Wrap Text
EXX - Reviewed condensed group interim financial statements and unreviewed production and
sales volumes
EXXARO RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
("Exxaro" or "the company" or "the group")
Reviewed condensed group interim financial statements and unreviewed production and
sales volumes information for the six-month period ended 30 June 2018
SALIENT FEATURES
Group
- Revenue R12.3 billion, up 14%
- Net operating profit R3.1 billion, up 7%
- Interim dividend of 530 cents per share, up 230 cents per share
- HEPS* of 1 222 cents up 39%
- AEPS** of 1 268 cents, up 49%
- Cash generated by operations at R3.9 billion
SIOC
- R0.8 billion post-tax equity-accounted income
- R1.3 billion, Exxaro's share of dividend declared for 1H18
Tronox
- R224 million post-tax equity-accounted income
- Dividend of R31 million received in 1H18
* Headline earnings per share
** Attributable earnings per share
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
(Re-presented)
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Revenue (note 7) 12 260 10 736 22 813
Operating expenses (9 134) (7 751) (17 593)
Operating profit (note 8) 3 126 2 985 5 220
BEE credentials (4 245)
Net operating profit 3 126 2 985 975
Finance income (note 9) 168 71 217
Finance costs (note 9) (345) (522) (828)
Income from financial assets 1 2
Share of income of equity-accounted
investments (note 10) 1 046 1 488 3 952
Profit before tax 3 996 4 022 4 318
Income tax expense (809) (861) (1 542)
Profit for the period from continuing
operations 3 187 3 161 2 776
Profit/(loss) for the period from
discontinued operations (note 6) 31 (438) 3 256
Profit for the period 3 218 2 723 6 032
Other comprehensive income/(loss), net
of tax 223 (181) (1 352)
Items that will not be reclassified to
profit or loss: 59 (4) 13
- Remeasurement of post-retirement
employee obligations (29) (29)
- Changes in fair value of equity
investments at fair value through
other comprehensive income 57
- Share of other comprehensive income
of equity-accounted investments 2 25 42
Items that may subsequently be reclassified
to profit or loss: 150 (177) (92)
- Unrealised gains/(losses) on translation
of foreign operations 41 (39) (62)
- Revaluation of financial assets
available-for-sale 5 (14)
- Share of other comprehensive income/(loss)
of equity-accounted investments 109 (143) (16)
Items that have subsequently been reclassified
to profit or loss: 14 (1 273)
- Recycling of exchange differences on
translation of foreign operations 14 58
- Share of recycling of other comprehensive income
of equity-accounted investments (1 331)
Total comprehensive income for the period 3 441 2 542 4 680
(Re-presented)
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Profit/(loss) attributable to:
Owners of the parent 3 182 2 692 5 982
- Continuing operations 3 151 3 130 2 726
- Discontinued operations 31 (438) 3 256
Non-controlling interests 36 31 50
- Continuing operations 36 31 50
Profit for the period 3 218 2 723 6 032
Total comprehensive income/(loss) attributable to:
Owners of the parent 3 405 2 511 4 630
- Continuing operations 3 374 3 016 2 545
- Discontinued operations 31 (505) 2 085
Non-controlling interests 36 31 50
- Continuing operations 36 31 50
Total comprehensive income for the period 3 441 2 542 4 680
(Re-presented)
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
cents cents cents
Attributable earnings/(loss) per share
Aggregate
- Basic 1 268 852 1 923
- Diluted 988 852 1 724
Continuing operations
- Basic 1 256 991 876
- Diluted 978 991 786
Discontinued operations
- Basic 12 (139) 1 047
- Diluted 10 (139) 938
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
At 30 June At 30 June At 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 49 691 51 556 47 706
Property, plant and equipment 25 613 22 568 24 362
Biological assets 34 47 34
Intangible assets 15 23 17
Investments in associates (note 13) 16 336 22 333 15 810
Investments in joint ventures (note 14) 1 482 1 329 1 479
Financial assets 2 601 4 827 5 433
- Financial assets at fair value through
other comprehensive income (note 20) 221
- Financial assets at fair value through
profit or loss (note 20) 1 426
- Loans to associates and joint ventures
(note 20) 258
- Other financial assets at amortised cost (note 20) 696
Lease receivables 60
Deferred tax 566 429 571
Other non-current assets (note 15) 2 984
Current assets 7 333 5 919 10 936
Inventories 1 485 1 287 1 055
Financial assets 82 48
- Loans to associates and joint ventures (note 20) 1
- Other financial assets at amortised cost (note 20) 81
Trade and other receivables 2 687 2 440 3 199
Lease receivables 14
Current tax receivable 29 119 28
Cash and cash equivalents 2 596 2 073 6 606
Other current assets (note 15) 440
Non-current assets held-for-sale (note 16) 3 740 175 3 910
Total assets 60 764 57 650 62 552
At 30 June At 30 June At 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 1 021 1 660 1 021
Other components of equity 8 063 5 007 8 120
Retained earnings 30 294 30 476 30 962
Equity attributable to owners of the parent 39 378 37 143 40 103
Non-controlling interests (702) (757) (738)
Total equity 38 676 36 386 39 365
Non-current liabilities 15 770 15 909 17 409
Interest-bearing borrowings (note 17) 4 480 5 498 6 480
Non-current other payables 92
Provisions 3 817 4 149 3 864
Post-retirement employee obligations 235 222 227
Financial liabilities 496 253 850
- Financial liabilities at fair value
through profit or loss (note 20) 337
- Financial liabilities at amortised cost (note 20) 159
Deferred tax 6 641 5 787 5 988
Other non-current liabilities (note 19) 9
Current liabilities 4 633 4 221 4 127
Interest-bearing borrowings (note 17) 581 11 2
Trade and other payables 2 555 2 753 3 237
Shareholder loans 18
Provisions 114 140 95
Financial liabilities 636 236 371
- Financial liabilities at fair value
through profit or loss (note 20) 310
- Financial liabilities at amortised cost (note 20) 285
- Derivative financial instruments (note 20) 41
Current tax payable 68 146 368
Overdraft (note 17) 49 917 54
Other current liabilities (note 19) 630
Non-current liabilities held-for-sale (note 16) 1 685 1 134 1 651
Total liabilities 22 088 21 264 23 187
Total equity and liabilities 60 764 57 650 62 552
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Other components of equity
Post-
Foreign Financial retirement Available-
Share currency instruments Equity- employee for-sale
capital translation revaluation settled obligations revaluation
Rm Rm Rm Rm Rm Rm
At 31 December 2016 (Audited) 2 509 4 010 23 1 898 (262) (60)
Profit for the period
Other comprehensive (loss)/income (39) (29) 5
Share of other comprehensive (loss)/income
of equity-accounted investments (174) (58) 89 25
Issue of share capital1 463
Share-based payments movement2 (422)
Dividends paid
Share repurchase3 (1 312)
Reclassification within equity
At 30 June 2017 (Reviewed) 1 660 3 797 (35) 1 565 (266) (55)
Profit for the period
Other comprehensive loss (23) (19)
Share of other comprehensive income/(loss)
of equity-accounted investments 20 (7) 114 17
Issue of share capital1 10 242
Share-based payments movement2 4 479
Dividends paid
Share repurchase3 (639)
Treasury shares4 (10 242)
Partial disposal of an associate5 (1 332) 1 (286) 91
Liquidation of subsidiaries6 58
At 31 December 2017 (Audited) 1 021 2 520 (41) 5 872 (158) (74)
Adjustment on initial application of
IFRS 15 (net of tax)7
Adjustment on initial application of
IFRS 9 (net of tax)7 74
Adjusted balance at 1 January 2018 1 021 2 520 (41) 5 872 (158)
Profit for the year
Other comprehensive income 41
Share of other comprehensive income
of equity-accounted investments 88 21 2
Share-based payments movement2 (280)
Dividends paid
Liquidation of subsidiaries6 14
At 30 June 2018 (Reviewed) 1 021 2 663 (20) 5 592 (156)
Other components of equity
Financial Attributable
asset to owners Non-
FVOCI Retained of the controlling Total
revaluation Other earnings parent interests equity
Rm Rm Rm Rm Rm Rm
At 31 December 2016 (Audited) (3 524) 31 281 35 875 (788) 35 087
Profit for the period 2 692 2 692 31 2 723
Other comprehensive (loss)/income (63) (63)
Share of other comprehensive (loss)/
income of equity-accounted investments (118) (118)
Issue of share capital1 463 463
Share-based payments movement2 (422) (422)
Dividends paid (1 284) (1 284) (1 284)
Share repurchase3 3 524 (2 212)
Reclassification within equity 1 (1)
At 30 June 2017 (Reviewed) 1 30 476 37 143 (757) 36 386
Profit for the period 3 290 3 290 19 3 309
Other comprehensive loss (42) (42)
Share of other comprehensive income/
(loss) of equity-accounted investments 144 144
Issue of share capital1 10 242 10 242
Share-based payments movement2 4 479 4 479
Dividends paid (943) (943) (943)
Share repurchase3 (2 056) (2 695) (2 695)
Treasury shares4 (10 242) (10 242)
Partial disposal of an associate5 195 (1 331) (1 331)
Liquidation of subsidiaries6 58 58
At 31 December 2017 (Audited) 1 30 962 40 103 (738) 39 365
Adjustment on initial application of
IFRS 15 (net of tax)7 314 314 314
Adjustment on initial application of
IFRS 9 (net of tax)7 (74) (11) (11) (11)
Adjusted balance at 1 January 2018 (74) 1 31 265 40 406 (738) 39 668
Profit for the year 3 182 3 182 36 3 218
Other comprehensive income 57 98 98
Share of other comprehensive income
of equity-accounted investments 111 111
Share-based payments movement2 (280) (280)
Dividends paid (4 153) (4 153) (4 153)
Liquidation of subsidiaries6 14 14
At 30 June 2018 (Reviewed) (17) 1 30 294 39 378 (702) 38 676
1 For 2017, the issue of share capital comprises the vesting of Mpower 2012 treasury shares to good leavers and beneficiaries upon
final vesting of the share-based payment scheme on 31 May 2017 amounting to R463 million and an issue of 67 221 565 ordinary shares
to NewBEECo at a discounted share price of R73.92 per share which had a market share price of R152.35 on 11 December 2017.
2 For 2018, the share-based payment movements include an amount of R147 million paid to the BEE Parties as a dividend. For 2017,
comprises the final vesting of Mpower 2012 shares as well as the potential benefit to be obtained by the BEE Parties amounting
to R4 245 million.
3 Exxaro executed two repurchases during 2017. Exxaro repurchased 43 943 744 ordinary shares from Main Street 333 for a purchase
consideration of R3 524 million during January 2017 and 22 686 572 ordinary shares from Main Street 333 for a purchase consideration
of R2 695 million during December 2017.
4 For 2017, 107 612 026 ordinary shares held by NewBEECo in Exxaro were accounted for as treasury shares on consolidation of NewBEECo.
5 During October 2017, Exxaro disposed of 22 425 000 Class A Tronox Limited ordinary shares which resulted in a gain on translation
differences being recycled to profit or loss, the release of a loss from the financial instruments revaluation reserve to profit
or loss, a net reclassification within equity from retirement benefit obligation reserve and equity-settled reserve to retained
earnings.
6 For 2018, recognised a gain on translation difference recycled to profit or loss on the liquidation of a foreign subsidiary
(Exxaro Coal Botswana Holding Company Proprietary Limited). For 2017, recognised a gain on translation difference recycled to
profit or loss on the liquidation of a foreign subsidiary (Exxaro Mineral Sands BV).
7 Refer note 4 for details of the adjustments on initial application of IFRS 9 Financial Instruments (IFRS 9) and IFRS 15 Revenue
from Contracts with Customers (IFRS 15).
Dividend distribution cents
Final dividend per share paid in respect of the 2017 financial year 400
Dividend per share paid in respect of the 2017 interim period 300
Dividend per share payable in respect of the 2018 interim period 530
Foreign currency translation
Arises from the translation of the financial statements of foreign operations within the group.
Financial instruments revaluation
Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments where the hedged transaction has not yet occurred.
Equity-settled
Represents the fair value, net of tax, of services received from employees and settled by equity
instruments granted as well as the fair value of the potential benefit to be obtained by the BEE
Parties in relation to the Replacement BEE Transaction.
Post-retirement employee obligations
Comprises remeasurements, net of tax, on the post-retirement employee obligations.
Available-for-sale revaluation
Comprises the fair value adjustments, net of tax, on the available-for-sale financial assets.
Financial asset FVOCI revaluation
Comprises the fair value adjustments, net of tax, on the financial assets classified at FVOCI.
CONDENSED GROUP STATEMENT OF CASH FLOWS
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Cash flows from operating activities (926) 1 528 3 400
Cash generated by operations 3 941 3 660 6 826
Interest paid (269) (328) (597)
Interest received 143 55 188
Tax paid (588) (575) (790)
Dividends paid (4 153) (1 284) (2 227)
Cash flows from investing activities (1 109) (907) 4 377
Property, plant and equipment acquired to maintain
operations (note 12) (1 177) (1 105) (2 977)
Property, plant and equipment acquired to expand
operations (note 12) (860) (209) (944)
Intangible assets acquired (1) (1)
Proceeds from disposal of property, plant and equipment 232 2 11
Settlement of contingent consideration (note 20.2) (299) (74) (74)
Decrease in loans to related parties 400 400
Interest received on loans to related parties 84 84
Decrease in other financial assets at amortised cost 41
Decrease in loan to joint venture 18
Increase in loan to joint venture (150)
Decrease in lease receivable 7
Increase in loan to associate (1)
Acquisition of associate (note 13) (191) (26)
Income from investments in associates and joint ventures 1 306 59 1 499
Proceeds from disposal of equity-accounted investments 6 525
Decrease in non-current financial assets 6 14
Increase in non-current financial assets (4) (4)
Increase in environmental rehabilitation funds (67) (66) (130)
Dividend income from financial assets and non-current
assets classified as held-for-sale 32 1
Cash flows from financing activities (2 065) (4 620) (6 361)
Interest-bearing borrowings raised 2 491
Interest-bearing borrowings repaid (1 496) (999) (2 534)
Shares acquired in the market to settle share-based payments (422) (97) (99)
Dividends paid to BEE Parties (147)
Repurchase of share capital (3 524) (6 219)
Net (decrease)/increase in cash and cash equivalents (4 100) (3 999) 1 416
Cash and cash equivalents at beginning of the period 6 566 5 183 5 183
Reclassifications of cash and cash equivalents 51
Translation difference on movement in cash and cash equivalents 40 (24) (33)
Cash and cash equivalents at end of the period 2 557 1 160 6 566
Cash and cash equivalents 2 596 2 073 6 606
Cash and cash equivalents classified as held-for-sale 10 4 14
Overdraft (49) (917) (54)
RECONCILIATION OF GROUP HEADLINE EARNINGS
Gross Tax Net
Rm Rm Rm
6 months ended 30 June 2018 (Reviewed)
Profit for the period attributable to owners of the parent 3 182
Adjusted for: (118) 3 (115)
- IAS 16 Net gains on disposal of property, plant and equipment (118) (1) (119)
- IAS 21 Loss on translation differences recycled to profit or
loss on the liquidation of a foreign subsidiary 14 14
- IAS 28 Share of equity-accounted investments' separate
identifiable remeasurements (14) 4 (10)
Headline earnings 3 067
Continuing operations 3 036
Discontinued operations 31
6 months ended 30 June 2017 (Reviewed) (Re-presented)
Profit for the period attributable to owners of the parent 2 692
Adjusted for: 103 (8) 95
- IAS 16 Net losses on disposal of property, plant and equipment 22 (6) 16
- IAS 28 Loss on dilution of associate 75 75
- IAS 28 Share of equity-accounted investments' separate
identifiable remeasurements 6 (2) 4
Headline earnings/(loss) 2 787
Continuing operations 3 150
Discontinued operations (363)
12 months ended 31 December 2017 (Audited)
Profit for the year attributable to owners of the parent 5 982
Adjusted for: (4 674) 252 (4 422)
- IAS 16 Net losses on disposal of property, plant and equipment 61 (18) 43
- IAS 16 Compensation from third parties for items of property,
plant and equipment impaired, abandoned or lost (3) 1 (2)
- IAS 21 Net gains on translation differences recycled to profit
or loss on the liquidation of a foreign subsidiary and partial
disposal of investment in foreign associate (1 274) (1 274)
- IAS 28 Loss on dilution of associate 106 106
- IAS 28 Share of equity-accounted investments' impairment
reversal of property, plant and equipment (987) 271 (716)
- IAS 28 Share of equity-accounted investments' separate
identifiable remeasurements 12 (2) 10
- IAS 28 Share of equity-accounted investments' loss on
disposal of a subsidiary 1 271 1 271
- IAS 28 Gain on partial disposal of associate (3 860) (3 860)
Headline earnings/(loss) 1 560
Continuing operations 2 120
Discontinued operations (560)
(Re-presented)
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
cents cents cents
Headline earnings/(loss) per share
Aggregate
- Basic 1 222 882 502
- Diluted 953 882 450
Continuing operations
- Basic 1 210 997 682
- Diluted 943 997 611
Discontinued operations
- Basic 12 (115) (180)
- Diluted 10 (115) (161)
Refer to note 11 for details regarding the number of shares.
NOTES TO THE REVIEWED CONDENSED GROUP INTERIM FINANCIAL STATEMENTS
1. CORPORATE BACKGROUND
Exxaro, a public company incorporated in South Africa, is a diversified resources group with interests
in the coal (controlled and non-controlled), TiO2 (non-controlled), ferrous (controlled and
non-controlled) and energy (non-controlled) markets. These reviewed condensed group interim financial
statements as at and for the six-month period ended 30 June 2018 (interim financial statements) comprise
the company and its subsidiaries (together referred to as the group) and the group's interest in
associates and joint ventures.
2. BASIS OF PREPARATION
2.1 Statement of compliance
The interim financial statements have been prepared in accordance with IFRS, IAS 34 Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements
of the Companies Act of South Africa.
The interim financial statements have been prepared under the supervision of Mr PA Koppeschaar CA(SA),
SAICA registration number: 00038621.
The interim financial statements should be read in conjunction with the group annual financial statements
as at and for the year ended 31 December 2017, which have been prepared in accordance with IFRS as issued
by the IASB. The interim financial statements have been prepared on the historical cost basis, excluding
financial instruments and biological assets, which are measured at fair value. This is the first set of
interim financial statements where IFRS 9 and IFRS 15 have been applied. Changes to significant accounting
policies are described in note 4.
The interim financial statements of the Exxaro group were authorised for issue by the board of directors
on 14 August 2018.
2.2 Judgements and estimates
Management made judgements, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these
estimates. The significant judgements made by management in applying the group's accounting policies and
the key source of estimation uncertainty were similar to those applied to the group annual financial
statements as at and for the year ended 31 December 2017, except for new significant judgements related
to the adoption of IFRS 9, which are described in note 4.2.4.
2.3 Re-presentation of comparative information
The reviewed condensed group statement of comprehensive income for the six-month period ended 30 June 2017
has been re-presented as a result of the investment in Tronox Limited being identified as a discontinued
operation (refer note 6).
3. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the interim financial statements are consistent with
those followed in the preparation of the group annual financial statements as at and for the year ended
31 December 2017, except for the estimation of income tax and the adoption of new or amended standards as
set out below.
3.1 Income tax
Income tax expense is recognised based on management's estimate of the weighted average effective annual
tax rate expected for the full financial year. As such, the effective tax rate used in the interim financial
statements may differ from management's estimate of the effective tax rate for the group annual financial
statements. The estimated weighted average effective annual tax rate used for the six-month period ended
30 June 2018 is 20.1%, compared to 24% for the six-month period ended 30 June 2017. The decrease in the
effective tax rate is mainly due to the following:
- Share of income or (loss) of equity-accounted investments and dividend income (-7%)
- Prior year adjustments (-1%)
Partly offset by:
- Non-deductible expenditure (+0.5%).
3.2 New or amended standards adopted by the group
A number of new or amended standards became effective for the current reporting period.
The group has adopted the following new standards, which are relevant to the group, for the first time
for the six-month period commencing on 1 January 2018:
- IFRS 9 Financial Instruments (IFRS 9)
- IFRS 15 Revenue from Contracts with Customers (IFRS 15).
The adoption of these standards has resulted in the group changing its accounting policies. The impact of
the adoption and the new accounting policies are disclosed in note 4.
3.3 Impact of new, amended or revised standards issued but not yet adopted by the group
Certain new accounting standards and interpretations have been published but are not yet effective on
30 June 2018, and have not been early adopted. Of these standards, only IFRS 16 Leases (IFRS 16) is
anticipated to have an impact on the group as summarised below.
IFRS 16
The standard is effective for annual periods beginning on or after 1 January 2019. The group made progress
on the initial assessment of the potential impact of this standard on the group's financial statements. This
initial assessment included the identification of material lease transactions within the group. The group
must still make a decision on the transition method to be applied as well as the practical expedients to be
used, if elected.
4. CHANGES IN ACCOUNTING POLICIES
This note explains the impact of the adoption of IFRS 9 and IFRS 15 on the interim financial statements and
also discloses the new accounting policies that have been applied from 1 January 2018, where they are different
to those applied in prior periods.
4.1 Impact on the financial statements
Prior year financial statements did not have to be restated as a result of the changes in the group's
accounting policies due to the adoption of IFRS 9 and IFRS 15. As explained in note 4.2 below, IFRS 9
was adopted without restating comparative information. The reclassifications and the adjustments arising
from the new impairment rules are therefore not reflected in a restated statement of financial position
as at 31 December 2017, but are recognised in the opening statement of financial position on 1 January 2018.
As explained in note 4.3 below, IFRS 15 was also adopted without restating comparative information.
The following table shows the reclassifications and adjustments recognised for each individual line item
as per the statement of financial position. The reclassifications and adjustments are explained in more
detail by standard below.
31 December
2017 1 January
Statement of financial position (extract) Previously 2018
presented IFRS 9 IFRS 15 Restated
Rm Rm Rm Rm
ASSETS
Non-current assets 47 706 (56) 47 650
Property, plant and equipment 24 362 24 362
Biological assets 34 34
Intangible assets 17 17
Investments in associates 15 810 15 810
Investments in joint ventures 1 479 1 479
Financial assets 5 433 (5 433)
- Financial assets at fair value through other comprehensive income 152 152
- Financial assets at fair value through profit or loss 1 391 1 391
- Loans to associates and joint ventures 128 128
- Other financial assets at amortised cost 678 678
Lease receivables1 62 62
Deferred tax 571 2 573
Other non-current assets 2 964 2 964
Current assets 10 936 (11) 10 925
Inventories 1 055 1 055
Financial assets 48 (48)
- Other current financial assets at amortised cost 48 48
- Derivative financial instruments 4 4
Trade and other receivables 3 199 (601) 2 598
Lease receivables 14 14
Current tax receivable 28 28
Cash and cash equivalents2 6 606 51 6 657
Other current assets 521 521
Non-current assets held-for-sale 3 910 3 910
Total assets 62 552 (67) 62 485
1 Unearned finance income of R56 million was reclassified from financial liabilities - finance leases to lease
receivables as the finance lease was previously presented on a gross basis instead of a net basis.
2 An amount of R51 million was reclassified from other receivables to cash and cash equivalents as the balances
meet the definition of cash and cash equivalents.
31 December
2017 1 January
Previously 2018
Statement of financial position (extract) presented IFRS 9 IFRS 15 Restated
Rm Rm Rm Rm
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 1 021 1 021
Other components of equity 8 120 8 120
Retained earnings 30 962 (11) 314 31 265
Equity attributable to owners of the parent 40 103 (11) 314 40 406
Non-controlling interests (738) (738)
Total equity 39 365 (11) 314 39 668
Non-current liabilities 17 409 31 (252) 17 188
Interest-bearing borrowings 6 480 6 480
Non-current other payables1 89 89
Provisions 3 864 3 864
Post-retirement employee obligations 227 227
Financial liabilities 850 (850)
- Financial liabilities at fair value through profit or loss 414 414
Deferred tax 5 988 (2) 122 6 108
Other non-current liabilities 380 (374) 6
Current liabilities 4 127 (87) (62) 3 978
Interest-bearing borrowings 2 66 68
Trade and other payables 3 237 (825) 2 412
Provisions 95 95
Financial liabilities 371 (371)
- Financial liabilities at fair value through profit or loss 309 309
- Derivative financial instruments 6 6
Current tax payable 368 368
Overdraft 54 54
Other current liabilities 728 (62) 666
Non-current liabilities held-for-sale 1 651 1 651
Total liabilities 23 187 (56) (314) 22 817
Total equity and liabilities 62 552 (67) 62 485
1 An amount of R89 million was reclassified from current other payables to non-current other payables as
the balance should have been presented as non-current due to it being payable after 12 months.
4.2 Impact of adopting IFRS 9
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) for annual periods
beginning on or after 1 January 2018. IFRS 9 brings together all aspects of accounting for financial
instruments that relate to the recognition, classification and measurement, derecognition, impairment
and hedge accounting.
The adoption of IFRS 9 from 1 January 2018 resulted in changes in accounting policies and adjustments to
the amounts recognised in the financial statements. The new accounting policies are set out in note 4.2.3
below. Comparative information has not been restated in accordance with the transitional requirements of
IFRS 9 which requires comparative information not to be restated (with an exception where it is possible
to restate without the use of hindsight) but for disclosures to be made concerning the reclassifications
and measurements as set out below.
The total impact on the group's retained earnings as at 1 January 2018 is as follows:
Note Rm
Closing balance at 31 December 2017 (IAS 39/IAS 18 Revenue (IAS 18)) 30 962
Adjustments from the adoption of IFRS 9 (11)
Increase in impairment allowances for trade receivables 4.2.2 (7)
Increase in impairment allowances for financial assets at amortised cost 4.2.2 (8)
Increase in deferred tax assets relating to impairment allowances 4.2.2 2
Decrease in deferred tax liabilities relating to impairment allowances 4.2.2 2
Opening balance at 1 January 2018 (after IFRS 9 before IFRS 15 restatement) 30 951
4.2.1 Classification and measurement
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of
financial liabilities. However, IFRS 9 eliminates the previous IAS 39 categories of held-to-maturity,
loans and receivables and available-for-sale financial assets.
The accounting for the group's financial liabilities remains largely the same as it was under IAS 39.
Similar to the requirements of IAS 39, IFRS 9 requires contingent consideration liabilities to be
treated as financial instruments measured at fair value, with changes in fair value recognised in profit
or loss.
Under IFRS 9, on initial recognition, a financial asset is classified as measured at:
- Amortised cost;
- Fair value through other comprehensive income (FVOCI) debt investment;
- FVOCI equity investment; or
- Fair value through profit or loss (FVPL).
The classification of financial assets under IFRS 9 is generally based on the business model in which
a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in
contracts where the host is a financial asset in the scope of the standard are never separated. Instead,
the hybrid financial instrument as a whole is assessed for classification.
On 1 January 2018 (the date of initial application of IFRS 9), the group's management assessed which
business model applied to the financial assets held by the group and classified its financial instruments
into the appropriate IFRS 9 categories. In addition, the group's management assessed whether contractual
cash flows on debt instruments solely comprised principal and interest based on the facts and circumstances
at the initial recognition of the assets. The main effects resulting from this reclassification are as
follows:
IAS 39 categories
At fair value through profit or loss
Loans and Available-
receivables for-sale
at financial
Held-for- amortised assets at
trading Designated cost fair value
Financial assets1 Note Rm Rm Rm Rm
Closing balance at 31 December 2017 (IAS 39) 4 1 391 13 129 152
Reclassify non-trading equities from
available-for-sale to FVOCI a (152)
Reclassify held-for-trading FVPL financial
assets to FVPL b (4)
Reclassify designated FVPL financial assets
to FVPL b (1 391)
Reclassify loans and receivables financial
assets to amortised cost c (10 169)
Reclassify indemnification asset to non-financial
instruments d (1 268)
Reclassify reimbursive non-current receivable asset
to non-financial instruments e (1 692)
Reclassify loans and receivables at amortised cost
to a financial asset measured at FVPL f
Opening balance at 1 January 2018 (IFRS 9)
IFRS 9 categories
FVOCI Non-
Amortised equity financial
FVPL cost instrument instruments
Financial assets1 Rm Rm Rm Rm
Closing balance at 31 December 2017 (IAS 39)
Reclassify non-trading equities from
available-for-sale to FVOCI 152
Reclassify held-for-trading FVPL financial
assets to FVPL 4
Reclassify designated FVPL financial assets
to FVPL 1 391
Reclassify loans and receivables financial
assets to amortised cost 10 169
Reclassify indemnification asset to non-financial
instruments 1 268
Reclassify reimbursive non-current receivable asset
to non-financial instruments 1 692
Reclassify loans and receivables at amortised cost
to a financial asset measured at FVPL
Opening balance at 1 January 2018 (IFRS 9) 1 395 10 169 152 2 960
1 The closing balances as at 31 December 2017 are prior to any adjustments made in terms of IFRS 9 and IFRS 15.
The opening balances as at 1 January 2018 differ from the amounts disclosed in note 4.1 as this table illustrates
the reclassification adjustments only and not the impairment adjustments.
IAS 39 categories IFRS 9 categories
At fair value through
profit or loss
Financial
liabilities
at
Held-for- amortised Amortised
trading Designated cost FVPL cost
Financial liabilities1 Note Rm Rm Rm Rm Rm
Closing balance at 31 December 2017 (IAS 39) 6 723 9 080
Reclassify held-for-trading FVPL financial liabilities to FVPL g (6) 6
Reclassify designated FVPL financial liabilities to FVPL g (723) 723
Reclassify financial liabilities to amortised cost h (9 080) 9 080
Opening balance at 1 January 2018 (IFRS 9) 729 9 080
1 The closing balances as at 31 December 2017 are prior to any adjustments made in terms of IFRS 9 and IFRS 15.
The impact of the changes on the group's equity is as follows:
IFRS 9
IAS 39 Financial
Available- asset
for-sale FVOCI
revaluation revaluation
reserve reserve
Other components of equity1 Note Rm Rm
Closing balance at 31 December 2017 (IAS 39) (74)
Reclassify non-trading equities from available-for-sale to FVOCI a 74 (74)
Opening balance at 1 January 2018 (IFRS 9) (74)
1 Reserves which were impacted by IFRS 9.
(a) Reclassify non-trading equities from available-for-sale to FVOCI
The group elected to present in OCI changes in the fair value of the Chifeng equity investment
previously classified as available-for-sale, because the investment is not expected to be sold in
the short- to medium-term. As a result, an asset with a fair value of R152 million was reclassified
from available-for-sale financial assets to financial assets at FVOCI and fair value losses of
R74 million were reclassified from the available-for-sale revaluation reserve to the financial asset
FVOCI revaluation reserve on 1 January 2018.
(b) Reclassify held-for-trading and designated FVPL financial assets to FVPL
These reclassifications have no impact on the measurement categories.
(c) Reclassify loans and receivables financial assets to amortised cost
These reclassifications have no impact on the measurement categories.
(d) Reclassify indemnification asset to non-financial instruments
This asset previously formed part of the financial instruments. However, with the adoption of IFRS 9
it was concluded that this asset is not within the scope of IFRS 9. This asset arose on the acquisition
of ECC which is within the scope of IFRS 3 Business Combinations.
(e) Reclassify reimbursive non-current receivable asset to non-financial instruments
This asset previously formed part of the financial instruments. However, with the adoption of IFRS 9
it was concluded that this is not within the scope of IFRS 9. This asset relates to the reimbursement
of the environmental rehabilitation provisions and the post-retirement medical obligations which is
within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
(f) Reclassify loans and receivables at amortised cost to a financial asset measured at FVPL
An other receivable with a gross amount of R70 million was reclassified to a financial asset at FVPL
as a result of the contractual cash flows not meeting the solely payments of principal and interest
(SPPI) criteria. In addition, the impairment allowance of R70 million was also reclassified. The fair
value of the financial asset was determined to be nil.
(g) Reclassify held-for-trading and designated FVPL financial liabilities to FVPL
These reclassifications have no impact on the measurement categories.
(h) Reclassify financial liabilities to amortised cost
These reclassifications have no impact on the measurement categories.
4.2.2 Impairment of financial assets
IFRS 9 replaces the "incurred loss" model in IAS 39 with an "expected credit loss" (ECL) model. The new
impairment model applies to financial assets measured at amortised cost, contract assets and debt
investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses
(impairments) are recognised earlier than under IAS 39.
Under IFRS 9, expected credit loss allowances are measured on either of the following basis:
- 12-month ECLs: these are ECLs that result from possible default events within the 12 months after
the reporting date; and
- lifetime ECLs: these are ECLs that result from all possible default events over the expected life
of a financial instrument.
The group has four types of financial assets that are subject to IFRS 9's new ECL model, namely:
- Trade receivables for sale of commodities and from the rendering of services;
- Other receivables;
- Loans to joint ventures and associates; and
- Financial assets carried at amortised cost.
The group was required to revise its impairment methodology under IFRS 9 for each of these classes of
assets. The impact of the change in impairment methodology on the group's retained earnings and equity
is disclosed in the first table of note 4.2 above.
While loans to joint ventures and associates as well as cash and cash equivalents are subject to the
impairment requirements of IFRS 9, the identified impairment loss was immaterial.
(a) Trade receivables
The group applies the IFRS 9 simplified approach to measuring ECLs which uses a lifetime expected credit
loss allowance for all trade receivables. To measure the ECLs, trade receivables have been grouped based
on shared credit risk characteristics (corporate entities, small medium enterprises and public sector
entities) and the days past due.
The impairment allowances as at 1 January 2018 for trade receivables are as follows:
More than More than More than
30 days 60 days 90 days
Current past due past due past due Total
Rm Rm Rm Rm Rm
Gross carrying amount 2 458 69 5 35 2 567
Impairment allowance 6 22 5 35 68
The impairment allowances for trade receivables as at 31 December 2017 reconcile to the opening expected
credit loss allowances for trade receivables on 1 January 2018 as follows:
Impairment allowances Rm
Closing balance at 31 December 2017 (IAS 39) 61
Amounts restated through opening retained earnings 7
Opening balance at 1 January 2018 (IFRS 9) 68
The expected credit loss allowances increased by a further R8 million to R76 million for trade receivables
during the six-month period ended 30 June 2018. The increase would have been R7 million lower under the
incurred loss model of IAS 39.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that
there is no reasonable expectation of recovery include, among others, the failure of a debtor to engage
in a repayment plan with the group, and a failure to make contractual payments for a period of greater
than 120 days past due.
(b) Other receivables and other financial assets at amortised cost
The group's other receivables and other financial assets at amortised cost are considered to have low
credit risk, and the expected credit loss allowance recognised during the period was therefore limited
to 12 months expected losses. These instruments are considered to be low credit risk when they have a
low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations
in the near term. Applying the expected credit risk model resulted in the recognition of an expected
credit loss allowance of R8 million on 1 January 2018 (previous impairment allowance was R70 million
which was reclassified on 1 January 2018) with no further increase in the allowance during the six-month
period ended 30 June 2018.
Impairment allowances Rm
Closing balance at 31 December 2017 (IAS 39) 70
Amount reclassified on a financial asset classified as FVPL (70)
Amounts restated through opening retained earnings 8
Opening balance as at 1 January 2018 (IFRS 9) 8
4.2.3 Accounting policies applied from 1 January 2018
(a) Financial assets
(i) Classification
From 1 January 2018, the group classifies its financial assets in the following measurement categories:
- those measured subsequently at fair value (either through OCI, or through profit or loss); and
- those measured at amortised cost.
The classification depends on the group's business model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
For investments in equity instruments that are not held-for-trading, this will depend on whether the
group has made an irrevocable election at the time of initial recognition to account for the equity
investment at FVOCI.
The group reclassifies debt instruments when, and only when, its business model for managing those assets
changes.
(ii) Measurement
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a
financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of the
financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their
cash flows are SPPI.
Debt instruments
Subsequent measurement of debt instruments depends on the group's business model for managing the asset
and the cash flow characteristics of the asset. Currently there are two measurement categories into which
the group classifies its debt instruments, as the group does not hold any debt instruments classified as
FVOCI, as summarised in the table below.
Business model Movements
Financial and cash flow in carrying
Category instruments characteristics amount Derecognition Impairment
Amortised cost - Trade and Financial assets that Interest income Any gain or loss Impairment losses
other are held for collection from these arising on are presented as
receivables of contractual cash financial assets derecognition is a separate line
- Loans to joint flows where those cash is included in recognised directly item in the notes
ventures and flows represent SPPI. finance income in profit or loss to the statement
associates using the and presented in of comprehensive
- Other financial effective operating expenses. income. The
assets interest rate impairment losses
method. are considered to
be immaterial and
Foreign exchange therefore it has
gains and losses not been presented
are recognised as a separate line
in profit or loss. on the face of the
statement of
comprehensive
income.
FVPL - Debt securities Financial assets that Gains and losses on Any gain or loss Debt instruments
- Derivative do not meet the criteria a debt investment arising on measured at FVPL are
financial assets for amortised cost or that is subsequently derecognition is not subject to the
FVOCI. measured at FVPL is recognised impairment model in
recognised in profit directly in profit terms of IFRS 9.
or loss and presented or loss and
net within operating presented in
expenses in the period operating expenses.
in which it arises.
Interest income is
recognised in profit
or loss.
Equity instruments
Equity investments are subsequently measured at fair value. Where the group's management has elected to
present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification
of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends
from such investments continue to be recognised in profit or loss as income from financial assets when the
group's right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in operating expenses in the statement
of comprehensive income as applicable. Impairment losses (and reversal of impairment losses) on equity
investments measured at FVOCI are not reported separately from other changes in fair value.
(iii) Impairment
From 1 January 2018, the group assesses on a forward-looking basis the ECLs associated with its debt
instruments carried at amortised cost. The impairment methodology applied depends on whether there has been
a significant increase in credit risk.
ECLs are a probability weighted estimate of credit losses. Credit losses are measured as the present value of
all cash shortfalls (i.e. the difference between the cash flows due to the group in accordance with the contract
and the cash flows that the group expects to receive). ECLs are discounted at the effective interest rate of
the financial asset.
For trade receivables, the group applies the simplified approach permitted by IFRS 9, which requires lifetime
ECLs to be recognised from initial recognition of the receivables. Trade receivables are written off when
there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery
include, among others, the failure of a debtor to engage in a repayment plan with the group, and a failure to
make contractual payments for a period of greater than 120 days past due.
For other financial assets measured at amortised cost, the ECL is based on the 12-month expected credit loss
allowance. The 12-month expected credit loss allowance is the portion of lifetime expected credit loss
allowances that result from default events on a financial instrument that are possible within 12 months after
the reporting date. However, when there has been a significant increase in credit risk since origination, the
ECL will be based on the lifetime expected credit loss allowances.
The group assumes that the credit risk on a financial asset has increased significantly if it is more than
30 days past due.
The group considers a financial asset in default when contractual payments are 90 days past due. However,
in certain cases, the group may also consider a financial asset to be in default when internal or external
information indicates that the group is unlikely to receive the outstanding contractual amounts in full
before taking into account any credit enhancements held by the group.
(b) Loan commitments issued by the group
Undrawn loan commitments are commitments under which, over the duration of the commitment, the group is
required to provide a loan with pre-specified terms to the counterparty. These contracts are in the scope
of the ECL requirements of IFRS 9.
When estimating 12-month or lifetime ECLs for undrawn loan commitments, the group estimates the expected
portion of the loan commitment that will be drawn down over 12 months or its expected life respectively. The
ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down,
based on a probability weighting. The cash shortfalls include the realisation of any collateral. The expected
cash shortfalls are discounted at an approximation to the expected effective interest rate on the loan.
4.2.4 Significant estimates and judgements
Impairment of financial assets
The expected credit loss allowances for financial assets are based on assumptions about risk of default
and expected loss rates. The group uses judgement in making these assumptions and selecting the inputs
to the impairment calculation, based on the group's past history, existing market conditions as well as
forward-looking estimates at the end of each reporting period. Details of the key assumptions and inputs
used are disclosed in note 4.2.2.
4.2.5 Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively,
except as described below.
- The group has taken an exemption not to restate comparative information for prior periods with respect
to classification and measurement (including impairment) requirements. Therefore, comparative periods
have not been restated. Differences in the carrying amounts of financial assets and financial liabilities
resulting from the adoption of IFRS 9 are recognised in retained earnings and reserves as at
1 January 2018. Accordingly, the information presented for 2017 does not reflect the requirements of
IFRS 9 but rather those of IAS 39.
- The following assessments have been made on the basis of the facts and circumstances that existed at the
date of initial application:
- The determination of the business model within which a financial asset is held
- The designation and revocation of previous designations of certain financial assets and financial
liabilities as measured at FVPL
- The designation of certain investments in equity instruments not held-for-trading as at FVOCI
- If an investment in a debt security had low credit risk at the date of initial application of IFRS 9,
then the group has assumed that the credit risk on the asset had not increased significantly since its
initial recognition.
4.3 Impact of adopting IFRS 15
The revenue accounting policy has changed with effect from 1 January 2018 as a result of the group adopting
IFRS 15.
IFRS 15 supersedes IAS 18, IAS 11 Construction Contracts and related interpretations for annual periods
beginning on or after 1 January 2018. IFRS 15 applies to all revenue arising from contracts with customers,
unless those contracts are in the scope of other standards. IFRS 15 establishes a comprehensive framework
for determining whether, how much and when revenue is recognised, providing additional guidance in many
areas not covered in detail under the previous revenue standards and interpretations. The standard requires
entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when
applying the framework to the contracts with customers. The standard also specifies the accounting treatment
for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
IFRS 15 further includes extensive new disclosure requirements.
Refer note 4.3.3 for the group's revised revenue accounting policy and note 7 for the disaggregated revenue
disclosure required by IFRS 15.
In accordance with the transition provisions of IFRS 15, the group has adopted the standard applying the
cumulative effect method. In terms of this method the group:
(a) applied the new rules retrospectively, only to contracts with customers that were not completed by
1 January 2018 (the date of initial application); and
(b) has adjusted the opening balance of retained earnings as at 1 January 2018, with the cumulative effect
of the retrospective application (per (a) above).
Accordingly, the comparative information presented for 2017 has not been restated, but presented as
previously reported applying the previous revenue standards and interpretations.
The cumulative effect of the retrospective application on the group's retained earnings as at
1 January 2018 is as follows:
Note Rm
Opening balance at 1 January 2018 (after IFRS 9 before 30 951
IFRS 15 restatement) (refer note 4.2)
Adjustment from the adoption of IFRS 15 314
Decrease in deferred revenue liability due to earlier recognition
of revenue from pricing adjustment 4.3.2 (a) 436
Increase in deferred tax liability relating to earlier recognition
of revenue from pricing adjustment 4.3.2 (a) (122)
Opening balance at 1 January 2018 (after IFRS 9 and IFRS 15 restatements) 31 265
4.3.1 Financial results for the six-month period ended 30 June 2018 had IAS 18 been applied
The following tables present a comparison of the financial results as reported in terms of IFRS 15
to what the financial results would have been in terms of IAS 18.
Impact on the reviewed condensed group statement of comprehensive income
As Adjust-
reported ments1 IAS 182
6 months 6 months 6 months
ended ended ended
30 June 30 June 30 June
2018 2018 2018
Note Rm Rm Rm
Revenue 4.3.2 12 260 (70) 12 190
Operating (expenses)/income 4.3.2 (9 134) 101 (9 033)
Net operating profit 3 126 31 3 157
Finance income 168 168
Finance costs (345) (345)
Income from financial assets 1 1
Share of income of equity-accounted investments 1 046 1 047
Profit before tax 3 996 31 4 027
Income tax expense (809) (9) (818)
Profit for the period from continuing operations 3 187 22 3 209
Profit for the period from discontinued operations 31 31
Profit for the period 3 218 22 3 240
Other comprehensive income, net of tax 223 223
Total comprehensive income for the period 3 441 22 3 463
Profit attributable to:
Owners of the parent 3 182 22 3 204
Non-controlling interests 36 36
Profit for the period 3 218 22 3 240
Total comprehensive income attributable to:
Owners of the parent 3 405 22 3 427
Non-controlling interests 36 36
Total comprehensive income for the period 3 441 22 3 463
1 Adjustments (refer note 4.3.2) comprise of:
- contract modification consideration that would be recognised as revenue over seven years under the
previous revenue standards and interpretations (R31 million and tax of R9 million); and
- reclassification of stock yard management service fee that would be recognised as a cost recovery
in operating expenses under the previous revenue standards and interpretations (R101 million).
2 Amounts without the adoption of IFRS 15.
4.3.1 Financial results for the six-month period ended 30 June 2018 had IAS 18 been applied (continued)
As Adjust- IAS 18
reported ments
6 months 6 months 6 months
ended ended ended
30 June 30 June 30 June
2018 2018 2018
cents cents cents
Attributable earnings per share
Aggregate
- Basic 1 268 9 1 277
- Diluted 988 7 995
Impact on the reviewed condensed group statement of financial position
As Adjust- IAS 182
reported ments1
At 30 June At 30 June At 30 June
2018 2018 2018
Note Rm Rm Rm
ASSETS
Non-current assets 49 691 49 691
Current assets 7 333 7 333
Non-current assets held-for-sale 3 740 3 740
Total assets 60 764 60 764
EQUITY AND LIABILITIES
Capital and other components
of equity
Share capital 1 021 1 021
Other components of equity 8 063 8 063
Retained earnings 4.3.2 (a) 30 294 (292) 30 002
Equity attributable to owners of the parent 39 378 (292) 39 086
Non-controlling interests (702) (702)
Total equity 38 676 (292) 38 384
Non-current liabilities 15 770 230 16 000
Interest-bearing borrowings 4 480 4 480
Non-current other payables 92 92
Provisions 3 817 3 817
Post-retirement employee obligations 235 235
Financial liabilities 496 496
Deferred tax 4.3.2 (a) 6 641 (113) 6 528
Other non-current liabilities 4.3.2 (a) 9 343 352
Current liabilities 4 633 62 4 695
Interest-bearing borrowings 581 581
Trade and other payables 2 555 2 555
Provisions 114 114
Financial liabilities 636 636
Current tax payable 68 68
Overdraft 49 49
Other current liabilities 4.3.2 (a) 630 62 692
Non-current liabilities held-for-sale 1 685 1 685
Total liabilities 22 088 292 22 380
Total equity and liabilities 60 764 60 764
1 Relates to the reversal of the IFRS 15 initial application adjustment amounting to R314 million, net
of tax, (refer note 4.3) and the impact for the six-month period ended 30 June 2018 arising from the
contract modification consideration assessment of R22 million, net of tax (refer note 4.3.2 (a)).
2 Amounts without the adoption of IFRS 15.
4.3.2 Impact assessment of customer contract terms and conditions
The standard terms and conditions in the group's contracts with customers result in the same revenue
recognition under IFRS 15, as compared to IAS 18, except for the following specific contractual
arrangements that had an impact on initial application:
(a) Contract modification consideration
A contract with a customer for the sale of goods has two distinct phases of delivery of the underlying
goods. The contract was modified to include additional consideration over a period of seven years
(referred to as the contract modification consideration).
Under IAS 18, the contract modification consideration was determined as a standalone revenue arrangement
and would have been recognised as revenue over the seven year period. Under IFRS 15, the contract
modification consideration is assessed as a pricing adjustment that relates only to the goods delivered
under the first phase of the contract, which was concluded at the end of the 2017 financial year, and is
therefore required to be allocated to the goods delivered under this phase. Accordingly, the revenue
recognition of the contract modification consideration is recognised earlier under IFRS 15 than IAS 18.
This adjustment has been made on the cumulative effect basis, with the adoption of IFRS 15, to opening
retained earnings as at 1 January 2018.
(b) Stock yard management services
On certain contracts, the group was compensated in the form of a cost recovery for the rendering of stock
yard management services.
Under IAS 18, up to 31 December 2017, these cost recoveries were accounted for in operating expenses as a
cost recovery, as it was not seen as the main operation or revenue stream of the group. Under IFRS 15,
however, the rendering of these services is seen as a separate performance obligation and forms part of the
revenue of the group. Accordingly, the income from the rendering of stock yard management services is
presented as revenue separately from the corresponding cost. There is no impact on the profit or loss of
the group as the accounting is similar to a reclassification.
4.3.3 Accounting policies applied from 1 January 2018
The group derives revenue from contracts with customers for the supply of goods (namely coal, ferrosilicon
and certain biological goods) and rendering of services (namely corporate management services, stock yard
management services and other mine management services).
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts
collected where the group acts as an agent. If the group is an agent, then revenue is recognised on a net
basis - corresponding to any fee or commission to which the group expects to be entitled.
The group recognises revenue when it transfers control of the goods or services to a customer. The group
has applied the practical expedient in IFRS 15.63 (which states that an entity is not required to reflect
the time value of money in its estimate of the transaction price if it expects, at contract inception,
that the period between customer payment and the transfer of goods or services will not exceed 12 months).
Generally for contracts in the group, the period of time between delivery of goods or services and receipt
of payment ranges between two weeks and 60 days which is less than 12 months. Accordingly, the group does
not adjust the promised amount of consideration for the effects of a significant financing component. For
the group, the total consideration in the service contracts will be allocated to all services per the
contract based on their standalone selling prices. The standalone selling prices will be determined based
on the listed prices at which the group sells the services in separate transactions.
Nature of goods and services
Below is a summary of the different types of revenue derived by the group depicting the standard terms and
performance obligations for each type:
Timing of when Allocation of
performance transaction price
Revenue Performance obligation to performance
type obligation is satisfied obligations Payment terms
Coal (domestic Delivery of coal On delivery Agreed standalone Range: 15 to 60 days
supply) at a contractually (point in time) price
agreed upon
delivery point
Coal (export Delivery of coal On delivery Agreed standalone Range: 15 to 60 days
supply) at a contractually (point in time) price
agreed upon delivery
point (FOB)
Ferrosilicon Delivery of On delivery Agreed standalone Range: 15 to 60 days
ferrosilicon at (point in time) price
a contractually
agreed upon
delivery point
Biological Delivery of biological On delivery Agreed standalone Range: 15 to 60 days
goods goods at a (point in time) price
contractually agreed
upon delivery point
Corporate Rendering of corporate As services are Based on costs Within 30 days
management services over time performed (over incurred
services time)
Stock yard Rendering of stock As services are Based on costs Within 30 days
management yard management performed (over incurred
services services over time time)
Other mine Rendering of other As services are Based on costs Within 30 days
management mine management performed (over incurred
services services over time time)
5. SEGMENTAL INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision maker, who is responsible for allocating resources and assessing performance of
the reportable operating segments. The chief operating decision maker has been identified as the group
executive committee. Segments reported are based on the group's different commodities and operations.
Total operating segment revenue, which excludes VAT, represents revenue from contracts with customers for
the supply of goods and rendering of services and includes operating revenues directly and reasonably
allocable to the segments. Segment net operating profit or loss equals segment revenue less segment
expenses, impairment charges, plus impairment reversals. Segment operating expenses, assets and liabilities
represent direct or reasonably allocable operating expenses, assets and liabilities.
There were no differences in the way segment profit or loss is measured between the reportable segments'
profit or loss and the group's profit or loss.
The reportable operating segments, as described below, offer different goods and services, and are managed
separately based on commodity, location and support function grouping. The group executive committee
reviews internal management reports on these divisions at least quarterly.
Coal
The coal operations are mainly situated in the Waterberg and Mpumalanga regions and are split between coal
commercial operations and coal tied operations. Coal commercial operations include a 50% (30 June 2017: 50%;
31 December 2017: 50%) investment in Mafube (a joint venture with Anglo), as well as a 10.82%
(30 June 2017: 10.82%; 31 December 2017: 10.82%) effective equity interest in RBCT. The coal operations
produce thermal coal, metallurgical coal and SSCC.
Ferrous
The ferrous segment mainly comprises the 20.62% (30 June 2017: 20.62%; 31 December 2017: 20.62%) equity
interest in SIOC (located in the Northern Cape province) reported within the other ferrous operating
segment as well as the FerroAlloys operations (referred to as Alloys).
TiO2
This segment has been renamed TiO2 as the Alkali chemicals business was disposed of in 2017. Exxaro holds
a 23.36% (30 June 2017: 43.66%; 31 December 2017: 23.66%) equity interest in Tronox Limited subsequent to
the sale of 22 425 000 Class A Tronox Limited ordinary shares on 10 October 2017. The investment in
Tronox Limited was classified as a non-current asset held-for-sale on 30 September 2017 (refer note 16).
Exxaro holds a 26% (30 June 2017: 26%; 31 December 2017: 26%) equity interest in Tronox SA (both
South African-based operations), as well as a 26% (30 June 2017: 26%; 31 December 2017: 26%) member's
interest in Tronox UK.
Energy
The energy segment comprises a 50% (30 June 2017: 50%; 31 December 2017: 50%) investment in Cennergi
(a South African joint venture with Tata Power) which operates two windfarms.
Other
This reportable segment comprises the 26% (30 June 2017: 26%; 31 December 2017: 26%) equity interest in
Black Mountain (located in the Northern Cape province), an effective investment of 11.7% (30 June 2017: 11.7%;
31 December 2017: 11.7%) in Chifeng (located in the PRC), the recently acquired equity interests in Curapipe
and AgriProtein as well as the corporate office which renders services to operations and other customers.
The Ferroland agricultural operation is also included in this segment.
The following table presents a summary of the group's segmental information:
Coal Ferrous Other Total
Com-
Tied mercial
opera- opera- Other Base
6 months ended 30 June 2017 tions tions Alloys ferrous TiO2 Energy metals Other
(Reviewed) Rm Rm Rm Rm Rm Rm Rm Rm Rm
External revenue 1 827 10 413 12 8 12 260
Segment net operating
profit/(loss) 192 3 195 8 (1) (268) 3 126
- Continuing operations 192 3 195 8 (1) (268) 3 126
External finance income (note 9) 44 124 168
External finance costs (note 9) (4) (121) (220) (345)
Income tax expense (36) (703) (2) (68) (809)
Depreciation and amortisation
(note 8) (6) (704) (34) (744)
Cash generated by/(utilised in)
operations 122 3 844 122 (1) (146) 3 941
Share of (loss)/income of
equity-accounted investments
(note 10) (48) 793 224 20 57 1 046
- Continuing operations (48) 793 224 20 57 1 046
Capital expenditure (note 12) (1 982) (55) (2 037)
At 30 June 2018 (Reviewed)
Segment assets and liabilities
Deferred tax1 (18) 184 12 388 566
Investments in associates
(note 13) 2 176 8 952 3 701 806 701 16 336
Investments in joint ventures
(note 14) 1 066 416 1 482
Loans to joint ventures 151 108 259
External assets2 2 985 32 354 188 25 2 829 38 381
Assets 2 967 35 931 200 8 977 3 701 524 806 3 918 57 024
Non-current assets held-for-sale
(note 16) 344 3 396 3 740
Total assets as per statement of
financial position 2 967 36 275 200 8 977 7 097 524 806 3 918 60 764
External liabilities 2 642 4 677 27 5 6 343 13 694
Deferred tax1 5 6 672 1 (37) 6 641
Current tax payable1 1 64 3 68
Liabilities 2 648 11 413 27 6 6 309 20 403
Non-current liabilities
held-for-sale (note 16) 1 685 1 685
Total liabilities as per statement
of financial position 2 648 13 098 27 6 6 309 22 088
1 Offset per legal entity and tax authority.
2 Excluding deferred tax, investments in associates, investments in and loans to joint ventures and non-current assets held-for-sale.
Coal Ferrous Other Total
Com-
Tied mercial
opera- opera- Other Base
6 months ended 30 June 2017 tions tions Alloys ferrous TiO2 Energy metals Other
(Reviewed) (Re-presented) Rm Rm Rm Rm Rm Rm Rm Rm Rm
External revenue 1 591 9 079 56 10 10 736
Segment net operating 149 2 865 (75) (29) 2 910
profit/(loss)
- Continuing operations 149 2 865 (29) 2 985
- Discontinued operations (75) (75)
External finance income (note 9) 21 50 71
External finance costs (note 9) (83) (121) (318) (522)
Income tax (expense)/benefit (26) (777) 8 (66) (861)
Depreciation and amortisation
(note 8) (6) (623) (46) (675)
Cash generated by/(utilised
in) operations 120 3 523 24 (7) 3 660
Share of income/(loss)
of equity-accounted
investments (note 10) 104 1 228 (295) (11) 99 1 125
- Continuing operations 104 1 228 68 (11) 99 1 488
- Discontinued operations (363) (363)
Capital expenditure (note 12) (1 305) (2) (7) (1 314)
At 30 June 2017 (Reviewed)
Segment assets and liabilities
Deferred tax 67 17 28 317 429
Investments in associates
(note 13) 2 203 8 771 10 740 619 22 333
Investments in joint ventures
(note 14) 961 368 1 329
Loan to joint venture 126 126
External assets1 2 907 27 911 163 25 177 2 075 33 258
Assets 2 974 31 092 191 8 796 10 740 494 796 2 392 57 475
Non-current assets held-for-sale
(note 16) 46 129 175
Total assets as per statement of
financial position 2 974 31 138 191 8 796 10 740 494 796 2 521 57 650
External liabilities 2 650 4 464 23 4 7 056 14 197
Deferred tax2 4 5 842 (59) 5 787
Current tax payable2 (4) 150 146
Liabilities 2 650 10 456 23 4 6 997 20 130
Non-current liabilities
held-for-sale (note 16) 1 134 1 134
Total liabilities as per statement
of financial position 2 650 11 590 23 4 6 997 21 264
1 Excluding deferred tax, investments in associates, investments in and loans to joint ventures and non-current
assets held-for-sale.
2 Offset per legal entity and tax authority.
Coal Ferrous Other Total
Com-
Tied mercial
opera- opera- Other Base
12 months ended 31 December 2017 tions tions Alloys ferrous TiO2 Energy metals Other
(Audited) Rm Rm Rm Rm Rm Rm Rm Rm Rm
External revenue 3 256 19 297 243 17 22 813
Segment net operating 133 5 876 54 (1) 5 085 (5 087) 6 060
profit/(loss)
- Continuing operations 133 5 876 54 (1) (5 087) 975
- Discontinued operations 5 085 5 085
External finance income
(note 9) 1 45 1 170 217
External finance costs
(note 9) (254) (574) (828)
Income tax expense (24) (1 326) (13) (179) (1 542)
Depreciation and amortisation
(note 8) (12) (1 296) (85) (1 393)
Gain on partial disposal
of associate 3 860 3 860
Cash generated by/(utilised
in) operations 151 6 754 (54) (2) (23) 6 826
Share of income/(loss) of
equity-accounted investments
(note 10) 235 3 303 (1 643) 2 226 2 123
- Continuing operations 235 3 303 186 2 226 3 952
- Discontinued operations (1 829) (1 829)
Capital expenditure (note 12) (3 804) (6) (111) (3 921)
At 31 December 2017 (Audited)
Segment assets and liabilities
Deferred tax 32 104 11 1 423 571
Investments in associates
(note 13) 2 193 9 367 3 477 747 26 15 810
Investments in joint ventures
(note 14) 1 105 374 1 479
Loan to joint venture 126 126
External assets1 3 012 30 648 309 25 6 662 40 656
Assets 3 044 34 050 320 9 393 3 477 500 747 7 111 58 642
Non-current assets
held-for-sale (note 16) 385 3 396 129 3 910
Total assets as per statement
of financial position 3 044 34 435 320 9 393 6 873 500 747 7 240 62 552
External liabilities 2 677 4 726 27 4 7 746 15 180
Deferred tax2 1 6 030 (43) 5 988
Current tax payable2 292 76 368
Liabilities 2 678 11 048 27 4 7 779 21 536
Non-current liabilities
held-for-sale (note 16) 1 651 1 651
Total liabilities as per
statement of financial position 2 678 12 699 27 4 7 779 23 187
1 Excluding deferred tax, investments in associates, investments in and loans to joint ventures and non-current
assets held-for-sale.
2 Offset per legal entity and tax authority.
6. DISCONTINUED OPERATIONS
On 30 September 2017, Exxaro classified the Tronox Limited investment as a non-current asset held-for-sale (refer note 16).
It was concluded that the related performance and cash flow information be presented as a discontinued operation as the
Tronox Limited investment represents a major geographical area of operation as well as the majority of the TiO2 reportable
operating segment.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below:
(Re-presented)
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Financial performance
Losses on financial instruments revaluations
recycled to profit or loss (1)
Gains on translation differences recycled to profit or
loss on partial disposal of investment in foreign associate 1 332
Other operating expenses1 (75) (106)
Operating (loss)/profit (75) 1 225
Gain on partial disposal of associate 3 860
Net operating (loss)/profit (75) 5 085
Dividend income 31
Share of loss of equity-accounted investment (363) (1 829)
Profit/(loss) for the period from discontinued operations 31 (438) 3 256
Cash flow information
Cash flow attributable to investing activities 31 59 6 634
Cash flow attributable to discontinued operations 31 59 6 634
1 Relates to loss on dilution of investment in associate of nil (30 June 2017: R75 million;
31 December 2017: R106 million).
7. REVENUE
Revenue is derived from contracts with customers. Revenue has been disaggregated based on timing of revenue
recognition, major type of goods and services, major geographic area and major customer industries.
Coal Ferrous Other Total
Tied Commercial
operations operations Alloys Other
6 months ended 30 June 2018 (Reviewed) Rm Rm Rm Rm Rm
By timing and major type of goods and services
Sale of goods recognised at a point in time 1 539 10 413 12 7 11 971
Coal 1 539 10 413 11 952
Ferrosilicon 12 12
Biological goods 7 7
Rendering of services recognised over time 288 1 289
Stock yard management services 101 101
Other mine management services 187 187
Accommodation 1 1
Total revenue from contracts with customers 1 827 10 413 12 8 12 260
By major geographic area1
Domestic 1 827 6 587 12 8 8 434
Export 3 826 3 826
Europe 2 384 2 384
Asia 1 043 1 043
Other 399 399
Total revenue from contracts with customers 1 827 10 413 12 8 12 260
By major customer industries
Public utilities 1 804 4 964 6 768
Merchants 2 889 2 889
Steel 23 800 823
Mining 600 12 612
Manufacturing 310 310
Cement 171 171
Other 679 8 687
Total revenue from contracts with customers 1 827 10 413 12 8 12 260
1 Geographic area is determined based on the customer supplied by Exxaro.
Coal Ferrous Other Total
Tied Commercial
6 months ended 30 June 2017 operations operations Alloys Other
(Reviewed) (Re-presented) Rm Rm Rm Rm Rm
By timing and major type of goods and services
Sale of goods recognised at a point in time 1 383 9 079 56 4 10 522
Coal 1 383 9 079 10 462
Ferrosilicon 56 56
Biological goods 4 4
Rendering of services recognised over time 208 6 214
Corporate management services 5 5
Other mine management services1 208 208
Accommodation1 1 1
Total revenue from contracts with customers 1 591 9 079 56 10 10 736
By major geographic area2
Domestic 1 591 6 157 56 10 7 814
Export 2 922 2 922
Europe 1 609 1 609
Asia 1 201 1 201
Other 112 112
Total revenue from contracts with customers 1 591 9 079 56 10 10 736
By major customer industries
Public utilities 1 563 4 670 6 233
Merchants 2 838 2 838
Steel 28 623 651
Mining 306 56 362
Manufacturing 309 309
Cement 161 161
Other 172 10 182
Total revenue from contracts with customers 1 591 9 079 56 10 10 736
1 Reclassification of service revenue previously included as part of revenue from goods sold.
2 Geographic area is determined based on the customer supplied by Exxaro.
Coal Ferrous Other Total
Tied Commercial
12 months ended 31 December 2017 operations operations Alloys Other
(Audited) (Re-presented) Rm Rm Rm Rm Rm
By timing and major type of goods and services
Sale of goods recognised at a point in time 2 838 19 297 243 10 22 388
Coal 2 838 19 297 22 135
Ferrosilicon 243 243
Biological goods 10 10
Rendering of services recognised over time 418 7 425
Corporate management services 6 6
Other mine management services1 418 418
Accommodation1 1 1
Total revenue from contracts with customers 3 256 19 297 243 17 22 813
By major geographic area2
Domestic 3 256 12 279 243 17 15 795
Export 7 018 7 018
Europe 3 670 3 670
Asia 2 629 2 629
Other 719 719
Total revenue from contracts with customers 3 256 19 297 243 17 22 813
By major customer industries
Public utilities 3 212 9 870 13 082
Merchants 5 637 5 637
Steel 44 1 278 1 322
Mining 853 243 1 096
Manufacturing 468 468
Cement 340 340
Other 851 17 868
Total revenue from contracts with customers 3 256 19 297 243 17 22 813
1 Reclassification of service revenue previously included as part of revenue from goods sold.
2 Geographic area is determined based on the customer supplied by Exxaro.
8. SIGNIFICANT ITEMS INCLUDED IN OPERATING PROFIT
(Re-presented)
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Raw materials and consumables (1 340) (1 412) (3 058)
Staff costs (2 308) (2 011) (4 060)
Royalties (172) (70) (143)
Depreciation and amortisation (744) (675) (1 393)
Fair value adjustments on contingent consideration1 (188) (37) (354)
Net realised foreign currency exchange gains/(losses) 57 (78) (147)
Consultancy fees (231) (134) (424)
Net gains/(losses) on disposal or scrapping of
property, plant and equipment 118 (22) (55)
1 Relates to the ECC acquisition.
9. NET FINANCING COSTS
Finance income 168 71 217
Interest income 161 66 207
Finance lease interest income 5 5 10
Commitment fee income 1
Interest income from loan to joint venture 1
Finance costs (345) (522) (828)
Interest expense (272) (325) (600)
Unwinding of discount rate on rehabilitation cost (198) (202) (410)
Recovery of unwinding of discount rate on
rehabilitation cost (tied mines) 72 163
Finance lease interest expense (2) (3)
Amortisation of transaction costs (4) (3) (9)
Borrowing costs capitalised1 57 10 31
Total net financing costs (177) (451) (611)
1 Borrowing costs capitalisation rate: 10.08% 9.05% 8.98%
10. SHARE OF INCOME/(LOSS) OF EQUITY-ACCOUNTED INVESTMENTS
(Re-presented)
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Associates
Unlisted investments 1 056 1 381 3 691
SIOC 793 1 228 3 303
Tronox SA 166 9 67
Tronox UK 58 59 119
RBCT (18) (14) (24)
Black Mountain 57 99 226
Joint ventures
Unlisted investments (10) 107 261
Mafube (30) 118 259
Cennergi 20 (11) 2
Share of income of equity-accounted investments 1 046 1 488 3 952
Included in discontinued operations:
Associates
Listed investments
Tronox Limited1 (363) (1 829)
Total share of income of equity-accounted investments 1 046 1 125 2 123
1 Application of the equity method ceased when the investment was classified as a non-current asset held-for-sale on
30 September 2017 (refer notes 6 and 16).
11. DIVIDEND DISTRIBUTION
Total dividends paid in 2017 amounted to R2 227 million, made up of a final dividend of R1 284 million which related
to the year ended 31 December 2016, paid in April 2017, as well as an interim dividend of R943 million, paid in
September 2017. A special dividend of 1 255 cents per share (R3 149 million to external shareholders) was paid in
March 2018, following the partial disposal of the shareholding in Tronox Limited. A final dividend relating to the
2017 financial year of 400 cents per share (R1 004 million to external shareholders) was paid in April 2018.
An interim cash dividend, number 31, for 2018 of 530 cents per share, was approved by the board of directors on
14 August 2018, to be paid out of income reserves. The dividend is payable on 25 September 2018 to shareholders
who will be on the register on 21 September 2018. This interim dividend, amounting to approximately R1 330 million
(to external shareholders), has not been recognised as a liability in these interim financial statements. It will
be recognised in shareholders' equity in the year ended 31 December 2018.
The interim dividend declared will be subject to a dividend withholding tax of 20% for all shareholders who are
not exempt from or do not qualify for a reduced rate of dividend withholding tax. The net local dividend payable
to shareholders, subject to dividend withholding tax at a rate of 20% amounts to 424.00000 cents per share.
The number of ordinary shares in issue at the date of this declaration is 358 706 754. Exxaro company's tax
reference number is 9218/098/14/4.
At At At
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Issued share capital (number of shares) 358 706 754 314 171 761 358 706 754
Ordinary shares (million)
- Weighted average number of shares 251 316 311
- Diluted weighted average number of shares 322 316 347
12. CAPITAL EXPENDITURE
At At At
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Incurred 2 037 1 314 3 921
To maintain operations 1 177 1 105 2 977
To expand operations 860 209 944
Contracted 5 211 3 881 5 409
Contracted for the group (owner-controlled) 3 760 2 581 4 313
Share of capital commitments of equity-accounted
investments 1 451 1 300 1 096
Authorised, but not contracted 3 387 1 148 2 838
13. INVESTMENTS IN ASSOCIATES
Listed investments
Tronox Limited1 7 383
Unlisted investments 16 336 14 950 15 810
SIOC 8 952 8 771 9 367
Tronox SA 1 966 1 740 1 800
Tronox UK 1 735 1 617 1 677
RBCT 2 176 2 203 2 193
Black Mountain 806 619 747
AgriProtein2 674
Curapipe 27 26
Total carrying value of investments in associates 16 336 22 333 15 810
1 The investment in Tronox Limited was classified as a non-current asset held-for-sale on 30 September 2017
(refer note 16).
2 On 31 May 2018, Exxaro entered into a share purchase agreement to obtain an equity interest in the shareholding
of AgriProtein, which is incorporated in the UK. The purchase price amounted to US$52.5 million, comprising an
initial cash consideration of US$14.5 million (R184.2 million) paid on 1 June 2018 and deferred consideration
amounting to US$38 million (R482.8 million) which will be paid over the next two years. The timing of the
deferred consideration is dependent on AgriProtein's capital expenditure requirements. Transaction costs paid
of R6.6 million were capitalised to the cost of the investment. AgriProtein is in the business of developing
operating municipal organic waste conversion plants in order to generate high-quality, natural protein which
is sold for use in animal, aquaculture and pet feed. Exxaro is currently in process of conducting a notional
purchase price allocation on the acquisition of the investment in AgriProtein.
14. INVESTMENTS IN JOINT VENTURES
At At At
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Unlisted investments 1 482 1 329 1 479
Mafube1 1 066 961 1 105
Cennergi2 416 368 374
Total carrying value of investments in joint ventures 1 482 1 329 1 479
1 Included in financial assets is a loan to Mafube
(refer note 20): 151
2 Included in financial assets is a loan to Cennergi
(refer note 20): 108 126 126
15. OTHER ASSETS
Non-current
Reimbursements1 1 669
Indemnification asset2 1 302
Other non-current assets 13
Total non-current other assets 2 984
Current
VAT 337
Royalties 39
Prepayments 33
Other current assets 31
Total current other assets 440
Total other assets 3 424
1 Amounts which are recoverable from Eskom in respect of the rehabilitation, environmental expenditure and
post-retirement medical obligation of the Matla and Arnot mines at the end of life of these mines.
2 Arose on the ECC acquisition.
16. NON-CURRENT ASSETS AND LIABILITIES HELD-FOR-SALE
Tronox Limited
In September 2017, the directors of Exxaro formally decided to dispose of the investment in Tronox Limited.
As part of this decision, Tronox Limited was required to publish an automatic shelf registration statement
of securities of well-known seasoned issuers which allowed for the conversion of Exxaro's Class B Tronox
Limited ordinary shares to Class A Tronox Limited ordinary shares. From this point, it was concluded that
the Tronox Limited investment should be classified as a non-current asset held-for-sale as all the
requirements in terms of IFRS 5 Non-Current Assets Held-for-Sale and Discontinued Operations (IFRS 5)
were met. As of 30 September 2017, the Tronox Limited investment, totalling 42.66% of Tronox Limited's
total outstanding voting shares, was classified as a non-current asset held-for-sale and the application
of the equity method ceased.
Subsequent to the classification as a non-current asset held-for-sale, Exxaro completed an initial offering
of 22 425 000 Class A Tronox Limited ordinary shares during October 2017. On 24 May 2018, Exxaro obtained
shareholder approval to sell the remainder of its shares in Tronox Limited. Exxaro will continue to assess
market conditions for further possible sell downs of the remaining 28 729 280 Class A Tronox Limited
ordinary shares.
The Tronox Limited investment is presented within the total assets of the TiO2 reportable operating segment
and presented as a discontinued operation (refer note 6).
Manyeka
Exxaro concluded a sale of share agreement with Universal, for the 100% shareholding in Manyeka, which
includes a 51% interest in Eloff. Manyeka was classified as a non-current asset held-for-sale on
30 September 2017. On 30 June 2018, conditions precedent to the sale of share agreement with Universal
had not been met. Manyeka did not meet the criteria to be classified as a discontinued operation since it
did not represent a separate major line of business, nor did it represent a major geographical area of
operation and is reported as part of the coal commercial operating segment. Subsequent to 30 June 2018,
the sale became effective (refer note 25).
NBC
During 2017, Exxaro took the decision to divest from the NBC operation and the divestment process
commenced during August 2017. On 31 December 2017, the NBC operation met the criteria to be classified as
a non-current asset held-for-sale in terms of IFRS 5. The NBC operation did not meet the criteria to be
classified as a discontinued operation since it did not represent a separate major line of business, nor
did it represent a major geographical area of operation and is reported as part of the coal commercial
operating segment.
On 2 March 2018, Exxaro concluded a sale of asset agreement for the disposal of the NBC operation.
On 30 June 2018, conditions precedent to the sale of asset agreement had not been met. Subsequent to
30 June 2018, the sale became effective (refer note 25).
EMJV
As part of the ECC acquisition in 2015, Exxaro acquired non-current liabilities held-for-sale relating
to the EMJV. The sale of the EMJV is conditional on section 11 approval required in terms of the MPRDA
for transfer of the new-order mining right to the new owners, Scinta Energy Proprietary Limited, as well
as section 43(2) approval for the transfer of environmental liabilities and responsibilities. The EMJV
remains a non-current liability held-for-sale for the Exxaro group on 30 June 2018, as the required
approvals are still pending. The EMJV does not meet the criteria to be classified as a discontinued
operation since it does not represent a separate major line of business, nor does it represent a major
geographical area of operation.
The major classes of assets and liabilities classified as non-current assets and liabilities
held-for-sale are as follows:
At At At
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Assets
Property, plant and equipment1 153 166 282
Investments in associate 3 396 3 396
Deferred tax 11 1 9
Inventories 105 133
Trade and other receivables 30 4 49
- Trade receivables 30 39
- Other receivables 4
- Non-financial instrument receivables 10
Current tax receivable 28 27
Cash and cash equivalents 10 4 14
Other current assets 7
Non-current assets held-for-sale 3 740 175 3 910
Liabilities
Non-current provisions (1 558) (1 113) (1 494)
Post-retirement employee obligations (22) (18) (22)
Trade and other payables (69) (3) (99)
- Trade payables (68) (3) (54)
- Other payables (1) (8)
- Non-financial instrument payables (37)
Shareholder loans (18) (18)
Current provisions (18)
Other current liabilities (18)
Non-current liabilities held-for-sale (1 685) (1 134) (1 651)
Net non-current assets/(liabilities) held-for-sale 2 055 (959) 2 259
1 The land and buildings situated at the corporate centre were sold during 2018.
17. INTEREST-BEARING BORROWINGS
At At At
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Non-current1 4 480 5 498 6 480
Loan facility 3 478 4 969 3 474
Bonds issue 520 520
Preference share liability2 1 001 2 483
Finance leases 1 9 3
Current3 581 11 2
Loan facility 51 (10) (9)
Bonds issue 525
Preference share liability (5) (5)
Finance leases 10 21 16
Total interest-bearing borrowings 5 061 5 509 6 482
Summary of loans and finance leases
by period of redemption:
- Less than six months 68 6 1
- Six to 12 months 513 5 1
- Between one and two years (12) 521 509
- Between two and three years (13) (9) (13)
- Between three and four years 3 305 (9) 3 239
- Between four and five years 1 139 4 809 2 620
- Over five years 61 186 125
Total interest-bearing borrowings 5 061 5 509 6 482
1 The non-current portion includes
the following amounts in respect
of transaction costs that will
be amortised using the effective
interest rate method, over the term
of the facilities: 38 30 44
2 An amount of R1 489 million was
redeemed during the six-month period
ended 30 June 2018.
3 The current portion represents: 581 11 2
- Capital repayments: 530 21 16
- Interest capitalised: 65
- Reduced by the amortisation of transaction costs: (14) (10) (14)
Overdraft
Bank overdraft 49 917 54
The bank overdraft is repayable on demand and interest payable is based on current South African money
market rates.
There were no defaults or breaches in terms of interest-bearing borrowings during the reporting periods.
Loan facility
The loan facility comprises a:
- R3 250 million bullet term loan facility with a term of five years (term loans)
- R2 000 million amortised term loan facility with a term of seven years (term loans) and
- R2 750 million revolving credit facility with a term of five years (revolving facility).
Interest is based on JIBAR plus a margin of 3.25% (30 June 2017: 3.25%; 31 December 2017: 3.25%) for the
bullet term loan facility (R3 250 million), JIBAR plus a margin of 3.60% (30 June 2017: 3.60%;
31 December 2017: 3.60%) for the amortised term loan facility (R2 000 million) and JIBAR plus a margin of
3.25% (30 June 2017: 3.25%; 31 December 2017: 3.25%) for the revolving credit facility (R2 750 million).
The effective interest rate for the transaction costs on the term loans is 0.17% and 1.17% respectively
(30 June 2017: 0.17% and 1.17%; 31 December 2017: 0.17% and 1.17%). Interest is paid on a quarterly basis
for the term loans, and on a monthly basis for the revolving credit facility.
The undrawn portion relating to the term loan facilities amounts to R1 750 million (30 June 2017:
R1 750 million; 31 December 2017: R1 750 million). The undrawn portion of the revolving credit facility
amounts to R2 750 million (30 June 2017: R1 250 million; 31 December 2017: R2 750 million).
Bond issue
In terms of Exxaro's R5 000 million DMTN programme, a senior unsecured floating rate note (bond) of
R1 000 million was issued in May 2014. The outstanding bond comprises a R520 million senior unsecured
floating rate note due 19 May 2019.
Interest on the R520 million bond is based on JIBAR plus a margin of 1.95% (30 June 2017: 1.95%;
31 December 2017: 1.95%) and paid on a quarterly basis. The effective interest rate for the transaction
costs for the R520 million bond was 0.08% (30 June 2017: 0.08%; 31 December 2017: 0.08%).
Preference share liability
The preference share liability relates to the consolidation of NewBEECo. The preference share liability
represents 249 069 Class A variable rate cumulative redeemable preference shares issued on 11 December 2017
by NewBEECo at an issue price of R10 000 per share. The preference shares are redeemable five years after
the subscription date or earlier as agreed between the parties at R10 000 per share plus the cumulative
preference dividends. The preference shareholders are entitled to receive a dividend equal to the issue
price multiplied by the dividend rate of 80% of Prime Rate calculated on a daily basis based on a
365-day year compounded per period and capitalised per period.
Subscription undertakings for the full value of the preference shares were secured at a total cost of
R23.8 million. The preference share liability is measured at amortised cost and the transaction costs
have therefore been included on initial measurement. The amount is amortised over the five-year period.
Finance leases
Included in the interest-bearing borrowings are obligations relating to finance leases for mining
equipment.
18. NET (DEBT)/CASH
Net (debt)/cash is presented by the following items on the statement of financial position (excluding
assets and liabilities classified as held-for-sale):
At At At
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Total net (debt)/cash (2 514) (4 353) 70
Non-current interest-bearing borrowings (4 480) (5 498) (6 480)
Current interest-bearing borrowings (581) (11) (2)
Net cash 2 547 1 156 6 552
- Cash and cash equivalents 2 596 2 073 6 606
- Overdraft (49) (917) (54)
Analysis of movement in net (debt)/cash
Liabilities from
financing activities
Non-
Cash and current Current
cash interest- interest-
equivalents/ bearing bearing
overdraft borrowings borrowings Total
Rm Rm Rm Rm
Net debt at 31 December 2016 5 183 (6 002) (503) (1 322)
Cash flows (3 999) 500 499 (3 000)
Operating activities 1 528 1 528
Investing activities (907) (907)
Financing activities (4 620) 500 499 (3 621)
- Interest-bearing borrowings repaid (999) 500 499
- Shares acquired in the market to
settle share-based payments (97) (97)
- Repurchase of share capital (3 524) (3 524)
Non-cash movements (28) 4 (7) (31)
Amortisation of transaction costs (3) (3)
Transfers between non-current and
current liabilities 4 (4)
Reclassification to non-current assets
held-for-sale (4) (4)
Translation difference on movement in
cash and cash equivalents (24) (24)
Net debt at 30 June 2017 1 156 (5 498) (11) (4 353)
Cash flows 5 415 (972) 16 4 459
Operating activities 1 872 1 872
Investing activities 5 284 5 284
Financing activities (1 741) (972) 16 (2 697)
- Interest-bearing borrowings raised 2 491 (2 491)
- Interest-bearing borrowings repaid (1 535) 1 519 16
- Shares acquired in the market to settle
share-based payments (2) (2)
- Repurchase of share capital (2 695) (2 695)
Non-cash movements (19) (10) (7) (36)
Amortisation of transaction costs (6) (6)
Preference dividend accrued (11) (11)
Reclassification to non-current assets
held-for-sale (10) (10)
Transfers between non-current and
current liabilities 1 (1)
Translation difference on movement in cash
and cash equivalents (9) (9)
Liabilities from
financing activities
Non-
Cash and current Current
cash interest- interest-
equivalents/ bearing bearing
overdraft borrowings borrowings Total
Rm Rm Rm Rm
Net cash at 31 December 2017 6 552 (6 480) (2) 70
Cash flows (4 100) 1 496 (2 604)
Operating activities (926) (926)
Investing activities (1 109) (1 109)
Financing activities (2 065) 1 496 (569)
- Interest-bearing borrowings repaid (1 496) 1 496
- Shares acquired in the market to
settle share-based payments (422) (422)
- Dividend paid to BEE Parties (147) (147)
Non-cash movements 95 511 (586) 20
Amortisation of transaction costs (7) (7)
Interest accrued (64) (64)
Reclassification of cash and
cash equivalents 51 51
Preference dividend accrued (4) (4)
Reclassification to non-current
assets held-for-sale 4 4
Transfers between non-current and
current liabilities 522 (522)
Translation difference on movement
in cash and cash equivalents 40 40
Net debt at 30 June 2018 2 547 (4 473) (588) (2 514)
19. OTHER LIABILITIES
At
30 June
2018
Reviewed
Rm
Non-current
Income received in advance 9
Total non-current other liabilities 9
Current
Leave pay 168
VAT 118
Royalties 29
Bonuses 201
Other current liabilities 114
Total current other liabilities 630
Total other liabilities 639
20. FINANCIAL INSTRUMENTS
The group holds the following financial instruments:
At 30 June
2018
Reviewed
Rm
Non-current
Financial assets 2 601
Financial assets at fair value through other comprehensive income 221
Equity: unlisted 221
- Chifeng 221
Financial assets at fair value through profit or loss 1 426
Equity: listed 26
- KIO 26
Debt: unlisted 1 400
- Environmental rehabilitation funds 1 400
Loans to associates and joint ventures 258
Joint ventures 258
- Cennergi1 108
- Mafube2 150
Other financial assets at amortised cost 696
Environmental rehabilitation funds 320
Deferred pricing receivable3 363
Deferred consideration receivable4 15
Impairment allowances of other financial assets at amortised cost (2)
Interest-bearing borrowings (excluding finance leases) (4 479)
Non-current other payables (92)
Financial liabilities (496)
Financial liabilities at fair value through profit or loss (337)
Contingent consideration5 (337)
Financial liabilities at amortised cost (159)
Deferred consideration payable6 (159)
At 30 June
2018
Reviewed
Rm
Current
Financial assets 82
Other current financial assets at amortised cost 81
Deferred pricing receivable3 51
Deferred consideration receivable4 29
Commitment fee receivable 1
Employee receivables 6
Impairment allowances of other current financial assets at amortised cost (6)
Loans to associates and joint ventures 1
Joint ventures 1
- Mafube2 1
Trade and other receivables 2 687
Trade receivables 2 405
- Trade receivables: gross 2 481
- Impairment allowances of trade receivables (76)
Other receivables 282
Cash and cash equivalents 2 596
Interest-bearing borrowings (excluding finance leases) (571)
Trade and other payables (2 555)
Trade payables (1 226)
Other payables (1 329)
Financial liabilities (636)
Derivative financial liabilities (41)
Financial liabilities at fair value through profit or loss (310)
Contingent consideration5 (310)
Financial liabilities at amortised cost (285)
Deferred consideration payable6 (285)
Overdraft (49)
1 Loan granted to Cennergi in 2016. The loan is interest free, unsecured and repayable on termination
date in 2026, unless otherwise agreed by the parties.
2 Loan granted to Mafube in 2018. The loan bears interest at JIBAR plus a margin of 4%, is unsecured
and repayable within five years, unless otherwise agreed by the parties.
3 An amount receivable in relation to a deferred pricing adjustment which arose during 2017. The amount
receivable will be settled over seven years and bears interest at Prime Rate less 2%.
4 Relates to deferred consideration receivable which arose on the disposal of a mining right.
5 Relates to the ECC acquisition.
6 Deferred consideration payable in relation to the acquisition of the investment in AgriProtein.
The group holds the following loan commitments:
At 30 June
2018
Reviewed
Rm
Total loan commitments 1 186
Mafube1 500
AgriProtein2 686
Undrawn loan commitments 1 036
Mafube 350
AgriProtein 686
1 Revolving credit facility available for five years, ending 2023.
2 A US$50 million term loan facility available from 2020 to 2025.
20.1 Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets and financial liabilities.
These fair value measurements are categorised into different levels in the fair value hierarchy based on
the inputs to the valuation techniques used. The different levels are defined as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the group
can access at the measurement date.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3 - unobservable inputs for the asset and liability.
Fair value Level 1 Level 2 Level 3
At 30 June 2018 (Reviewed) Rm Rm Rm Rm
Financial assets at fair value through
other comprehensive income 221 221
Equity: unlisted 221 221
- Chifeng 221 221
Financial assets at fair value through profit or loss 1 426 26 1 400
Equity: listed 26 26
- KIO 26 26
Debt: unlisted 1 400 1 400
- Environmental rehabilitation funds 1 400 1 400
Financial liabilities at fair value
through profit or loss (647) (647)
Non-current contingent consideration (337) (337)
Current contingent consideration (310) (310)
Derivative financial liabilities (41) (41)
Net financial assets/(liabilities) held at fair value 959 26 1 359 (426)
Fair value Level 1 Level 2 Level 3
At 30 June 2017 (Reviewed) Rm Rm Rm Rm
Financial assets held-for-trading at
fair value through profit or loss 1 1
- Current derivative financial assets 1 1
Financial assets designated at fair
value through profit or loss 1 263 1 263
- Environmental rehabilitation funds 1 248 1 248
- KIO 15 15
Available-for-sale financial assets 177 177
- Chifeng 177 177
Financial liabilities designated at fair
value through profit or loss (427) (427)
- Non-current contingent consideration (191) (191)
- Current contingent consideration (236) (236)
Net financial assets/(liabilities) held at fair value 1 014 1 263 1 (250)
Fair value Level 1 Level 2 Level 3
At 31 December 2017 (Audited) Rm Rm Rm Rm
Financial assets held-for-trading at
fair value through profit or loss 4 4
- Current derivative financial assets 4 4
Financial assets designated at fair
value through profit or loss 1 391 1 391
- Environmental rehabilitation funds 1 357 1 357
- KIO 34 34
Available-for-sale financial assets 152 152
- Chifeng 152 152
Financial liabilities held-for-trading at
fair value through profit or loss (6) (6)
- Current derivative financial liabilities (6) (6)
Financial liabilities designated at
fair value through profit or loss (723) (723)
- Non-current contingent consideration (414) (414)
- Current contingent consideration (309) (309)
Net financial assets/(liabilities) held at fair value 818 1 391 (2) (571)
Reconciliation of financial assets and financial liabilities within Level 3 of the hierarchy
Contin-
gent
considera-
tion Chifeng1 Total
Rm Rm Rm
At 31 December 2016 (Audited) (483) 178 (305)
Movement during the period
Gains recognised for the period in other
comprehensive income (pre-tax effect)2 5 5
Losses recognised for the period in profit or loss (37) (37)
Settlements 74 74
Exchange losses for the period recognised
in other comprehensive income (6) (6)
Exchange gains for the period recognised in profit or loss 19 19
At 30 June 2017 (Reviewed) (427) 177 (250)
Movement during the period
Losses recognised for the period in other
comprehensive income (pre-tax effect)2 (31) (31)
Losses recognised for the period in profit or loss (317) (317)
Exchange gains for the period recognised in
other comprehensive income 6 6
Exchange gains for the period recognised
in profit or loss 21 21
At 31 December 2017 (Audited) (723) 152 (571)
Movement during the period
Gains recognised for the period in other
comprehensive income (pre-tax effect)2 69 69
Losses recognised for the period in profit or loss (188) (188)
Settlements 299 299
Exchange losses for the period recognised in profit or loss (35) (35)
At 30 June 2018 (Reviewed) (647) 221 (426)
1 Before 1 January 2018, the Chifeng equity investment was classified as available-for-sale in accordance
with IAS 39. From 1 January 2018, the Chifeng equity investment is classified at FVOCI in accordance
with IFRS 9.
2 Tax on Chifeng amounts to R12 million (30 June 2017: nil; 31 December 2017: R12 million).
Transfers
The group recognises transfers between levels of the fair value hierarchy as at the end of the reporting
period during which the transfer has occurred. There were no transfers between Level 1 and Level 2 nor
between Level 2 and Level 3 of the fair value hierarchy during the periods ended 30 June 2018, 30 June 2017
and 31 December 2017, except for the environmental rehabilitation funds which were transferred from Level 1
to Level 2 as a result of not applying the look-through principle.
Valuation process applied by the group
The fair value computations of the investments are performed by the group's corporate finance department,
reporting to the finance director, on a six-monthly basis. The valuation reports are discussed with the
chief operating decision maker and the audit committee in accordance with the group's reporting governance.
Current derivative financial instruments
Level 2 fair values for simple over-the-counter derivative financial instruments are based on market
quotes. These quotes are assessed for reasonability by discounting estimated future cash flows using the
market rate for similar instruments at measurement date.
Environmental rehabilitation funds
Level 2 fair values for debt instruments held in the environmental rehabilitation funds are based on
quotes provided by the financial institutions at which the funds are invested at measurement date.
20.2 Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well
as significant inputs used in the valuation models
Chifeng
Chifeng is classified within Level 3 of the fair value hierarchy as there is no quoted market price or
observable price available for this investment. This unlisted investment is valued as the present value
of the estimated future cash flows, using a discounted cash flow model. The valuation technique is
consistent to that used in previous reporting periods.
The significant observable and unobservable inputs used in the fair value measurement of the investment
in Chifeng are rand/RMB exchange rate, RMB/US$ exchange rate, zinc LME price, production volumes, operational
costs and the discount rate.
Sensitivity
analysis of a
10% increase in
Sensitivity the inputs is
of inputs and demonstrated
fair value below2
Inputs measurement1 Rm
At 30 June 2018 (Reviewed)
Observable inputs
Rand/RMB exchange rate R2.07/RMB1 Strengthening 22
of the rand to
the RMB
RMB/US$ exchange rate RMB6.37 to Strengthening 119
RMB6.97/US$1 of the RMB to
the US$
Zinc LME price (US$ per tonne US$2 200 to Increase in 119
in real terms) US$2 860 price
of zinc
concentrate
Unobservable inputs
Production volumes 85 000 tonnes Increase in 39
production
volumes
Operational costs (US$ million US$62.71 to Decrease in (86)
per annum in real terms) US$71.36 operational
costs
Discount rate 11.07% Decrease in (17)
the discount
rate
At 30 June 2017 (Reviewed)
Observable inputs
Rand/RMB exchange rate R1.92/RMB1 Strengthening 18
of the rand to
the RMB
RMB/US$ exchange rate RMB6.52 to Strengthening 96
RMB7.42/US$1 of the RMB to
the US$
Zinc LME price (US$ per tonne US$2 100 to Increase in price 96
in real terms) US$2 719 of zinc
concentrate
Unobservable inputs
Production volumes 85 000 tonnes Increase in 29
production
volumes
Operational costs (US$ million US$59.14 to Decrease in (70)
per annum in real terms) US$71.31 operational
costs
Discount rate 11.23% Decrease in (12)
the discount
rate
1 Change in observable or unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on the
basis that all other variables remain constant.
Sensitivity
analysis of a
10% increase in
Sensitivity the inputs is
of inputs and demonstrated
fair value below2
Inputs measurement1 Rm
At 31 December (Audited)
Observable inputs
Rand/RMB exchange rate R1.90/RMB1 Strengthening 15
of the rand to
the RMB
RMB/US$ exchange rate RMB6.52 to Strengthening 100
RMB7.28/US$1 of the RMB to
the US$
Zinc LME price (US$ per tonne US$2 100 to Increase in price 100
in real terms) US$3 000 of zinc
concentrate
Unobservable inputs
Production volumes 85 000 tonnes Increase in 29
production
volumes
Operational costs (US$ million per US$58.46 to Decrease in (75)
annum in real terms) US$70.20 operational
costs
Discount rate 11.05% Decrease in (12)
the discount
rate
1 Change in observable or unobservable input which will result in an increase in the fair value
measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, on
the basis that all other variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact
within the range of reasonably possible alternative assumptions for all reporting periods.
Contingent consideration
The potential undiscounted amount of all deferred future payments that the group could be required to
make under the ECC acquisition is between nil and US$120 million. The amount of future payments is
dependent on the API4 coal price.
At 30 June 2018, there was an increase of US$13.7 million (R188.09 million) (30 June 2017: US$2.9 million
(R37 million); 31 December 2017: US$28.5 million (R354 million)) recognised in profit or loss for the
contingent consideration arrangement.
API4 coal price range Future
(US$/tonne) payment
Reference year Minimum Maximum US$ million
2015 60 80 10
2016 60 80 25
2017 60 80 25
2018 60 90 25
2019 60 90 35
The amount to be paid in each of the five years is determined as follows (refer to the table above):
- If the average API4 price in the reference year is below the minimum API4 price of the agreed range,
then no payment will be made;
- If the average API4 price falls within the range, then the amount to be paid is determined based
on a formula contained in the agreement; and
- If the average API4 price is above the maximum API4 price of the range, then Exxaro is liable for
the full amount due for that reference year.
An additional payment to Total SA amounting to R299 million was required for the 2017 reference year
and R74 million was required for the 2016 reference year as the API4 price was within the agreed range.
No additional payment to Total SA was required for the 2015 reference year as the API4 price was below
the range.
The contingent consideration is classified within Level 3 of the fair value hierarchy as there is no
quoted market price or observable price available for this financial instrument. This financial
instrument is valued as the present value of the estimated future cash flows, using a discounted
cash flow model.
The significant observable and unobservable inputs used in the fair value measurement of this financial
instrument are rand/US$ exchange rate, API4 export price and the discount rate.
Sensitivity
analysis of a
10% increase in
Sensitivity the inputs is
of inputs and demonstrated
fair value below2
Inputs measurement1 Rm
At 30 June 2018 (Reviewed)
Observable inputs
Rand/US$ exchange rate R13.72/US$1 Strengthening 65
of the rand to
the US$
API4 export price (price per tonne) US$82.50 Increase in 134
to US$88.06 API4 export
price per tonne
Unobservable inputs
Discount rate 3.44% Decrease in the (31)
discount rate
At 30 June 2017 (Reviewed)
Observable inputs
Rand/US$ exchange rate R13.01/US$1 Strengthening 43
of the rand to
the US$
API4 export price (price per tonne) US$68.52 Increase in 241
to US$75.00 API4 export
price per tonne
Unobservable inputs
Discount rate 3.44% Decrease in the (23)
discount rate
1 Change in observable or unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, except for
the API4 export price which would result in a decrease of R221 million (30 June 2017: R280 million;
31 December 2017: R245 million), on the basis that all other variables remain constant.
Sensitivity
analysis of a
10% increase in
Sensitivity the inputs is
of inputs and demonstrated
fair value below2
Inputs measurement1 Rm
At 31 December 2017 (Audited)
Observable inputs
Rand/US$ exchange rate R12.37/US$1 Strengthening 72
of the rand to
the US$
API4 export price (price per tonne) US$74.41 Increase in 180
to US$84.35 API4 export price
per tonne
Unobservable inputs
Discount rate 3.44% Decrease in (19)
the discount
rate
1 Change in observable or unobservable input which will result in an increase in the fair value measurement.
2 A 10% decrease in the respective inputs would have an equal but opposite effect on the above, except for
the API4 export price which would result in a decrease of R221 million (30 June 2017: R280 million;
31 December 2017: R245 million), on the basis that all other variables remain constant.
Inter-relationships
Any inter-relationships between unobservable inputs are not considered to have a significant impact within
the range of reasonably possible alternative assumptions for all reporting periods.
21. CONTINGENT LIABILITIES
At At At
30 June 30 June 31 December
2018 2017 2017
Reviewed Reviewed Audited
Rm Rm Rm
Pending litigation and other claims1 1 030 948 876
Operational guarantees2 3 168 3 683 3 480
- Guarantees ceded to the DMR 2 918 2 905 3 052
- Other operational guarantees 250 778 428
Share of contingent liabilities of equity- 909 1 189 1 084
accounted investments3
Total contingent liabilities 5 107 5 820 5 440
1 Consists of legal cases as well as tax disputes where Exxaro is the defendant.
2 Includes guarantees to banks and other institutions in the normal course of business from which it is
anticipated that no material liabilities will arise.
3 Mainly operational guarantees issued by financial institutions relating to environmental rehabilitation
and closure cost.
The timing and occurrence of any possible outflows of the contingent liabilities above are uncertain.
SARS
On 18 January 2016, Exxaro received a letter of audit findings from SARS following an international
income tax audit for the years of assessment 2009 to 2013.
According to the letter, SARS proposed that certain international Exxaro companies would be subject to
South African income tax under section 9D of the Income Tax Act.
Assessments to the amount of R442 million (R199 million tax payable, R91 million interest and R152 million
penalties) were issued on 30 March 2016 and Exxaro formally objected against these assessments. These
assessments were subsequently reduced by SARS to R246 million (including interest and penalties). A resolution
hearing with SARS was held on 18 July 2017 but the parties could not settle the matter. Notice was given to
refer the matter to the Tax Court and a court date of 4 March 2019 was allocated to Exxaro.
These assessments have been considered in consultation with external tax and legal advisers and senior
counsel. Exxaro believes this matter has been treated appropriately by disclosing a contingent liability for
the amount under dispute.
22. RELATED PARTY TRANSACTIONS
The group entered into various sale and purchase transactions with associates and joint ventures during the
ordinary course of business. These transactions were subject to terms that are no less, nor more favourable
than those arranged with independent third parties.
23. GOING CONCERN
Based on the latest results for the six-month period ended 30 June 2018, the latest board approved budget
for 2018, as well as the available bank facilities and cash generating capability, Exxaro satisfies the
criteria of a going concern.
24. JSE LISTINGS REQUIREMENTS
The reviewed condensed group interim financial statements have been prepared in accordance with the
Listings Requirements of the JSE.
25. EVENTS AFTER THE REPORTING PERIOD
Details of the interim dividend are provided in note 11.
Subsequent to 30 June 2018, all conditions precedent to the sale of share agreement with Universal were
met and the sale of Manyeka became effective.
Subsequent to 30 June 2018, all conditions precedent to the sale of the NBC operation became effective.
The directors are not aware of any other significant matter or circumstance arising after the reporting
period up to the date of this report, not otherwise dealt with in this report.
26. REVIEW CONCLUSION
These reviewed condensed group interim financial statements for the six-month period ended 30 June 2018,
as set out above, have been reviewed by the group's external auditors, PricewaterhouseCoopers Inc.,
who expressed an unmodified review conclusion. A copy of the auditor's review report on the condensed group
interim financial statements is available for inspection at Exxaro's registered office together, with the
financial statements identified in the external auditor's report.
27. CORPORATE GOVERNANCE
Corporate governance forms one of the foundational layers of the Exxaro strategy as we understand that
transparency, integrity and accountability need to permeate everything that we do. The board of directors
endorse the principles contained in King IVTM. A thorough gap analysis was conducted in 2017, to understand
where additional effort is required to implement the recommended practices that support the King IVTM principles.
Exxaro will disclose actions taken toward compliance in the integrated report for the year ending 31 December 2018.
We have also mandated EY to conduct an independent review of our application of King IVTM to ensure that we are
able to thoroughly apply and explain our application of the principles in the next integrated report. Exxaro's
application of these principles are set out in the supplementary information, as well as in the 2017
integrated report and has been, in accordance with the JSE Listings Requirements, available on the company's
website since April 2018. Please contact Mrs SE van Loggerenberg, group company secretary and legal, for any
additional information.
28. MINERAL RESOURCES AND MINERAL RESERVES
Other than the normal LoM depletion, there have been no material changes to the Mineral Resources and
Mineral Reserves estimates as disclosed in the 2017 integrated report.
29. KEY MEASURES1
At At At
30 June 30 June 31 December
2018 2017 2017
Closing share price (rand per share) 125.70 93.00 162.50
Market capitalisation (Rbn) 45.09 29.22 58.29
Average rand/US$ exchange rate (for the period ended) 12.30 13.20 13.30
Closing rand/US$ spot exchange rate 13.72 13.01 12.37
1 Non-IFRS numbers.
COMMENTARY
for the six-month period ended 30 June 2018
Comments below are based on a comparison between the six-month periods ended 30 June 2018 and 2017
(1H18 and 1H17) respectively.
1. SAFETY
Exxaro recorded a year-to-date LTIFR of 0.10, an improvement compared to the 0.12 reported in FY17 and
reported zero fatalities during 1H18. Exxaro remains committed to the Zero Harm Vision and relentless
efforts to reduce incidents through the Safety Improvement Plans continue.
2. ROBUST FINANCIAL PERFORMANCE
The group's net operating profit for 1H18 increased by 7% to R3 126 million compared to 1H17. This was
mainly driven by a 12% increase in the net operating profit of the coal segment to R3 387 million
(1H17: R3 014 million), partly offset by a higher net operating loss of R268 million (1H17: R29 million)
of the other segment, which includes a R188 million fair value adjustment on the contingent consideration
relating to the acquisition of ECC. The income from equity-accounted investments decreased to R1 046 million
(1H17: R1 125 million), primarily due to lower equity-accounted income from SIOC due to rail challenges
experienced coupled with a stronger rand and lower iron ore export prices. However, this was offset by a
positive impact of ceasing equity accounting of the Tronox Limited investment due to the investment being
classified as a non-current asset held-for-sale on 30 September 2017 (1H17 included an equity-accounted
loss of R363 million).
3. COMPARABILITY OF RESULTS
The key transactions shown in table 1 should be considered to gain a better understanding of the
comparability of the results for the two periods.
Table 1: Key transactions impacting comparability
1H18 1H17 2H17
Reporting segment Description Rm Rm Rm
Coal - Insurance claim received by Leeuwpan
from external parties1 3
- Gain/(loss) on disposal of property,
plant and equipment1 117 (22) (40)
TiO2 - Loss on dilution of shareholding in (75) (31)
Tronox Limited1
- Gain on partial disposal of investment
in Tronox Limited including the recycling
of the foreign currency translation reserve,
offset by a loss on the recycling of the
financial instruments revaluation reserve
to profit and loss1;2 5 191
Other - Gain/(loss) on disposal of property, plant
and equipment1 1 (2)
- Receivable relating to the Mayoko iron ore
project written off (27)
- Recycling of foreign currency translation
reserve on liquidation of foreign entities
to profit or loss1 (14) (58)
- BEE credentials expense and transaction costs (4 339)
- Fair value adjustment on contingent
consideration relating to the acquisition
of ECC (188) (37) (317)
Group Total net operating profit impact (84) (161) 407
Coal - Tax on disposal of property, plant and
equipment1 1 6 12
- Tax on insurance claim received by Leeuwpan (1)
- Post-tax share of Mafube gain on disposal
of property, plant and equipment1 1
Ferrous - Post-tax share of SIOC gain/(loss) on disposal
of property, plant and equipment1 9 (4) (7)
- Post-tax share of SIOC reversal of impairment
of property, plant and equipment1 716
TiO2 - Post-tax share of Tronox Limited loss on
disposal of Alkali chemical business1 (1 271)
- Post-tax share of Tronox gain on disposal
of property, plant and equipment1 1
Net financing cost - NewBEECo preference dividend accrued
(consolidation impact) (67) (11)
Group - Total attributable earnings impact (140) (159) (154)
1 Excluded from headline earnings.
2 Tronox Limited was classified as a non-current asset held-for-sale on 30 September 2017.
4. COMMODITY PRICE PERFORMANCE AND GROUP SEGMENT RESULTS
The movement in the main commodity prices impacting Exxaro's performance is summarised in table 2 below.
Table 2: Change in commodity prices
Average US$ per tonne Change
Commodity price 1H18 1H17 %
API4 coal 97 79 +23
Iron ore fines 62% Fe ((CFR) China) 70 74 -5
The group revenue and net operating profit is summarised in table 3 below.
Table 3: Group segment results (Rm)
Revenue Net operating profit/(loss)
Reviewed Reviewed Reviewed Reviewed
1H18 1H17 2H17 1H18 1H17 2H17
Coal 12 240 10 670 11 883 3 387 3 014 2 995
- Tied1 1 827 1 591 1 665 192 149 (16)
- Commercial 10 413 9 079 10 218 3 195 2 865 3 011
Ferrous 12 56 187 7 53
TiO2 (75) 5 160
Other 8 10 7 (268) (29) (5 058)
Total 12 260 10 736 12 077 3 126 2 910 3 150
1 Mines managed on behalf of and supplying their entire production to Eskom in terms of contractual
agreements.
5. FINANCIAL AND OPERATIONAL RESULTS
5.1. Group financial results
5.1.1. Revenue and net operating profit
Consolidated group revenue increased by 14% to R12 260 million (1H17: R10 736 million), mainly due
to a higher contribution from the coal operations driven by improved coal sales prices and higher
Eskom commercial volumes at Grootegeluk based on demand from the Medupi Power Station. The average
price per tonne achieved on exports was US$79 (1H17: US$65) which was offset by a stronger average
spot exchange rate of R12.30 to the US dollar recorded for the period ended 30 June 2018
(1H17: R13.20).
Consolidated group net operating profit increased by 7% to R3 126 million (1H17: R2 910 million),
which is discussed further under the relevant segments.
5.1.2. Earnings
Earnings, which include Exxaro's share of income or loss of equity-accounted investments in
associates and joint ventures, were R3 182 million (1H17: R2 692 million) or 1 268 cents per share
(1H17: 852 cents per share).
Headline earnings were 10% higher at R3 067 million (1H17: R2 787 million) or 1 222 cents per share
(1H17: 882 cents per share).
Table 4: Income/(loss) from investments in associates and joint ventures (Rm)
Equity-accounted income/(loss) Dividends received
Reviewed Reviewed Reviewed Reviewed
1H18 1H17 2H17 1H18 1H17 2H17
SIOC 793 1 228 2 075 1 306 1 390
Tronox SA and UK operations1 224 68 118
Tronox Limited2 (363) (1 466) 31 59 50
Mafube (30) 118 141
Black Mountain 57 99 127
Cennergi 20 (11) 13
RBCT (18) (14) (10)
Total 1 046 1 125 998 1 337 59 1 440
1 Exxaro has a 26% interest in Tronox SA and Tronox UK.
2 Application of the equity method ceased when the investment was classified as a non-current
asset held-for-sale on 30 September 2017.
5.1.3. Cash flow and funding
Cash flow generated by operations increased by R281 million to R3 941 million (1H17: R3 660 million)
and was sufficient to cover operating activities and capital expenditure, as shown in table 5 below.
Table 5: Utilisation of cash generated by operations (Rm)
Reviewed Reviewed
1H18 1H17 2H17
Cash generated by operations 3 941 3 660 3 166
Net finance costs (126) (273) (136)
Capital expenditure (2 037) (1 314) (2 607)
Tax paid (588) (575) (215)
Final/interim ordinary dividend paid (1 004) (1 284) (943)
Net surplus/(deficit) after operating activities 186 214 (735)
and capital expenditure
Total capital expenditure for 1H18 increased by R723 million when compared to the corresponding period
last year, consisting of a R72 million increase in expenditure on sustaining and environmental capital
(stay-in-business capital) and R651 million on new capacity (expansion capital).
A gross special dividend of R4 502 million (R3 149 million paid to external shareholders) was paid to
shareholders on 5 March 2018 following the partial disposal of Exxaro's shareholding in Tronox Limited
during October 2017.
A dividend of R1 306 million was received from our investment in SIOC (1H17: nil). SIOC has declared a
dividend to its shareholders in July 2018, amounting to R1 263 million for Exxaro's 20.62% shareholding.
The dividend will be accounted for in 2H18.
5.1.4. Debt exposure
Net debt at 30 June 2018 was R2 514 million compared to net debt of R4 353 million at 30 June 2017.
This equates to a net debt to equity ratio of 6.5% (1H17: 12.0%), well below our internal limit of 40%.
5.2. Coal business performance
Table 5: Unreviewed coal production and sales volumes ('000 tonnes)
Production Sales
1H18 1H17 2H17 1H18 1H17 2H17
Thermal 22 218 20 823 22 020 22 125 20 911 22 347
Tied 3 538 3 542 3 858 3 538 3 542 3 861
Commercial: domestic 18 680 17 281 18 162 14 666 13 973 14 270
Commercial: export 3 921 3 396 4 216
Metallurgical 1 179 1 069 1 063 584 566 624
Commercial: domestic 1 179 1 069 1 063 584 566 624
Total coal 23 397 21 892 23 083 22 709 21 477 22 971
Semi-coke 23 46 40 33 47 41
Total coal (excluding buy-ins) 23 420 21 938 23 123 22 742 21 524 23 012
Thermal coal buy-ins 868 105 399
Total coal (including buy-ins) 24 288 22 043 23 522 22 742 21 524 23 012
Domestic trading conditions were favourable in 1H18 as producers experienced strong demand for
higher-quality product. The metals and reductants markets remained stable amid stable international
commodity prices.
The first half of 2018 saw relatively subdued export demand as a result of high international prices.
The API4 index remained above US$100 per tonne. This resulted in India, our natural market, sourcing
its coal from Russia, United States and Australia.
5.2.1. Production and sales volumes
Overall coal production volumes (excluding buy-ins and semi-coke) increased by 7% or 1 505kt. This
increase can essentially be attributed to the higher production volumes at Grootegeluk (GG) due to
continued ramp up at GG7 and GG8 plants to supply the Medupi Power Station. Sales were also
6% higher (1 232kt).
5.2.1.1. Metallurgical coal
Grootegeluk's metallurgical coal production was 110kt (10%) higher, mainly due to better yields at
GG1 as a result of better geological conditions compared to 2017. Sales increased by 18kt (3%)
mainly due to higher demand.
5.2.1.2. Thermal coal
Tied mines
Power station coal production from Matla mine was in line with 1H17, despite equipment breakdowns
and unfavourable geological conditions.
Commercial mines
Power station coal production from the commercial mines was 2 122kt higher mainly due to:
- Increased production at the Grootegeluk plants (GG7 and GG8) of 2 329kt
- Increased production at Leeuwpan of 155kt as a result of higher plant availability.
This increase was partly offset by:
- Lower production at NBC of 362kt due to community actions as well as discontinuing production
at Eerstelingsfontein due to the pending divestment to Universal.
Domestic power station coal sales from the commercial mines were 913kt higher than 1H17 mainly
as a result of an increase of 1 508kt at Grootegeluk due to higher demand from Medupi Power
Station. This was partly offset by lower NBC sales of 595kt due to community actions preventing
Eskom from collecting coal.
Steam coal production decreased by 723kt mainly as a result of:
- Lower buy-ins from Mafube JV of 616kt due to the ramping down of Springboklaagte and the
ramping up of Nooitgedacht reserve.
Domestic steam sales decreased by 225kt mainly as a result of:
- Lower sales at Leeuwpan of 407kt due to coal being diverted to the export market
- Lower sales at Grootegeluk of 67kt due to lower product availability
- Lower sales at ECC of 44kt.
The negative variance was partly offset by:
- Higher sales at NBC 293kt due to alternative markets found for the lower Eskom off-take.
The Semi-Coke production was 23kt (50%) lower due to a fire incident in March 2018 at
Grootegeluk's reductant plant. Sales were 14kt (30%) lower and in line with the lower
production and stock availability.
5.2.2. Revenue and net operating profit
Coal revenue of R12 240 million was 15% higher than 1H17 (R10 670 million). Higher revenue
from the commercial mines was mainly attributable to the higher selling prices as well as
an increase in Eskom volumes.
Net operating profit of R3 387 million (1H17: R3 014 million) at an operating margin of 28%
represents an increase of 12%, mainly due to:
- Higher sales prices (+R1 195 million)
- Volume variances (+R605 million)
- Lower distribution cost (+R257 million).
Partly offset by:
- Higher cost of buy-ins (-R396 million)
- Inflation (-R392 million)
- Exchange rate variance on sales due to a stronger rand against the US dollar (-R311 million)
- Net scope changes of environmental rehabilitation provisions (-R134 million)
- Royalties (-R71 million).
5.2.3. Equity-accounted investment
Exxaro recorded an equity-accounted loss of R30 million for 1H18 (1H17: profit of R118 million)
from Mafube, a 50% joint venture with Anglo, mainly due to the ramping down of Springboklaagte
reserve and ramping up of the Nooitgedacht reserve.
5.3. Ferrous business
Equity-accounted investment
The decrease in equity-accounted income from SIOC of R435 million to R793 million in 1H18 is
primarily due to rail challenges experienced coupled with a stronger rand exchange rate and lower
iron ore export prices.
5.4. Titanium dioxide
Equity-accounted investment
Equity-accounted income from Tronox SA and Tronox UK increased by R156 million to R224 million
compared to 1H17. This is mainly due to an improved operating performance as well as foreign currency
exchange gains.
The Tronox Limited investment was classified as a non-current asset held-for-sale on 30 September 2017,
upon which date equity accounting ceased. An equity-accounted loss of R363 million was included in 1H17
for Tronox Limited.
Exxaro obtained shareholder approval to sell the remainder of its shares in Tronox Limited and is
exploring alternatives for the monetisation thereof, through an efficient and staged sales process.
We are continuing to monitor developments with Tronox Limited, such as the proposed acquisition of
Cristal, and its approval by the US and European authorities.
5.5. Energy business
Equity-accounted investment
Exarro recorded an equity-accounted income of R20 million for 1H18 (1H17: loss of R11 million)
from Cennergi, a 50% joint venture with Tata Power. The two windfarm projects are running at slightly
lower than planned capacity due to lower than expected wind speeds, which was offset by
better than contracted equipment availability.
The results were also positively influenced by a change in the useful life (from 20 years to 30 years)
of the property, plant and equipment at the two windfarms which reduced the depreciation charge.
6. PERFORMANCE AGAINST NEW B-BBEE CODES AND MINING CHARTER
We are pleased with the improvement in our recognition level, from Level Six to Level Five, in terms
of the scorecard of the Department of Trade and Industry (DTI) Codes of Good Practice. This improvement
is attributable to our initial efforts during 2017 in the Enterprise and Supplier Development
category; however, much work remains to achieve our goal of reaching Level Three by 2019. We are
confident that, with the plans we have in place, together with our intent to diversify our supply chain,
enhance local economic development in the various communities of our operations and innovatively grow
our business of tomorrow, we will achieve this goal.
We further note the publication by the DMR of a draft Mining Charter and the invitation for comment
by stakeholders. Exxaro has commented on the draft document and is also participating, through the
Minerals Council South Africa, regarding key issues that need to be considered to achieve
competitiveness, growth and transformation.
7. THE YOUTH EMPLOYMENT SERVICES (YES) INITIATIVE
The YES initiative was pronounced by President Cyril Ramaphosa on 27 March 2018. YES is a partnership
between government, business, labour and civil society and aims to see more than one million young
South Africans, between the ages of 18 and 35, being offered paid work experience over the next
three years. We are committed to this initiative and currently awaiting further clarification and
guidelines for participation from the DTI. We will be partnering with service providers to implement
and enable the programme of both skills and work experience for the youth.
8. BROAD-BASED BLACK ECONOMIC EMPOWERMENT
As referred to in the announcement released on the SENS of the JSE Limited on 20 November 2017
relating to the results of the extraordinary general meeting of shareholders with respect to the
implementation of the Replacement BEE Transaction, Exxaro provided certain undertakings:
8.1. Implementation of Employee and Community Empowerment Schemes
In order to ensure that the profile of NewBEECo is enhanced to be more broad-based, and include
new empowerment beneficiaries, Exxaro undertook to finalise appropriate employee and community
empowerment structures by transferring no less than 10% of its equity holding in NewBEECo by
30 June 2018.
Exxaro has made meaningful progress with respect to the conceptualisation of relevant employee
and community empowerment structures in line with the abovementioned undertaking. In light of the
recent developments regarding the revised Mining Charter, the board of directors of Exxaro has
resolved that the implementation of the relevant employee and community empowerment structures be
delayed to ensure regulatory compliance is achieved and that sustainable ownership structures are
optimised in this regard.
Exxaro remains fully committed in meeting the undertaking given in a manner which meets the
objectives of all stakeholders.
8.2. Other undertakings
Exxaro is in discussions with stakeholders in respect of the undertakings relating to the
restructuring of the BEE shareholding and the potential listing of NewBEECo on a BEE exchange.
9. MINERAL RESOURCES AND mineral RESERVES
Other than the normal LOM depletion, there have been no material changes to the Mineral Resources
and Mineral Reserves as disclosed in the 2017 integrated report.
10. MINING AND PROSPECTING RIGHTS
Exxaro has continued with the successful submissions of amendments to existing rights to protect
Exxaro's interests and ensure greater LOM.
In addition to the above, Exxaro has made slow progress with the mining right registrations of
Matla, Arnot and Glisa (at the NBC operation). While there are still challenges pertaining to
these registrations, Exxaro still expects the registrations to be concluded during 3Q18.
11. CHANGES TO THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The following non-executive directors have been appointed on 23 May 2018:
- Ms GJ Fraser-Moleketi
- Mr MJ Moffett
- Mr LI Mophatlane.
Mr J van Rooyen, who joined the board of directors in August 2008, was appointed as lead independent
director on 26 March 2018. Mr van Rooyen resigned as lead independent director and as chairman of the
audit committee when he was appointed as chairman of the board of directors on 15 June 2018.
Ms GJ Fraser-Moleketi was appointed as lead independent director on 15 June 2018.
The following independent non-executive directors have been appointed as chairmen of Exxaro's
board committees on 15 June 2018:
- Mr V Nkonyeni, has been appointed to chair the audit committee
- Mr LI Mophatlane, has been appointed to chair the investment committee (a newly constituted
committee of the board)
- Mr EJ Myburgh, has been appointed to chair the remuneration committee
- Ms A Sing, has been appointed to chair the social and ethics committee
- Mr PCCH Snyders, has been appointed to chair the sustainability, risk and compliance committee
- Mr J van Rooyen, has been appointed to chair the nomination committee.
12. OUTLOOK
We expect that the domestic market demand for sized product will remain strong as supply remains
tight. We are confident that all products will be placed successfully into the market during 2H18.
Export markets are still reliant on demand from India for lower-quality coal. However, Exxaro is
actively diversifying its markets for lower quality coal to minimise dependency on the Indian
market. Growth is expected from the South-East Asian markets.
Exxaro expects a stable outlook for the coal business in 2H18 based on:
- Favourable trading conditions in domestic markets
- Strong international coal prices
- Our business optimisation strategy driving operational and innovation excellence throughout
the business with a strong focus on eliminating systemic waste.
- Good progress being made on building key technology enabling infrastructure and the
visualisation of business constraints, aimed at accelerating our innovation and technology
implementation strategy.
During 2H18, the performance of our SIOC investment will be supported by a relatively stable
iron ore fines price and lump premium, and continued strong demand for higher-grade products.
Relatively stable commodity prices and global economic growth are anticipated. Over the next
six months the US-China trade tension and high oil price are expected to slow global economic
growth momentum somewhat. The rand to the US dollar exchange rate is expected to remain
volatile and subject to ongoing event risk such as US Federal interest rate normalisation,
geopolitical risks and emerging market sentiment.
13. REVISED DIVIDEND POLICY AND INTERIM DIVIDEND
In determining the level of dividend payout Exxaro takes cognisance of the current state of
the industry, Exxaro's capital expenditure and other relevant commitments as well as its
ability to generate sustainable cash flows.
Exxaro's declared dividend policy was based on a cover ratio of between 2.5 and 3.5 times
core attributable group earnings.
Given Exxaro's strong balance sheet, underpinned by strong cash flow generation, the board of
directors has approved a revised dividend policy. The revised dividend policy comprises two
components; firstly, a pass through of the SIOC dividend received and secondly, a dividend based
on a targeted cover ratio of 2.5 to 3.5 core attributable coal earnings.
Additionally, Exxaro is targeting a gearing ratio below 1.5 times net debt to EBITDA.
The board of directors has therefore declared a cash dividend comprising:
- 3.3 times core attributable coal earnings
- Pass through of SIOC dividend of R1 263 million.
Notice is hereby given that a gross interim cash dividend, number 31 of 530 cents per share,
for the six-month period ended 30 June 2018 was declared, and is payable to shareholders of
ordinary shares. For details of the dividend, please refer to note 11 of the reviewed condensed
group interim financial statements for the six-month period ended 30 June 2018.
Salient dates for payment of the interim dividend are:
- Last day to trade cum dividend on the JSE Tuesday 18 September 2018
- First trading day ex dividend on the JSE Wednesday 19 September 2018
- Record date Friday 21 September 2018
- Payment date Tuesday 25 September 2018
No share certificates may be dematerialised or re-materialised between Wednesday, 19 September 2018
and Friday, 21 September 2018, both days inclusive. Dividends for certificated shareholders will
be transferred electronically to their bank accounts on payment date. Shareholders who hold
dematerialised shares will have their accounts at their central securities depository participant
or broker credited on Tuesday, 25 September 2018.
14. GENERAL
Additional information on financial and operational results for the six-month period ended
30 June 2018, and the accompanying presentation can be accessed on our website on www.exxaro.com.
On behalf of the board of directors
Jeffrey van Rooyen Mxolisi Mgojo Riaan Koppeschaar
Chairman Chief executive officer Finance director
16 August 2018
ACRONYMS
AgriProtein AgriProtein Holdings UK Limited
Anglo Anglo South Africa Capital Proprietary Limited
API4 All publications index 4 (FOB Richards Bay 6000kcal/kg)
B-BBEE Broad-based black economic empowerment
BEE Black economic empowerment
BEE Parties External shareholders of NewBEECo
Black Mountain Black Mountain Proprietary Limited
Cennergi Cennergi Proprietary Limited
CFR Cost and freight
Chifeng Chifeng Kumba Hongye Corporation Limited
Cps Cents per share
Curapipe Curapipe Systems Limited
DCM Dorstfontein
DEA Department of Environmental Affairs
DMR Department of Mineral Resources
DMTN Domestic medium-term note
ECC Exxaro Coal Central Proprietary Limited
ECL(s) Expected credit loss(es)
Eloff Eloff Mining Company Proprietary Limited
EMJV Ermelo joint venture
Ferroland Ferroland Grondtrust Proprietary Limited
FOB Free on board
FVOCI Fair value through other comprehensive income
FVPL Fair value through profit or loss
HDSA The meaning given to it, or any equivalent or
replacement term, in the broad-based socio-economic
empowerment charter for the South African Mining
Industry, developed under section 100 of the MPRDA,
as amended or replaced from time to time
HEPS Headline earnings per share
IAS International Accounting Standard
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
JIBAR Johannesburg Interbank Agreed Rate
JSE JSE Limited
kcal Kilocalorie
KIO Kumba Iron Ore Limited
Kt Kilo tonnes
LME London Metal Exchange
LOM Life of mine
LTIFR Lost-time injury frequency rate
Mafube Mafube Coal Proprietary Limited
Main Street 333 Main Street 333 Proprietary Limited
Manyeka Manyeka Coal Mines Proprietary Limited
Mpower 2012 Exxaro Employee Empowerment Trust
MPRDA Mineral and Petroleum Resources Development Act, 2002
Mt Million tonnes
Mtpa Million tonnes per annum
NBC North Block Complex
NEMA National Environmental Management Act, 1998
NewBEECo Eyesizwe (RF) Proprietary Limited, special purpose
private company which holds the BEE shares
OCI Other comprehensive income
PRC Peoples Republic of China
Prime Rate South African prime bank rate
Rb Rand billion
RB1 Richards Bay export product 1
RBCT Richards Bay Coal Terminal Proprietary Limited
Replacement BEE Transaction BEE transaction which was implement in 2017 and
resulted in Exxaro being held 30% by HDSAs
Rm Rand million
RMB Chinese Renminbi
SAICA South African Institute of Chartered Accountants
SARS South African Revenue Service
SIOC Sishen Iron Ore Company Proprietary Limited
SPPI Solely payments of principal and interest
SSCC Semi-soft coking coal
Tata Power Tata Power Company Limited
TiO2 Titanium dioxide
Tronox Exxaro's investment in Tronox entities
Tronox SA Tronox KZN Sands Proprietary Limited and
Tronox Mineral Sands Proprietary Limited
Tronox UK Tronox Sands Limited Liability Partnership
in the United Kingdom
UK United Kingdom
Universal Universal Coal Development IV Proprietary Limited
US$ United States Dollar
VAT Value Added Tax
CORPORATE INFORMATION
REGISTERED OFFICE
Exxaro Resources Limited
Roger Dyason Road
Pretoria West, 0183
Tel: +27 12 307 5000
Fax: +27 12 323 3400
This report is available at: www.exxaro.com
DIRECTORS
J van Rooyen*** (chairman), MDM Mgojo* (chief executive officer), PA Koppeschaar* (finance director),
GJ Fraser-Moleketi (lead independent director)***, MW Hlahla**, D Mashile-Nkosi**, L Mbatha**,
VZ Mntambo**, MJ Moffett***, LI Mophatlane***, EJ Myburgh***, V Nkonyeni***, A Sing***, PCCH Snyders***
*Executive
**Non-executive
***Independent non-executive
PREPARED UNDER SUPERVISION OF:
PA Koppeschaar CA(SA)
SAICA registration number: 00038621
GROUP COMPANY SECRETARY
SE van Loggerenberg
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
Rosebank Towers
13 Biermann Avenue
Rosebank, 2196
PO Box 61051
Marshalltown, 2107
INVESTOR RELATIONS
MI Mthenjane (+27 12 307 7393)
SPONSOR
Absa Bank Limited (acting through its Corporate and Investment Bank Division)
Tel: +27 11 895 6000
If you have any queries regarding your shareholding in Exxaro Resources Limited, please
contact the transfer secretaries at +27 11 370 5000
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
forward looking statements. Financial forecasts and data given herein are estimates based on the
reports prepared by experts who in turn relied on management estimates. Undue reliance should
not be placed on such opinions, forecasts or data. No representation is made as to the completeness
or correctness of the opinions, forecasts or data contained herein. Neither the company, nor any of
its affiliates, advisers or representatives accepts any responsibility for any loss arising from the
use of any opinion expressed or forecast or data herein. Forward looking statements apply only as of
the date on which they are made and the company does not undertake any obligation to publicly update
or revise any of its opinions or forward looking statements whether to reflect new data or future
events or circumstances.
www.exxaro.com
Date: 16/08/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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