INTERIM RESULTS PRESENTATION. for the six-month period ended 30 June 2017

Transcription

1 INTERIM RESULTS PRESENTATION for the six-month period ended 30 June 2017

2 Disclaimer 2 The operational and financial information on which any outlook or forecast statements are based has 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 operational and financial information. Exxaro undertakes no obligation to update or reverse any forward-looking statements, whether as a result of new information or future developments. Where relevant, comments exclude transactions which make the results not comparable. These exclusions are the responsibility of the group's board of directors and have been presented to illustrate the impact of these transactions on the core operations performance and hence may not fairly present the group s financial position, changes in equity, results of operations or cash flows. These exclusions have not been reviewed nor reported on by the group s external auditors.

3 Presentation outline 3 1 Strategic context Mxolisi Mgojo, Chief Executive Officer 2 Operational performance and markets Nombasa Tsengwa, Executive Head - Coal Operations v 3 Financial results Riaan Koppeschaar, Finance Director 4 Outlook Mxolisi Mgojo, Chief Executive Officer

4 Strategic context Mxolisi Mgojo

5 Index: 1 January 2016 = Jan Jan Feb Mar-16 6-Apr Apr May Jun Jul-16 4-Aug Aug Sep Oct-16 8-Nov-16 2-Dec Dec Jan Feb-17 8-Mar-17 1-Apr Apr May Jun-17 1H17 price and currency markets 5 Commodity price correction evident during 1H17 % Change in price 1H17 vs 2H16 1H17 vs 1H16 Global coal markets relatively stable; iron ore price volatility continued Iron ore (62% Fe CFR China US$/t) Coal (API4) 5% 15% 43% 48% Overall, the TiO 2 pigment market fundamentals remained strong Zinc (LME cash US$/t) TiO2 2 pigment (US$/t CIF US) 13% 10% 8% 50% Rand against the US$ H16: 5% appreciation 2H16: 5,8% 1H17: 4,6% 1H17 range: 12,42 to 13,91 Depreciation Appreciation R13,06/US$ World real GDP growth momentum continued, however RSA lagged behind Global and RSA political noise contributed towards the extreme volatility in currency markets RSA policy environment remains uncertain

6 1H17 performance overview 6 1H17 vs 2H16 Coal API4 US$ export price 20% Export volumes 10% LTIFR Core NOP Core equity inv contribution Core HEPS Dividends Eskom Commercial Volumes 6% 1H16 2H16 1H17 0,08 R1 981m (R26m) 307 cents 90 cps 0,09 R2 960m R2 192m cents 410 cps 0,16 R3 073m R1 129m 903 cents 300 cps Dividend 300 cps

7 1H17 performance continuing to deliver on strategic priorities 7 Resilient operating structures Efficiency and cost performance improvements through Operational Excellence Functional excellence programme Digitalisation and innovation roll-out in Functions and Operations BEE unwind and replacement structure Continuous review of coal portfolio Tronox disposal process planned for 2H17 Portfolio improvement Disposal process also in place for: Black Mountain Moranbah coal project Arnot NBC

8 Optimal capital allocation 8 Source of cash Capital Allocation Financial Targets Cash generated by operations Portfolio optimisation Coal asset disposals Investment disposals Debt Service Sustaining capital Expansion capital Return cash to shareholders M&A activity Net Debt : EBITDA <2 times Return: 1,5 x WACC Dividend Policy: 2,5 3,5 Core Attributable Earnings

9 The mining sector is in a crisis drastic decline over the past 5 years 9 Number of people employed in the industry declined by Industry profits before tax declined by 48% Mining s contribution to GDP declined by 0,2% per annum Dividends paid to investors declined by 52% Domestic input costs continue to rise Energy Transport Labour Steel The policy environment remains negative for the sector Source: Chamber of Mines

10 Operational performance and markets Nombasa Tsengwa

11 SHEC performance 11 Safety and health Reportable fatalities One fatality in March at Matla 0,16 LTIFR* is above the target of 0,11 1H17 OHIFR** of 0,27 was 13% better than target of 0,31 Integrated environmental management 1H15 2H15 1H16 2H16 1H17 1 Finalised Global Climate Models to predict impacts in locations where our operations are Carbon emissions intensity reduced by 13% Water intensity reduced by 38% LTIFR Community relationship Delivering on SLP # projects 0,17 0,17 0,08 Target 0,15 0,09 +78% Target 0,11 0,16 1H15 2H15 1H16 2H16 1H17 * Lost Time Injury Frequency Rate YTD ** Occupational Health Injury Frequency Rate YTD # Social and labour plan

12 Coal production and sales volumes remain stable 12 Tonnage movements (Mt) Total coal production (Mt) 1H17 vs 2H16 Production 1H17 vs 2H16 Sales GG 7&8 ramp up (Addendum 9) 0,9 0,7 0,5 4,2 15,3 Commercial Tied Buy-ins 0,6 0,6 +3% 0,1 4,3 5,1 4,0 3,9 3,5 18,5 17,4 17,5 18,4 21,8 4,1 19,5 Matla Mine 3 (shortwall stopped) (0,4) (0,4) Exports (RBCT congestion) (0,4) 1H15 2H15 1H16 2H16 1H17 2H17* 1H18* Total coal sales (Mt) Export Tied Domestic (2%) Other (0,3) 2,3 4,2 3,9 5,1 4,1 3,8 3,4 4,9 3,9 3,5 4,5 3,9 4,3 4,1 Total 0,5 (0,4) 13,5 14,5 13,8 14,2 14,6 16,2 16,2 1H15 2H15 1H16 2H16 1H17 2H17* 1H18* * Based on latest internal forecast Refer to slide 32, 33 and 34 for additional detail

13 Coal export volumes slightly lower 13 Export sales destinations (%) Europe India Other Asia Africa Other H15 2H15 1H16 2H16 1H17 Average realised prices $ Average Average API4 Exxaro average R/$ R/US$ rate export price H15 2H15 1H16 2H16 1H17 FY21* Export product mix (%) RB1 RB3 Power station coal Industry contracted volume (Mt) TFR industry annualised actual rail volume (Mt) 1H ,99 2H ,68 1H ,43 2H ,73 1H ,11 1H15 2H15 1H16 2H16 1H17 FY21* * Based on latest internal forecast Refer to slide 32 and 33 for additional detail

14 Operational excellence (OE) 14 Some geological challenges being experienced at LP and Mafube due to nearing end of current LoM GG slightly higher due to variable cost impact Coal cash cost (Rm indexed) 4,0 (5,6) 1,8 (0,1) 100,1 (1,9) 98,3 Continued focus on cash cost reduction and productivity improvements across all BU s 2H16 Inflation Variable volume Variable cost Fixed cost Arnot/ Inyanda 1H17 Unit cash cost movement (%) 1H17 Inflation PPI at 2,47% FY17 Inflation PPI at 6% Grootegeluk cash cost (Rm indexed) GG 4,2% 7,8% 13,9 (1,5) 118,0 LP NBC Matla Mafube 50% ECC -1,4% 0,1% 0,9% 2,8% 2,5% 1H17 vs. 2H16 9,8% 10,0% 14,1% 15,8% 19,6% FY17 vs. 2H16 100,0 1,5 4,1 2H16 Inflation Variable volume Variable cost Fixed cost 1H17 Refer to slide 32 for additional detail

15 Coal projects will drive growth 15 Waterberg Region Mpumalanga Region GG6 Expansion Capex: R4,8bn Product: 1,7Mtpa of semi soft coking coal 1 st production: FY20 Thabametsi Phase 1 Capex: R2,8bn Product: 3,9Mtpa of thermal coal 1 st production: FY21 Grootegeluk Rapid Load Out Station Capex: R1,3bn Load capacity: 12Mtpa 1 st production: 1H19 Belfast Capex: R3,3bn Product: 2,7Mtpa of thermal coal 1 st production: 1H20 Matla Mine 1 Relocation Capex: R1,8bn Construction start pending Eskom approval Leeuwpan Lifex* Capex: R0,5bn Product: 2,7Mtpa of thermal coal 1 st production: 2H18 Grootegeluk Discard Inpit Phase 2 Capex: R0,6bn In commissioning Orange text indicates changes from March guidance * Life Expansion Refer to slide 30 for additional detail

16 Capex adequately provided 16 Expansion capital profile (Rm) Sustaining capital profile (Rm) H16 2H16 1H17 2H17* FY18* FY19* FY20* FY21* 0 1H16 2H16 1H17 2H17* FY18* FY19* FY20* FY21* FY22* Waterberg Other Total Previous guidance Refer to slide 31 for additional detail

17 Financial results Riaan Koppeschaar

18 Financial overview group IFRS 18 R million 1H16 2H16 1H (9) Revenue Net operating profit Equity-accounted income Cash generated by operations Refer to slides 37 & 38 for additional detail

19 Financial overview non-core adjustments 19 R million 1H17 2H16 1H16 Coal (24) Disposal of assets Loss on disposal of other non-core assets and VSPs* (24) (40) (15) Ferrous (100) (1) Impairment charges (100) VSPs* (1) Other (139) 121 (9) ECC contingent consideration adjustment (37) (483) 38 Mayoko iron ore project (27) 670 Loss on dilution of investment in Tronox (75) (7) (29) Loss on disposal of other non-core assets, VSPs* and other (59) (18) Non-core adjustment impact on net operating profit (163) Tax on items with impact on net operating profit Post-tax equity-accounted income (4) SIOC (4) 201 (9) RBCT 35 Mafube (15) Tronox 4 (9) Total non-core adjustment impact on attributable earnings (161) * Voluntary severance packages

20 Financial overview group core* 20 R million 1H17 2H16 % change 1H17 vs 2H16 1H16 % change 1H17 vs 1H16 Revenue (4) Operating expenses (7 663) (8 175) 7 (7 781) 2 Net operating profit Net operating profit margin (%) Post-tax equity-accounted income (48) (26) Headline earnings (30) Headline earnings per share (cents) (21) EBITDA Capital expenditure (18) Net debt Average API4 export price (US$/tonne) Average coal export price realised US$/tonne R/tonne * Non-IFRS

21 Net operating profit core 2H16 vs 1H17 21 R million (81) (163) (100) (126) 115 (21) Outside management control Inside management control IFRS 2H16 Non-core Core 2H16 Inflation Forex Rehab Price Volume Cost Core 1H17 Non-core IFRS 1H17 Coal (60) (104) (146) 115 (20) (24) Ferrous (40) (2) 2 (1) (61) 2 Other 147 (121) (1) (14) 35 (139) (104) TOTAL (81) (100) (126) 115 (21) (163) 2 910

22 Attributable earnings core 22 R million 1H17 2H16 % change 1H17 vs 2H16 1H16 % change 1H17 vs 1H16 Net operating profit Net financing cost (451) (294) (53) (334) (35) Post-tax equity-accounted income (48) (26) SIOC (17) Tronox (295) 542 (154) (921) 68 Mafube (30) Cennergi (11) (34) (130) Black Mountain RBCT (14) (25) 44 (10) (40) Tax (867) (728) (19) (566) (53) Non-controlling interest (31) (46) (191) Attributable earnings: owners of parent (30) Attributable earnings per share (cents) (21) Refer to slides 47 for additional detail

23 1H17 Net debt 23 R million (3 660) (348) (59) Dec 2016 Capex Investing activities Dividends received Share repurchase Other 30 Jun Dividends paid Cash generated Net financing costs Tax Refer to slides 42, 43 & 44 for additional detail

24 Dividend payment to shareholders 24 Interim dividend Interim dividend Final dividend Total dividend 1H17 1H16 2H16 FY16 Attributable earnings per share* (cents) Dividend declared per share (cents) Dividend cover* (times) 3,0 3,4 2,8 2,9 Dividend declared (Rm) MS333** Anglo Public Employee empowerment (Mpower 2012) Dividend distribution 1H17 MS333 38% Public 62% * Adjusted for non-cash non-core items ** Main Street 333 Refer to slide 45 for additional detail

25 Replacement BEE Transaction and second share repurchase Jun Q17 4Q17 Agreement of Replacement BEE Transaction and unwind Signing Transaction/ Funding Agreements Fairness opinion Agree reference price Election of MS333 shareholders to be finalised Detailed terms announcement Circular sent to shareholders BEE election period commences (reinvestment) Exxaro shareholders approval Transaction implementation

26 Outlook Mxolisi Mgojo

27 Outlook for 2H17 and beyond 27 Global economic growth outlook remains upbeat Global Uncertainty of Chinese and Indian domestic coal policy implementation Relatively stable international coal markets Political and policy uncertainty continues RSA to return to positive economic growth, albeit weak Stable thermal coal trading conditions anticipated South Africa Implications for political environment leading up to ruling party s elective conference Policy uncertainty to negatively impact investment. Chamber of Mines application to High Court to prevent the implementation of Reviewed Mining Charter of 2017 Sovereign credit rating remains at risk Volatile rand exchange rate

28 Thank you

29 Additional slides

30 Coal mega projects 30 2H17 GG6 Expansion investment decision approved 1H17 and construction in process Belfast rezoning appeal outcome expected 2H17 and construction commencement expected 2H17 Thabametsi Phase 1 early works in process and expected to conclude 2H17. Notice to proceed for full construction expected 1H18 by Department of Energy Matla Mine 1 Relocation awaits Eskom funding approval Grootegeluk Rapid Load Out Station construction continues Grootegeluk Discard Inpit Project Phase 2 completion expected 2H17 1H18 GG6 Expansion construction continues Belfast construction continues Thabametsi Phase 1 detail design for full infrastructure Grootegeluk Rapid Load Out Station construction continues Leeuwpan Lifex completion expected 2H18 GG6 Expansion Capex: R4,8bn Product: 1,7Mtpa of semi soft coking 12,5% ash 1 st production: FY20 Belfast Capex: R3,3bn Product: 2,7Mtpa of thermal coal 1st production: 1H20 Thabametsi Phase 1 Capex: R2,8bn Product: 3,9Mtpa of thermal coal 1 st production: FY21 Matla Mine 1 Relocation Capex: R1,8bn Construction start pending Eskom funding approval 2H18 GG6 Expansion construction continues Belfast construction continues Thabametsi Phase 1 construction continues Grootegeluk Rapid Load Out Station construction continues Leeuwpan Lifex first product FY19 GG6 Expansion construction continues Belfast construction continues Thabametsi Phase 1 construction continues Grootegeluk Rapid Load Out Station completion expected 2H19 Grootegeluk Rapid Load Out Station Capex: R1,3bn Load capacity: 12Mtpa 1 st production: 1H19 Grootegeluk Discard Inpit Phase 2 Capex: R0,6bn In commissioning Leeuwpan Lifex Capex: R0,5bn Product: 2,7Mtpa of thermal coal 1 st production: 2H18

31 Capital expenditure Coal 31 R million Actual Forecast* 1H16 2H16 1H17 2H17 FY18 FY19 FY20 FY21 FY22 Sustaining GG load out station GG trucks, shovels and stacker reclaimers GG backfill phase GG other Leeuwpan OI reserve ECC Other operations Expansion GG6 phase Other GG Thabametsi phase Belfast Total coal capital expenditure Waterberg Other Previous guidance * Based on latest internal forecast

32 Coal volumes 32 '000 tonnes 1H16 2H16 1H17 2H17* FY18* FY19* Thermal Production Grootegeluk Matla ECC Leeuwpan NBC Mafube Buy-ins Total thermal production (including buy-ins) Total metallurgical production - Grootegeluk Sales to Eskom Grootegeluk Matla NBC Leeuwpan 416 Other domestic thermal coal sales Exports Total thermal coal sales Total domestic metallurgical coal sales * Based on latest internal forecast

33 Export market volumes per mine 33 0,6 0,6 0,4 0,8 0,3 0,9 0,8 0,7 0,7 0,3 0,5 0,8 0,5 1,9 1,6 1,5 1,8 1,8 0,5 1,5 0,5 0,2 0,3 0,4 0,4 0,6 0,7 0,5 0,6 0,7 0,6 0,4 0,5 0,6 0,6 1H15 2H15 1H16 2H16 1H17 2H17* 1H18* Leeuwpan Grootegeluk ECC Inyanda Mafube Other** * Based on latest internal forecast ** Buy-ins and inventory

34 Domestic market volumes per mine 34 0,1 1,4 1, ,4 0,1 1,4 1,5 0,7 4,4 0,2 0,3 0,4 1,6 1,4 1,3 1,2 1,6 1,4 4,0 3,9 3,5 0,2 0,3 0,4 1,7 1,5 1,4 4,1 4,3 10,7 11,6 10,9 10,9 11,5 12,8 14,1 1H15 2H15 1H16 2H16 1H17 2H17* 1H18* Grootegeluk Matla Arnot Leeuwpan NBC Other** * Based on latest internal forecast ** Other consisted of Inyanda and now ECC (2H15)

35 Grootegeluk 7/8 production and sales profile Addendum 9 settlement 35 Matimba (Mt) Medupi (Mt) Total (Mt) Take-or-pay (Mt) Premium (Rm) Shortfall (Rm) ,5 14, ,5 2,8 15,3 3, ,0 8,5 19,5 2, , ,5 6, ,7 8,9 21,6 3, H17 6,3 4,0 10,3 1, H17* 6,4 4,9 11,3 1, * 12,7 12,5 25, onwards* 12,7 12,5 25,2 Highlighted text indicates changes from March guidance * Based on latest internal forecast 28

36 Exxaro coal sensitivities* 36 Measure Sensitivity Impact on NOP (Rm) Environmental rehabilitation discount rate 0,5% (120) 106 Sales volumes 1% (59) 59 Price per tonne US$1 (45) 45 Labour 1% (10) 10 Railage 10 cents (10) 10 Exchange rate 1% (10) 10 Fuel 1% (4) 4 Electricity 1% (2) 2 * 1H17 impact

37 Financial overview group IFRS 37 R million 1H17 2H16 % change 1H17 vs 2H16 1H16 % change 1H17 vs 1H16 Revenue (4) Operating expenses (7 826) (7 994) 2 (7 603) (3) Impairment charges (100) Net operating profit (4) Net operating profit margin (%) Post-tax equity-accounted income (53) (9) Attributable earnings: owners of parent (39) Headline earnings* (21) Cash generated from operations Capital expenditure (18) Net debt* Attributable earnings per share (cents) ** (31) Headline earnings per share (cents) ** (11) Average R/US$ rate Realised 13,42 14,34 (6) 14,92 (10) Spot 13,20 13,98 (6) 15,39 (14) * Non-IFRS number ** Based on weighted average number of shares of 316 million for 1H17 and 355 million for 1H16 and 2H16

38 Group revenue 2H16 vs 1H17 38 R million Volume = (R560m) Price = +R333m (251) 148 (316) (172) (141) H16 Tied volume Commercial volume Export volume Other volume Tied price Commercial price Export price Other price Forex 1H17

39 Group net operating profit core - 1H16 vs 1H17 39 R million (226) (163) (178) (287) (290) Outside management control Inside management control IFRS 1H16 Non-core Core 1H16 Inflation Forex Price Volume Cost Rehab Core 1H17 Non-core IFRS 1H17 Coal (188) (277) (308) (325) (24) Ferrous (7) 1 (6) (1) (2) 9 (2) 2 Other (66) 9 (57) (10) 19 (19) (139) (104) (178) (287) (290) (226) (163) 2 910

40 Group depreciation, amortisation and EBITDA core 40 R million Depreciation and amortisation 1H17 2H16 % change 1H17 vs 2H16 1H16 % change 1H17 vs 1H16 Coal Tied operations Commercial operations Ferrous 3 4 FerroAlloys 3 4 Other Other (28) 43 7 Total depreciation and amortisation EBITDA Coal Tied operations Commercial operations Ferrous 62 (2) FerroAlloys 35 (3) Other 27 1 Other (14) Total EBITDA

41 HEPS contribution to group * 41 1H17 cents Contribution % 2H16 cents Contribution % (Decrease)/ increase contribution % 1H17 vs 2H16 1H16 cents Contribution % JSE HEPS Increase/ (decrease) contribution % 1H17 vs 1H16 Coal (59) Ferrous (24) TiO 2 (93) (10) (26) (262) (85) 75 Energy (4) (10) (1) (3) Other 21 2 (118) (12) 14 (28) (9) 11 Core HEPS Coal (61) Ferrous (25) TiO 2 (93) (10) (23) (262) (85) 75 Energy (4) (10) (1) (3) Other (30) (10) 14 * Based on group average number of shares of 316 million for 1H17 and 355 million for 1H16 and 2H16

42 Cash generated before working capital movements vs EBITDA 42 R million 1H17 2H16 1H16 EBITDA (core) Fair value adjustment of contingent consideration (37) (483) 38 VSP s and termination costs (77) (21) Mayoko iron ore project (27) EBITDA Unrealised foreign exchange and other fair value movements (70) 56 (39) Fair value contingent consideration (38) Provisions raised/(reversed) (192) Impairment or write-down of receivable Indemnification asset movement (30) (28) (28) Share-based payment expense Transaction cost amortised 5 5 Other unrealised foreign exchange movements 1 (11) (25) Cost recovery of tied mines not yet received and other 9 (893) (3) Cash generated before working capital movements

43 Debt and key performance indicators 43 Target 1H17 2H16 1H16 Bank covenants* Net debt: equity (%) < EBITDA interest cover (times) (12 months) > Net debt: EBITDA (times) (12 months) < Internal key performance indicators EBITDA interest cover (times) > Return on equity: headline earnings (%) (12 months) Return on capital employed** (%) (12 months) > Net debt: equity (%) <40 12,0 3,8 6,5 Net debt: EBITDA (times) (12 months) <2 0,6 0,2 0,4 * Including contingent liabilities except DMR guarantees, as well as dividends received from associates ** Excluding impairments

44 Capital funding structure 44 R million Drawn Facilities available Undrawn/ committed Term loan and revolving facility* Undrawn/ unissued DMTN** programme Interest bearing borrowings Finance lease liabilities 30 Capitalised transaction costs (41) Total interest bearing borrowings Current 11 Non-current Net cash and cash equivalents (1 160) Net debt Maturity profile of debt Repayment year Less than 6 months months years years (9) 3 4 years (9) 4 5 years > 5 years 186 * Excludes additional R2bn accordion option ** Domestic medium-term note

45 Mpower 2012 benefits 45 Rand Dividends per participant* FY12 = 500cps FY13 = 550cps FY14 = 470cps FY15 = 150cps 581 FY16 = 500cps Proceeds on sale of shares ** FY17 = R90,40 per share Total benefit per participant * Based on an employee participating in Mpower 2012 for the full five year period with a total share of 387 units ** Pre-tax

46 ECC contingent consideration 46 API4 coal price range (US$/tonne) Deferred payments (US$m) Expected coal price (US$/tonne)* Discount factor of 3% Fair value adjustment (US$m) Net present value of the fair value adjustment (US$m) Year Minimum Maximum FY ,00 0,97 18,75 18,12 FY ,36 0,93 6,13 5,73 FY ,52 0,90 9,94 8,98 Total 85 32,83 Total ZAR** 427 Payable January Payable beyond * Based on latest internal forecast ** Assuming closing US$ exchange rate of R13.01 at 30 June 2017

47 Tronox US GAAP reconciliation to IFRS 47 US GAAP (loss)/profit after tax as reported by Tronox 1H17 2H16 1H16 US$m Rm US$m Rm US$m Rm (33) 82 (140) IFRS adjustments (23) 10 2 Reversal of amortisation on intangible asset PPA step-up adjustments (21) 8 (4) Translation differences and other adjustments (18) 3 (7) Tax adjustment 12 (11) 2 Prior year adjustment* (7) IFRS loss after tax (56) 92 (138) Non-core adjustments** 1 (Loss)/profit after tax (56) 92 (137) Remainder of Tronox (76) 94 (140) SA operations 20 (2) 3 Exxaro's share of (loss)/profit after tax (21) (295) (59) (921) Remainder of Tronox (33) (447) (61) (958) SA operations (1) (22) 2 37 * Exxaro included this adjustment in the current year ** As defined by Exxaro