 16 13 17 - Synthetic rutile 109 113 100 - Leucoxene 14 16 16 - Pigment 53 43 54 Sales - Zircon 30 35 29 - Rutile 14 14 16 - Synthetic rutile 50 62 57 - Leucoxene 15 17 17
Slide 46: Comparable physical information: Base Metals
Comparable physical information: Base Metals ‘000 tonnes FY09 FY08 FY07 Zinc concentrate (Rosh Pinah) - Production 94 94 95 - Sales: inter company 96 86 97 Lead concentrate (Rosh Pinah) - Production 20 20 22 - Sales: export 19 22 19 Zinc metal (Zincor) - Production 87 87 101 - Sales 93 98 99 Zinc me
Slide 47: 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 2010 26 400 2 216 19 944 2011 26 700 2 061 19 976 53 100 2 139 19 960 Lead 2010 5 172 1 713 15 690 2011 5 500 1 967 19 065 10 672 1 840 17 378 47
Slide 48: Project details
Project details Estimated Status Estimated Ownership Scope capex start-up Committed Sands Kwinana expansion (Australia 100%) 40ktpa AUD117m Construction 2Q10 (Approval Feb 2008) Coal Medupi Detail 14,6Mtpa R9bn engineering 2Q12 (Approval May 2006) Sands Dry mine replacement (Australia 100%) 100-200k
Slide 49: Salient dates
Salient dates Last day to trade cum dividend Friday 9 April 2010 Shares trade ex-dividend Monday 12 April 2010 Record date Friday 16 April 2010 Payment date Monday 19 April 2010 49
Slide 50: Index
Index Item Page no. Item Page no. Business focus 28 Headline earnings 36 Commodities Mpower trust 39 – Base Metals Net debt variance 22 Hedging 47 Net financing cost 38 Production 12, 46 Net operating profit Markets and sales 13, 46 – Per commodity 15 – Coal – FY08 vs FY09 16 Production 8, 40 - 42 –
Slide 51: 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