Wrap Text
EXX: Reviewed Condensed Group Annual Financial Statements For The Year Ended 31 December 2018.
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 annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
SALIENT FEATURES
Sustainable operations
- LTIFR of 0.12
Group financial performance
- Revenue R25.5 billion, up 12%
- Core EBITDA R7.3 billion, up 1%
- Core headline earnings of R21.59 per share, up 7%
- Cash generated from operations R7.0 billion, up 3%
- Final cash dividend of R5.55 per share, total dividend of R10.85 per share, up 55%
Coal operational performance
- Record production volumes of 47.8Mt
- Record sales volumes of 45.2Mt
- Record export volumes of 8.0Mt
SIOC
- R2.6 billion post-tax equity-accounted income
- Dividend of R2.6 billion in FY18
COMMENTARY
for the year ended 31 December 2018
Comments below are based on a comparison between the financial years ended 31 December 2018 and 2017
(FY18 and FY17) respectively.
SAFETY
Exxaro recorded an LTIFR of 0.12 (FY17: 0.12) against a target of 0.11. At year end, the group achieved
22 months without a fatality. We are committed to the zero harm vision and relentless efforts to reduce
incidents through our Safety Improvement Plans continue.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Exxaro has been a constituent of the JSE's FTSE Russell ESG Ratings (previously JSE SRI Index) since 2008.
These ratings are a measure of our business sustainability practices in relation to environmental stewardship,
social responsibility as well as governance and ethical leadership of the business and are key indicators of
progress in our response to socio-economic and environmental challenges where we operate.
During the financial year ended 31 December 2018, our overall ESG rating was a score of 3.7 out of a total of 5,
attributable to a score of 3.5 for environmental performance, 3.3 for social responsibility and 4.6 for governance
and ethical leadership. These were leading scores compared to peers in both the coal sector and the mining industry.
These non-financial metrics are integrated into our business decision-making process, thus enhancing our stakeholder
value creation through reduced risk to the business.
One of the key highlights during the financial year was the completion of the restructuring of the board of
directors (Board) following the implementation of the Replacement BEE Transaction. Through this process we
were able to increase the Board gender diversity (among others) with black representation of 64% (against a
target of 50%) and black female representation of 36% (against a target of 30%).
While we are pleased with this leading performance, we are conscious of the challenges that remain in the
environmental and social elements, including the systemic climate risk to our business. Our response to these
challenges are addressed in detail in our 2018 Integrated Report, which will be published in April 2019.
ROBUST PERFORMANCE
Exxaro delivered a solid financial performance for FY18, achieving core EBITDA1 of R7 281 million
(FY17: R7 207 million), while unadjusted EBITDA2 rose to R6 924 million (FY17: R2 487 million). Reconciliation
from EBITDA to core EBITDA is provided in the table below. We believe these adjustments should be excluded
to enable a more meaningful year-on-year comparison.
Table 1: Difference between unadjusted EBITDA and core EBITDA
FY18 FY17
Segment Description Rm Rm
EBITDA 6 924 2 487
Adjustments: 357 4 720
Other - Receivable for Mayoko iron ore project written off 27
- BEE credentials expense and transaction costs 4 339
- Fair-value adjustment on contingent consideration
relating to the acquisition of ECC 357 354
Core EBITDA 7 281 7 207
1 Core EBITDA is calculated by adjusting EBITDA with once-off items to remove the volatility in profit or
loss and make it more comparable. However, these terms are not defined under IFRS and may not be comparable
with similarly titled measures reported by other companies.
2 EBITDA is calculated by adjusting earnings before interest and tax for depreciation, amortisation, impairment
charges and net loss or gain on disposal of investments and assets.
The prior year results for income from equity-accounted investments included several headline earnings
adjustments. After taking these into consideration, core income from equity-accounted investments increased
by 22% to R3 271 million (FY17: R2 688 million).
Table 2: Adjustments impacting income from equity-accounted investments
FY18 FY17
Segment Description Rm Rm
Unadjusted equity-accounted income 3 259 2 123
Adjustments: 12 565
Coal - Post-tax share of equity-accounted investments'
remeasurements1 1
Ferrous - Post-tax share of SIOC's loss on disposal of property,
plant and equipment1 13 11
- Post-tax share of SIOC's reversal of impairment of
property, plant and equipment1 (716)
TiO2 - Post-tax share of Tronox's gain on disposal of property,
plant and equipment1 (1) (1)
- Post-tax share of Tronox Limited's loss on disposal of
Alkali chemical business1 1 271
Energy - Post-tax share of Cennergi's net gain on disposal of
property, plant and equipment1 (1)
Core equity-accounted income 3 271 2 688
1 Excluded from headline earnings.
CHANGES IN SEGMENT REPORTING
We have revised the way in which our coal operations are reported to provide stakeholders with more useful
and relevant information. The coal operations have been disaggregated based on the nature of the operation -
commercial, tied and other - as well as geographical location between the Waterberg and Mpumalanga regions
in South Africa.
The key changes to the coal reportable segments are:
- The commercial coal operations have been split by region into Waterberg and Mpumalanga
- The tied coal operation includes the Matla mine
- Coal other operations have been added which include the remaining coal operations not reported on under the
commercial or tied coal operations as well as Arnot and Tshikondeni (mines in closure).
Coal export revenue and related export cost items have been allocated to the coal operating segments based
on the origin of the initial coal production.
FY17 numbers have been re-presented to reflect these changes.
COMPARABILITY OF RESULTS
The key transactions shown below should be considered for a better understanding of the comparability
of results between the two years.
Key transactions impacting on comparability (non-core adjustments) (Rm)
Segment Description FY18 FY17
Total EBITDA impact (refer table 1) (357) (4 720)
Coal - Insurance claim received from external parties1 57 3
- Gain on disposal of non-core investments1, 2 171
- Gain/(loss) on disposal of property, plant and
equipment1, 3 121 (62)
TiO2 - Loss on dilution of shareholding in Tronox Limited1 (106)
- Gain on partial disposal of investment in Tronox
Limited1, including recycling of the foreign currency
translation reserve, offset by a loss on recycling
financial instruments' revaluation reserve to profit or
loss1, 4 5 191
Other - Loss on disposal of property, plant and equipment1 (2)
- Loss on disposal of financial asset (2)
- Recycling of the foreign currency translation reserve on
liquidation of foreign entities to profit or loss1 14 (58)
Total net operating profit impact 4 246
Total post-tax equity-accounted income impact1 (refer table 2) (12) (565)
Net financing - Eyesizwe preference dividend accrued (consolidation
cost impact) (100) (11)
Net tax
adjustments - Tax on non-core adjustments (29) 17
Total attributable earnings impact (137) (313)
1 Excluded from headline earnings.
2 Comprises gain on disposal of Manyeka (R69 million) and gain on disposal of certain assets and
liabilities of NBC (R102 million).
3 Includes R115 million gain on disposal of mineral properties by Matla.
4 Tronox Limited was classified as a non-current asset held-for-sale on 30 September 2017.
COMMODITY PRICE PERFORMANCE AND GROUP SEGMENT RESULTS
Commodity price movements impacting Exxaro's performance are summarised below.
Change in commodity prices
Average US$ per tonne
Commodity price FY18 FY17 % change
API4 coal 98 84 +17
Iron ore fines 62% Fe ((CFR) China) 70 71 -1
Group segment results (Rm)
Revenue Core EBITDA1
(Re-
presented)
FY18 FY17 FY18 FY17
Coal 25 302 22 553 7 617 7 374
Commercial - Waterberg 13 289 11 328 6 882 6 461
Commercial - Mpumalanga 7 984 7 970 1 558 1 388
Tied1 3 665 2 837 144 140
Other 364 418 (967) (615)
Ferrous 169 243 15 52
Alloys 169 243 18 53
Other (3) (1)
Other 20 17 (351) (219)
Total 25 491 22 813 7 281 7 207
1 Core EBITDA is calculated after adjusting for non-core transactions reflected in table 3.
FINANCIAL AND OPERATIONAL RESULTS
Group financial results
Revenue
Group revenue rose 12% to R25 491 million (FY17: R22 813 million), mainly due to higher coal selling prices and
higher Eskom commercial volumes at Grootegeluk, based on demand from Medupi power station, partially offset by
a lower quality product mix. The average price per tonne achieved on exports was US$77 (FY17: US$69). The average
spot exchange rate realised was marginally stronger at R13.24 to the US dollar (FY17: R13.30).
Earnings
Headline earnings increased to R6 707 million (FY17: R1 560 million) or 2 672 cents per share (FY17: 502 cents
per share), driven by the following non-recurring costs in the prior year:
- BEE credential expense and transaction costs of R4 339 million for the Replacement BEE Transaction, which
were not adjusted for in headline earnings
- Cessation of the equity method of accounting for Tronox Limited on 30 September 2017.
After adjusting for non-core transactions on table 3, core headline earnings rose 14% to R7 167 million
(FY17: R6 295 million) or 2 159 cents per share (FY17: 2 011 cents per share) based on a WANOS of
332 million (FY17: 313 million).
Similarly, core equity-accounted income/(loss) is shown below.
Core equity-accounted income/(loss) (Rm)
Equity-accounted Dividends
income/(loss) received
FY18 FY17 FY18 FY17
Coal: Mafube 113 259
Coal: RBCT (34) (24)
Ferrous: SIOC 2 605 2 598 2 569 1 390
TiO2: Tronox SA and UK operations1 491 186
TiO2: Tronox Limited2 (559) 69 109
Energy3 60 2 58
Other: Other4 36 226
Total 3 271 2 688 2 696 1 499
1 Application of the equity method of accounting ceased when the Tronox UK investment was classified as
a non-current asset held-for-sale on 30 November 2018.
2 Application of the equity method of accounting ceased when the investment was classified as a non-current
asset held-for-sale on 30 September 2017.
3 FY18 includes equity-accounted income or loss for Cennergi (R65 million income) and LightApp
(R5 million loss).
4 FY18 includes equity-accounted income or loss for AgriProtein (R31 million loss); Curapipe (R3 million loss)
and Black Mountain (R70 million income), (FY17 includes only Black Mountain).
Cash flow and funding
Cash flow generated by operations of R7 024 million (FY17: R6 826 million) plus dividends received from
investments of R2 695 million was sufficient to cover our capital expenditure and ordinary dividends as
shown below.
Deploying cash generated by operations (Rm)
FY18 FY17
Cash generated by operations 7 024 6 826
Dividends from investments in associates and joint ventures 2 696 1 499
Net finance costs (289) (409)
Capital expenditure (5 790) (3 921)
Tax paid (1 007) (790)
Final/interim ordinary dividends paid (2 334) (2 227)
Net surplus 300 978
Total capital expenditure increased by R1 869 million mainly for investments in Grootegeluk's GG6 phase 2
expansion and Belfast projects.
SIOC declared a final dividend to shareholders on 14 February 2019, totalling R1 369 million for Exxaro's
20.62% shareholding. This will be reflected in our 1H19 results.
Debt exposure
The group had net debt of R3 867 million at 31 December 2018 compared to net cash of R69 million at
31 December 2017.
Net debt includes the preference share liability of R609 million (FY17: R2 478 million) for Eyesizwe.
In addition to cash flow items noted above, a gross special dividend of R4 502 million (R3 149 million
paid to external shareholders) was paid to shareholders on 5 March 2018 after the partial disposal of
our shareholding in Tronox Limited in October 2017.
Coal business performance
Unreviewed coal production and sales volumes ('000 tonnes)
Production Sales
FY18 FY17 FY18 FY17
Thermal 44 417 42 843 43 967 43 258
Commercial - Waterberg 27 375 23 406 25 364 22 466
Commercial - Mpumalanga 10 433 12 037 4 033 5 777
Exports commercial 7 965 7 612
Tied 6 609 7 400 6 605 7 403
Metallurgical 2 323 2 132 1 197 1 190
Commercial - Waterberg 2 323 2 132 1 197 1 190
Total coal 46 740 44 975 45 164 44 448
Semi-coke 23 86 33 88
Total coal (excluding buy-ins) 46 763 45 061 45 197 44 536
Thermal coal buy-ins 1 049 504
Total coal (including buy-ins) 47 812 45 565 45 197 44 536
Trading conditions in the domestic market were strong in FY18, resulting in all premium product being sold
at stable prices. Our supply to Eskom increased in line with contractual commitments while all other
markets remained stable.
The international export market recorded strong demand for most of 2018. India increased its demand for
South African lower-grade material up to 3Q18, when the market became oversupplied with coal from Indonesia
and Australia after the ban on coal imports by China. Demand from South Korea slowed in 2018 as South African
coal could not compete with Colombian material, but new opportunities came from Japan after Exxaro shipped
a trial cargo to a power plant and received a new order for 2019. In Pakistan, new coal-fired power plants
were commissioned in 2018, increasing annual coal demand to 6Mtpa from the traditional 4Mtpa. We made further
inroads into the Pakistan market, supplying both the power plant and cement industries.
China has recently relaxed the ban on coal imports. However, there is still a strong indication that it will
continue to protect its domestic market by limiting coal imports. If China imposes a further ban on imports,
this will have a negative impact on coal pricing, especially into India.
In addition to favourable domestic and international trading conditions, we realised year-on-year operational
excellence improvements and successfully implemented two key initiatives, namely visualisation of our mining
value chain and the integrated operations centre at some of our major mines, focused on eliminating systemic waste.
Production and sales volumes
Overall coal production volumes (excluding buy-ins and semi-coke) were up 1 765kt (4%), mainly attributable to
higher production at Grootegeluk due to the ramp-up of Medupi. Sales were only 716kt (2%) higher due to strategic
stock-building at Grootegeluk to compensate for disrupted production while constructing the GG6 expansion project.
Thermal coal
Commercial: Waterberg
Production at Grootegeluk rose 3 969kt (17%), mainly due to the ramp-up of Medupi. This also resulted in an
increase in sales of 2 898kt (13%).
Commercial: Mpumalanga
The commercial Mpumalanga mines' thermal coal production was 1 604kt (13%) lower, driven by:
- Community actions as well as the subsequent disposal of certain assets and liabilities of NBC to North Block
Complex Proprietary Limited at the end of October 2018 (-1 538kt or -52%)
- A labour strike by the contractor, geological challenges at Forzando South, as well as the timing of coal seams
mined at Dorstfontein Complex East affecting production at ECC (-263kt or -6%)
- Ramping down Springboklaagte reserve and ramping up Nooitgedacht reserve at Mafube (-669kt or -40%).
The decrease was partly offset by:
- Higher ramp-up in overburden tonnes enabling higher production at Leeuwpan, as well as the decision to increase
power station coal to the export market (+865kt or +26%).
The commercial Mpumalanga mines' thermal coal sales were down 1 744kt (30%), driven by:
- Community actions preventing Eskom from collecting coal and the subsequent disposal of certain assets and
liabilities of NBC (-1 317kt or -47%)
- A change in sales strategy at Leeuwpan aimed at maximising export sales to capitalise on strong market prices
and demand (-317kt or -14%)
- Product availability driven by lower production at ECC (-110kt or -16%).
Exports commercial
Export sales increased by 5% to 7 965kt as buy-ins more than doubled.
Tied
Coal production and sales from Matla were 11% lower. Lower production of 792kt was largely affected by the
Mine 2 wall halting production mid-March (-1 393kt), partly offset by Mine 3 (+601kt ) after implementing an
additional section in the review period.
Metallurgical coal
Grootegeluk's metallurgical coal production increased by 191kt (9%), resulting in higher export sales. Our operational
excellence initiatives (focusing on the seven-day work week, plant throughput, plant discard and coal fragmentation)
contributed to higher production. Sales were in line with FY17.
Semi-coke
Semi-coke production was 63kt (73%) lower due to a fire in March 2018 at the reductant plant, resulting in lower
sales of 55kt (63%).
Capex and projects
Exxaro's capital for its coal business increased by 50% compared to FY17. This is mainly due to:
- the GG6 Phase 2 expansion project in the Waterberg region
- the Belfast project, Leeuwpan Lifex project and higher sustaining capex at ECC, in the Mpumalanga region.
The higher capex is partly offset by:
- optimisation on sustaining capital at Grootegeluk (trucks, stacker and reclaimers as well as discard and
backfill phase 2 project).
Coal Capex (Rm)
FY18 FY17 % change
Sustaining 2 779 3 203 -13
Commercial: Waterberg 1 904 2 687 -29
Commercial: Mpumalanga 875 516 +70
Expansion 2 943 601
Commercial: Waterberg 1 987 440
Commercial: Mpumalanga 956 161
Total coal capex 5 722 3 804 +50
Revenue and core EBITDA
Coal revenue of R25 302 million rose by 12% higher (FY17: R22 553 million). Higher revenue from our commercial
mines reflects higher selling prices, an increase in Eskom sales volumes and higher exports. This was partly
offset by lower domestic sales and a lower product quality mix.
Coal EBITDA of R7 617 million (FY17: R7 374 million) rose 3%, driven by:
- Higher commercial revenue (+R1 920 million)
- Higher stock movement (+R281 million)
- Savings on distribution costs (+R396 million).
The increase was partly offset by:
- Higher inflation (-R962 million)
- Higher mining costs (-R437 million)
- Higher maintenance (-R362 million)
- Higher general costs (-R402 million) (includes cost relating to digital strategy, grants in respect of our
enterprise and supply development strategy and fair value on Trust investments)
- Higher royalties (-R281 million)
- Higher employee costs (-R121 million).
Equity-accounted investment
Mafube, a 50% joint venture with Anglo, recorded lower core equity-accounted income of R113 million
(FY17: R259 million), mainly due to ramping down at Springboklaagte and ramping up at the Nooitgedacht
reserve.
Ferrous business
Equity-accounted investments
After adjusting for non-core transactions, equity-accounted income from SIOC was R2 605 million
(FY17: R2 598 million).
An interim dividend of R1 263 million was received from SIOC in FY18 (FY17: R1 390 million). A final
dividend, of which Exxaro's share will be R1 369 million, was declared on 14 February 2019.
Titanium dioxide
Equity-accounted investment
After adjusting for non-core transactions, core equity-accounted income from Tronox SA and Tronox UK increased
by R305 million to R491 million compared to FY17. This is mainly due to improved operating performance and
foreign currency exchange gains.
We are committed to monetising our remaining 23,4% interest in Tronox Limited to focus on core activities,
repay debt, fund capital commitments and make distributions to shareholders by applying our capital allocation
framework. In this regard, on 26 November 2018, Exxaro and Tronox Limited agreed to address the following
key matters:
- The terms of our support for Tronox Limited's intention to redomicile from Australia, where it is currently
incorporated, to the United Kingdom
- Exxaro's accelerated disposal of its 26% member's interest in Tronox UK for R2 billion in cash, representing our
indirect share of loan accounts in Tronox SA at 30 September 2018
- Further clarification of terms and conditions agreed between Exxaro and Tronox Limited in 2012, when Tronox Limited
was formed, by which Exxaro can dispose of its 26% equity interest in Tronox SA in exchange for 7.2 million Tronox
Limited shares or the cash equivalent (the disposal). In addition to existing triggers, Exxaro and Tronox Limited
have agreed that the disposal can be triggered on the occurrence of certain events, including confirmation or
agreement that Tronox SA has met the relevant ownership requirements for its existing mining rights, in the
context of the new mining charter
- The terms on which Exxaro can begin a staged process to monetise its remaining Tronox Limited stake of 28.7 million
shares in 2019, subject to market conditions, including Exxaro's grant to Tronox Limited of a right to acquire such
shares at a market-related price in lieu of selling them in the market or to any third parties.
The investment in Tronox Limited continues to meet the criteria to be classified as a non-current asset held-for-sale.
In addition, Exxaro's membership interest in Tronox UK was classified as a non-current asset held-for-sale as of 30
November 2018, when all the requirements in terms of IFRS 5 were met, and application of the equity method ceased.
On 15 February 2019, Tronox Limited confirmed the completion of the first stage of its redomiciliation, in which it
has acquired Exxaro's 26% ownership interest in Tronox UK for R2.1 billion.
On 8 March 2019, Tronox Limited announced that the shareholders of Tronox Limited approved the transaction to
redomicile to the United Kingdom to Australia.
Energy business
Equity-accounted investments - Cennergi
Core equity-accounted income from Cennergi, a 50% joint venture with Tata Power, increased from R2 million in FY17 to
R65 million in FY18.
Financial results were boosted by fair value adjustments on derivative instruments, as well as a change in the
useful life (from 20 years to 30 years) of property, plant and equipment at the two wind farms which reduced the
depreciation charge.
In FY18, Exxaro received dividends of R58 million as well as R186 million for the settlement of shareholder loans.
Equity-accounted investments - Other
On 31 May 2018, Exxaro entered into a share-purchase agreement to obtain an equity interest in AgriProtein,
incorporated in the UK. The purchase price of US$52.5 million comprises initial cash of US$14.5 million
(R184.2 million) paid on 1 June 2018 and a deferred consideration of US$38 million (R482.8 million), which
will be paid over the next two years. The timing of the deferred consideration depends on AgriProtein's capital
expenditure requirements. Transaction costs of R6.6 million were capitalised to the cost of the investment.
AgriProtein develops municipal organic waste-conversion plants to generate high-quality, natural protein sold
for use in animal feed and agriculture.
On 18 September 2018, Exxaro finalised a share purchase agreement to obtain an equity interest in LightApp.
The purchase price of US$10 million comprises initial cash of US$5 million (R71.9 million), paid on
27 September 2018, and a deferred consideration of US$5 million (R70.7 million) which will be paid over
the next two years. Transaction costs of R0.6 million were capitalised to the cost of the investment.
LightApp is one of the leading start-ups in industrial energy analytics. It is a software company that
develops and deploys an energy management system for industrial customers. The LightApp solution enables
continuous collection and analysis of energy consumption data together with production indicators from
sensors on the production floor. This analysis leads to improved energy management and efficiency through
deeper insights and alerts. While LightApp is a global business, Exxaro will also use the LightApp platform
to improve energy management at its own operations, with the first deployment already commencing at the
FerroAlloys facility in Pretoria.
SALE OF NON-CORE ASSETS AND INVESTMENTS
To optimise Exxaro's coal portfolio, we concluded a sale-of-shares agreement with Universal Coal for the 100%
shareholding in Manyeka, including the 51% interest in Eloff. The transaction closed on 31 July 2018. Exxaro
received net cash of R75 million, resulting in a gain on disposal of R69 million.
On 2 March 2018, Exxaro concluded a sale-of-asset agreement with North Block Complex Proprietary Limited to dispose of
certain assets and liabilities of NBC. Given the composition of the assets, two section 11 applications were submitted
to the DMR to transfer the mineral rights. Although the section 11 for the Paardeplaats mining right has not yet been
granted, it was agreed with the buyer to close the transaction on 31 October 2018. Exxaro received proceeds of
R17 million for the Glisa and Eerstelingsfontein reserves, resulting in a gain on disposal of R102 million.
The sale of Paardeplaats will be concluded once the section 11 approval has been obtained.
PERFORMANCE AGAINST NEW B-BBEE CODES AND MINING CHARTER
Exxaro achieved level 5 B-BEEE recognition (FY17: level 6) and is on track to achieve level 3 recognition for FY19.
This reflects implementation of our ESD strategy through a combination of loans and grants amounting to R180 million,
which was fully operationalised in 2018. We support the principles of transformation and will use regulatory
mechanisms as a minimum to advance national aspirations for transformation.
MINERAL RESOURCES AND MINERAL RESERVES
Material changes in Coal Reserve estimates are reported at two of our operations for FY18.
At ECC, there was an increase of 56% in ROM reserves by incorporating the 2017 geological model to update the
LOM and Coal Reserve classification for the Dorstfontein West and Dorstfontein East operations. This resulted
in a material amount of seam 2 and 4 lower to be included in the underground reserve at Dorstfontein East.
MINERAL RESOURCES AND MINERAL RESERVES continued
At Matla mine, the update of the geological model and subsequent review of the resource classification resulted
in a 5.7% decrease in the ROM Coal Reserve. In addition, a reduction of the pillar-extraction recovery based on
reviewing the extraction process to enhance ventilation and safety, as well as considering actual extraction
figures in the reporting period, resulted in an additional 13% decrease of the Coal Reserve.
For all other operations, other than normal LOM depletion, no material changes to Mineral Resources and Mineral
Reserves estimates are reported.
MINING AND PROSPECTING RIGHTS
Exxaro faced several challenges over the period, due to the temporary closure of DMR offices in Limpopo and Mpumalanga
and continued delays in registering rights and amendments to existing rights. Despite these, notable achievements
included ministerial consent to transfer NBC's Glisa and Eerstelingsfontein mining rights, the grant and execution
of the Paardeplaats mining right and renewal of two Waterberg prospecting rights.
OUTLOOK
We expect sustainable improvement in the physical operating results for the coal business by embedding our business
optimisation and operational excellence initiatives across all operations, and unlocking value through data analytics
and value-chain integration.
We are proud to report that we are on track and within budget to deliver value on our coal capital projects, spending
more that R20 billion over the next five years to increase sales volumes from 45Mtpa in FY18 to more that 60Mtpa by
FY23. The Belfast and Leeuwpan Lifex projects are ahead of schedule, while the GG6 expansion and Grootgeluk rapid loan
out station projects are impacted by community and labour related activities in the Lephalale area. We continue to engage
with contractors faced with labour unrest and corporate uncertainty.
A stable domestic market is anticipated for 1H19, supported by healthy prices due to tight supply in premium quality
sized coal.
In Mpumalanga Eskom has, due to the termination of several coal supply agreements, requested industry participants for
expressions of interest to supply coal on a short-term basis while it is looking to enter into longer-term contracts.
This is positive for Exxaro as it provides more flexibility between various markets.
We remain positive that the outcome of the national elections on 8 May 2019 will put South Africa on a renewed
investment and economic growth path urgently needed to address the socioeconomic challenges the country is facing.
Exxaro is fully supportive of the investment drive spearheaded by the Presidency.
The international market remains largely bearish owing to possible market oversupply, which hinges on China and its
ban on coal imports. An increase in coal demand is expected in India, a market that is likely to remain our main export
destination.
Market conditions are expected to be supportive in 2019. We remain confident that through our well-diversified coal
portfolio, we will continue to explore more opportunities in emerging markets where coal-fired power plants are being
commissioned.
In 1H19, the performance of our SIOC investment will be boosted by higher iron ore prices after supply disruptions in
Brazil, a relative high global lump premium and a weak rand/US dollar exchange rate.
Although global economic activity is edging down and market sentiment is challenging, commodity price support in 2H18
is expected to continue into 1H19. However, global policy tensions, especially on trade, remain the biggest threat to
global growth. The rand/US dollar exchange rate is expected to remain volatile during the period.
FINAL DIVIDEND
Exxaro's dividend policy is based on two components: a pass-through of the SIOC dividend received and a targeted cover
ratio of 2.5 times to 3.5 times core attributable coal earnings.
Additionally, we are targeting a gearing ratio below 1.5 times net debt to EBITDA.
The board has declared a cash dividend comprising:
- 3.3 times core attributable coal earnings
- Pass-through of SIOC dividend of R1 369 million.
Notice is given that a gross final cash dividend, number 32 of 555 cents per share, for the financial year
ended 31 December 2018 was declared, payable to shareholders of ordinary shares. For details of the dividend,
please refer note 11 of the reviewed condensed group annual financial statements for the year ended
31 December 2018.
Salient dates for payment of the final dividend are:
Last day to trade cum dividend on the JSE Monday, 6 May 2019
First trading day ex dividend on the JSE Tuesday, 7 May 2019
Record date Friday, 10 May 2019
Payment date Monday, 13 May 2019
No share certificates may be dematerialised or rematerialised between Tuesday, 7 May 2019 and Friday, 10 May 2019,
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 Monday, 13 May 2019.
GENERAL
Additional information on financial and operational results for the financial year ended 31 December 2018,
and the accompanying presentation can be accessed on our website on http://www.exxaro.com.
On behalf of the board
Jeff van Rooyen Mxolisi Mgojo Riaan Koppeschaar
Chairman Chief executive officer Finance director
12 March 2019
EXXARO 2018 PERFORMANCE AT A GLANCE
Performance overview
- Revenue up 12% at R25.5 billion
- Post-tax equity income of R3.3 billion, up 54%
- Net debt:equity of 9%
- Total dividend increased 55%
- HEPS of R26.72
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
2018 2017
Reviewed Audited
Rm Rm
Revenue (note 7) 25 491 22 813
Operating expenses (19 788) (17 593)
Operating profit (note 8) 5 703 5 220
BEE credentials (4 245)
Net operating profit 5 703 975
Finance income (note 9) 283 217
Finance costs (note 9) (605) (828)
Income from financial assets 6 2
Share of income of equity-accounted investments (note 10) 3 259 3 952
Profit before tax 8 646 4 318
Income tax expense (1 653) (1 542)
Profit for the year from continuing operations 6 993 2 776
Profit for the year from discontinued operations (note 6) 69 3 256
Profit for the year 7 062 6 032
Other comprehensive income/(loss), net of tax 246 (1 352)
Items that will not be reclassified to profit or loss: 66 13
- Remeasurement of post-retirement employee obligations 39 (29)
- Changes in fair value of equity investments at fair value through other
comprehensive income 21
- Share of other comprehensive income of equity-accounted
investments 6 42
Items that may subsequently be reclassified to profit or loss: 194 (92)
- Unrealised gains/(losses) on translation of foreign operations 67 (62)
- Revaluation of financial assets available-for-sale (14)
- Share of other comprehensive income/(loss) of equity-accounted
investments 127 (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 year 7 308 4 680
Profit attributable to:
Owners of the parent 7 030 5 982
- Continuing operations 6 961 2 726
- Discontinued operations 69 3 256
Non-controlling interests 32 50
- Continuing operations 32 50
Profit for the year 7 062 6 032
Total comprehensive income attributable to:
Owners of the parent 7 276 4 630
- Continuing operations 7 207 2 487
- Discontinued operations 69 2 143
Non-controlling interests 32 50
- Continuing operations 32 50
Total comprehensive income for the year 7 308 4 680
2018 2017
Reviewed Audited
cents cents
Attributable earnings per share
Aggregate
- Basic 2 801 1 923
- Diluted 2 156 1 724
Continuing operations
- Basic 2 774 876
- Diluted 2 135 786
Discontinued operations
- Basic 27 1 047
- Diluted 21 938
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
at 31 December
(Re-presented)
2018 2017
Reviewed Audited
Rm Rm
ASSETS
Non-current assets 52 226 47 660
Property, plant and equipment 28 825 24 362
Biological assets 30 34
Intangible assets 15 17
Investments in associates (note 13) 15 477 15 810
Investments in joint ventures (note 14) 1 569 1 479
Financial assets (note 20) 2 634 2 351
- Financial assets at fair value through other comprehensive income 185
- Financial assets at fair value through profit or loss 1 432
- Loans to associates and joint ventures 250
- Enterprise and supplier development loans 80
- Other financial assets at amortised cost 687
Lease receivables 66 72
Deferred tax 523 571
Other non-current assets (note 15) 3 087 2 964
Current assets 7 641 10 844
Inventories 1 604 1 055
Financial assets (note 20) 134 48
- Loans to associates and joint ventures 9
- Enterprise and supplier development loans 45
- Other financial assets at amortised cost 80
Trade and other receivables 3 140 2 613
Lease receivables 5 4
Current tax receivables 23 28
Cash and cash equivalents 2 080 6 657
Other current assets (note 15) 655 439
Non-current assets held-for-sale (note 16) 5 183 3 910
Total assets 65 050 62 414
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 1 021 1 021
Other components of equity 8 028 8 120
Retained earnings 32 797 30 962
Equity attributable to owners of the parent 41 846 40 103
Non-controlling interests (701) (738)
Total equity 41 145 39 365
Non-current liabilities 15 745 17 442
Interest-bearing borrowings (note 17) 3 843 6 480
Non-current other payables 152 89
Provisions 3 952 3 864
Post-retirement employee obligations 193 227
Financial liabilities (note 20) 713 414
- Financial liabilities at fair value through profit or loss 488
- Financial liabilities at amortised cost 225
Deferred tax 6 874 5 988
Other non-current liabilities (note 19) 18 380
Current liabilities 6 823 3 956
Interest-bearing borrowings (note 17) 573 68
Trade and other payables 2 960 2 245
Provisions 70 95
Financial liabilities (note 20) 757 309
- Financial liabilities at fair value through profit or loss 361
- Financial liabilities at amortised cost 395
- Derivative financial instruments 1
Current tax payable 209 368
Overdraft (note 17) 1 531 54
Other current liabilities (note 19) 723 817
Non-current liabilities held-for-sale (note 16) 1 337 1 651
Total liabilities 23 905 23 049
Total equity and liabilities 65 050 62 414
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 year
Other comprehensive loss for the year (62) (29) (14)
Share of other comprehensive (loss)/income
of equity-accounted investments (154) (65) 203 42
Issue of share capital1 10 705
Share-based payments movement2 4 057
Dividends paid
Share repurchase3 (1 951)
Treasury shares4 (10 242)
Disposal of an associate5 (1 332) 1 (286) 91
Liquidation of subsidiary6 58
Reclassification within equity
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 for the year 67 39
Share of other comprehensive income
of equity-accounted investments 118 9 6
Adjustment to NCI8
Share-based payments movement2 (338)
Dividends paid
Disposal of subsidiaries9
Liquidation of subsidiary6 (14)
At 31 December 2018 (Reviewed) 1 021 2 691 (32) 5 534 (113)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY (continued)
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 year 5 982 5 982 50 6 032
Other comprehensive loss for the year (105) (105)
Share of other comprehensive (loss)/income
of equity-accounted investments 26 26
Issue of share capital1 10 705 10 705
Share-based payments movement2 4 057 4 057
Dividends paid (2 227) (2 227) (2 227)
Share repurchase3 3 524 (4 268) (2 695) (2 695)
Treasury shares4 (10 242) (10 242)
Disposal of an associate5 195 (1 331) (1 331)
Liquidation of subsidiary6 58 58
Reclassification within equity 1 (1)
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 7 030 7 030 32 7 062
Other comprehensive income for the year 21 127 127
Share of other comprehensive income
of equity-accounted investments 133 133
Adjustment to NCI8 (15) (15) 15
Share-based payments movement2 (338) (338)
Dividends paid (5 483) (5 483) (5 483)
Disposal of subsidiaries9 (10) (10)
Liquidation of subsidiary6 (14) (14)
At 31 December 2018 (Reviewed) (53) 1 32 797 41 846 (701) 41 145
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 Eyesizwe 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 R247 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 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 Eyesizwe in Exxaro were accounted for as treasury shares on consolidation
of Eyesizwe.
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 post-retirement employee obligations
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 loss on translation
difference recycled to profit or loss on the liquidation of a foreign subsidiary (Exxaro Mineral Sands BV).
7 Refer to note 4 for details of the adjustments on initial application of IFRS 15 and IFRS 9.
8 NCI's share of an error which was identified at a subsidiary company level. Interest on the environmental
rehabilitation trust fund was erroneously omitted in the subsidiary accounting records. This was considered
material for the subsidiary companies which were impacted however this was not considered a material error for
group and therefore there was no restatement for the Exxaro group.
9 For 2018, derecognised the NCI reserve which relates to Eloff that was disposed of as part of the Manyeka
disposal.
Dividend distribution cents
Dividend per share paid in respect of a special dividend declared during 2018 1 255
Final dividend per share paid in respect of the 2017 financial year 400
Dividend per share paid in respect of the 2018 interim period 530
Final dividend per share payable in respect of the 2018 financial year 555
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
for the year ended 31 December
(Re-presented)
2018 2017
Reviewed Audited
Rm Rm
Cash flows from operating activities (54) 3 326
Cash generated by operations 7 024 6 826
Settlement of contingent consideration (note 20.2)1 (299) (74)
Interest paid (518) (597)
Interest received 229 188
Tax paid (1 007) (790)
Dividends paid (5 483) (2 227)
Cash flows from investing activities (3 195) 4 451
Property, plant and equipment acquired to maintain operations (note 12) (2 847) (2 977)
Property, plant and equipment acquired to expand operations (note 12) (2 943) (944)
Intangible assets acquired (1) (1)
Proceeds from disposal of property, plant and equipment 268 11
Decrease in loans to Main Street 333 400
Interest received on loans to Main Street 333 84
Decrease in other financial assets at amortised cost 82
Increase in Enterprise and supplier development loans (125)
Decrease in loan to joint venture 186
Increase in loan to joint venture (250)
Decrease in lease receivables 14
Proceeds from disposal of operation 17
Proceeds from disposal of subsidiaries2 75
Proceeds from disposal of a financial asset 24
Increase in loan to associate (1)
Acquisition of associates (note 13) (263) (26)
Dividend income from investments in associates and joint ventures 2 627 1 499
Proceeds from disposal of equity-accounted investments 6 525
Decrease in non-current financial assets 14
Increase in non-current financial assets (4)
Increase in environmental rehabilitation funds (135) (130)
Dividend income from financial assets and non-current assets
classified as held-for-sale 76 1
Cash flows from financing activities (2 861) (6 361)
Interest-bearing borrowings raised 14 2 491
Interest-bearing borrowings repaid (2 161) (2 534)
Shares acquired in the market to settle share-based payments (467) (99)
Dividends paid to BEE Parties (247)
Repurchase of share capital (6 219)
Net (decrease)/increase in cash and cash equivalents (6 110) 1 416
Cash and cash equivalents at beginning of the year 6 617 5 183
Reclassifications of cash and cash equivalents 51
Translation difference on movement in cash and cash equivalents 42 (33)
Cash and cash equivalents at end of the year 549 6 617
Cash and cash equivalents 2 080 6 657
Cash and cash equivalents classified as held-for-sale 14
Overdraft (1 531) (54)
1 The settlement of contingent consideration has been reclassified from investing activities to operating
activities as this relates to post-acquisition changes in fair value of the contingent consideration that
has been paid but is not recognised as an adjustment in the investment value previously acquired.
2 Consists of cash received of R90 million and cash disposed of R15 million.
RECONCILIATION OF GROUP HEADLINE EARNINGS
Gross Tax Net
Rm Rm Rm
For the year ended 31 December 2018 (Reviewed)
Profit attributable to owners of the parent 7 030
Adjusted for: (348) 25 (323)
- IFRS 10 Gain on disposal of subsidiaries (69) (69)
- IAS 16 Gain on disposal of operation (102) (102)
- IAS 16 Net gains on disposal of property, plant and equipment (122) 13 (109)
- IAS 16 Compensation from third parties for items of property,
plant and equipment impaired, abandoned or lost (57) 16 (41)
- IAS 21 Net gains 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 16 (4) 12
Headline earnings 6 707
Continuing operations 6 638
Discontinued operations 69
For the year ended 31 December 2017 (Audited)
Profit 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 investment in associate 106 106
- IAS 28 Share of equity-accounted investments' separate identifiable
remeasurements 12 (2) 10
- IAS 28 Share of equity-accounted investments' impairment reversal of
property, plant and equipment (987) 271 (716)
- IAS 28 Share of equity-accounted investments' loss on disposal of a
subsidiary 1 271 1 271
- IAS 28 Gain on partial disposal of an associate (3 860) (3 860)
Headline earnings/(loss) 1 560
Continuing operations 2 120
Discontinued operations (560)
2018 2017
Reviewed Audited
cents cents
Headline earnings/(loss) per share
Aggregate
- Basic 2 672 502
- Diluted 2 057 450
Continuing operations
- Basic 2 645 682
- Diluted 2 036 611
Discontinued operations
- Basic 27 (180)
- Diluted 21 (161)
Refer to note 11 for details regarding the number of shares.
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL 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 annual financial statements as at
and for the year ended 31 December 2018 (condensed annual 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 condensed annual financial statements have been prepared in accordance with the requirements of
the JSE Listings Requirement for preliminary reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with
the framework concepts and the measurement and recognition requirements of IFRS and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council and also, as a minimum, contain the information required by
IAS 34 Interim Financial Reporting.
The condensed annual financial statements have been prepared under the supervision of PA Koppeschaar CA(SA),
SAICA registration number: 00038621.
The condensed annual 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 condensed annual financial statements have been prepared on the historical cost
basis, excluding financial instruments, share-based payments and biological assets, that are measured at
fair value. This is the first set of condensed annual financial statements where IFRS 9 Financial Instruments
(IFRS 9) and IFRS 15 Revenue from Contracts with Customers (IFRS 15) have been applied. The changes to the
accounting policies impacted by these new standards are described in note 4.
The condensed annual financial statements were authorised for issue by the board of directors on 12 March 2019.
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.
2.3 Re-presentation of comparative information
The condensed group statement of financial position and condensed group statement of cash flows as at and
for the year ended 31 December 2017 have been re-presented as a result of a detailed analysis which was
performed for the implementation of IFRS 9 on the classification of items in the statement of financial
position. It was concluded that certain items needed to be reclassified in the prior year financial
statements, as these reclassifications provide more relevant information on the nature of these assets
and liabilities and results in more appropriate classifications (refer note 4).
3. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the condensed annual 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 adoption of new or amended standards as set
out below.
3.1 New or amended standards adopted by the group
A number of new or amended standards became effective for the current year of reporting.
The group has adopted the following new standards, which are relevant to the group, for the first time
for the year 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.
3.2 Impact of new, amended or revised standards issued but not yet effective
Certain new accounting standards and interpretations have been published but are not yet effective on
31 December 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 has
assessed all leasing arrangements that have not reached the end of their respective lease terms as
at 31 December 2018 and has decided to apply IFRS 16 retrospectively using the cumulative effect method
and will make use of the practical expedients available in this standard.
4. CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF COMPARATIVE INFORMATION
This note explains the items which were reclassified as well as the impact of the adoption of IFRS 9 and
IFRS 15 on the condensed annual financial statements. This note 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
As part of the implementation of IFRS 9 a detailed analysis was performed on the classification of items
in the statement of financial position. It was concluded that certain items needed to be reclassified in
the prior year financial statements, as these reclassifications provide more relevant information on the
nature of these assets and liabilities and results in more appropriate classifications. The reclassified
items are discussed in detail below the table. Although the reclassifications to cash and cash equivalents,
lease receivables, trade and other payables as well as interest-bearing borrowings are corrections to the
incorrect classification applied previously it was not considered material and therefore the prior year
financial statements have not been restated but only represented.
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, IFRS 9 was
adopted without restating comparative information. 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 31 December 1 January
Previously Reclassi- 2017 2018
presented fications Re-presented IFRS 9 IFRS 15 Restated
Statement of financial position (extract) Rm Rm Rm Rm Rm Rm
ASSETS
Non-current assets 47 706 (46) 47 660 47 660
Property, plant and equipment 24 362 24 362 24 362
Biological assets 34 34 34
Intangible assets 17 17 17
Investments in associates 15 810 15 810 15 810
Investments in joint ventures 1 479 1 479 1 479
Financial assets 5 433 (3 082) 2 351 (2 351)
- 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 72 72 72
Deferred tax 571 571 2 573
Other non-current assets2 2 964 2 964 2 964
Current assets 10 936 (92) 10 844 (11) 10 833
Inventories 1 055 1 055 1 055
Financial assets 48 48 (48)
- Other current financial assets
at amortised cost 48 48
- Derivative financial instruments 4 4
Trade and other receivables 3 199 (586) 2 613 (15) 2 598
Lease receivables3 4 4 4
Current tax receivable 28 28 28
Cash and cash equivalents4 6 606 51 6 657 6 657
Other current assets5 439 439 439
Non-current assets held-for-sale 3 910 3 910 3 910
Total assets 62 552 (138) 62 414 (11) 62 403
1 Lease receivables of R118 million were reclassified from non-current financial assets to non-current
lease receivables so as to improve the presentation of the item according to the nature of the asset.
In addition, unearned finance income of R46 million was reclassified from non-current financial liabilities
- finance leases to non-current lease receivables as the finance lease was previously presented on a gross
basis instead of a net basis.
2 An amount of R2 964 million was reclassified from non-current financial assets to other non-current assets
so as to improve the presentation of the items according to the nature of the assets. Included in this amount
is R1 268 million for an indemnification asset which arose on the acquisition of ECC, which is within the
scope of IFRS 3 Business Combinations, as well as an amount of R1 692 million for an asset which relates to
the reimbursement of the environmental rehabilitation provisions and the post-retirement employee obligations,
which is within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The remaining
R4 million relates to a non-current prepayment.
3 Lease receivables of R14 million were reclassified from trade and other receivables to current lease
receivables so as to improve the presentation of the item according to the nature of the asset. In addition,
unearned finance income of R10 million was reclassified from non-current financial liabilities - finance
leases to current lease receivables as the finance lease was previously presented on a gross basis instead
of a net basis and the current portion was incorrectly included as non-current.
4 An amount of R51 million was reclassified from trade and other receivables to cash and cash equivalents as
this is the interest accrued on bank balances and bank accounts that were incorrectly classified.
5 An amount of R521 million was reclassified from trade and other receivables to other current assets so as
to improve the presentation of the items (such as VAT refundable, prepayments, royalties) according to
the nature of the assets. In addition, an amount of R82 million was reclassified from trade and other
payables to other current assets so as to correctly eliminate the intercompany insurance prepayment,
the elimination entry was previously incorrectly classified as part of other payables.
4.1 Impact on the financial statements continued
31 December
2017 31 December 1 January
Previously Reclassi- 2017 2018
Statement of financial presented fications Re-presented IFRS 9 IFRS 15 Restated
position (extract) (continued) Rm Rm Rm Rm Rm Rm
Equity and liabilities
Capital and other components of equity
Share capital 1 021 1 021 1 021
Other components of equity 8 120 8 120 8 120
Retained earnings 30 962 30 962 (11) 314 31 265
Equity attributable to owners
of the parent 40 103 40 103 (11) 314 40 406
Non-controlling interests (738) (738) (738)
Total equity 39 365 39 365 (11) 314 39 668
Non-current liabilities 17 409 33 17 442 (2) (252) 17 188
Interest-bearing borrowings 6 480 6 480 6 480
Non-current other payables1 89 89 89
Provisions 3 864 3 864 3 864
Post-retirement employee obligations 227 227 227
Financial liabilities 850 (436) 414 (414)
- Financial liabilities at fair
value through profit or loss 414 414
Deferred tax 5 988 5 988 (2) 122 6 108
Other non-current liabilities2 380 380 (374) 6
Current liabilities 4 127 (171) 3 956 2 (62) 3 896
Interest-bearing borrowings3 2 66 68 68
Trade and other payables 3 237 (992) 2 245 (4) 2 241
Provisions 95 95 95
Financial liabilities 371 (62) 309 (309)
- Financial liabilities at fair value
through profit or loss 309 309
- Derivative financial instruments 6 6
Current tax payable 368 368 368
Overdraft 54 54 54
Other current liabilities4 817 817 (62) 755
Non-current liabilities held-for-sale 1 651 1 651 1 651
Total liabilities 23 187 (138) 23 049 (314) 22 735
Total equity and liabilities 62 552 (138) 62 414 (11) 62 403
1 An amount of R89 million was reclassified from current trade and 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.
2 An amount of R380 million was reclassified from non-current financial liabilities to other non-current
liabilities so as to improve the presentation of the item (such as deferred revenue) according to the
nature of the liability.
3 An amount of R66 million was reclassified from trade and other payables to current interest-bearing
borrowings as the balance relates to the interest accrued on the loans and bonds.
4 An amount of R62 million was reclassified from current financial liabilities to other current
liabilities and an amount of R755 million was reclassified from trade and other payables to other
current liabilities so as to improve the presentation of the items (such as deferred revenue, payroll
related accruals and VAT payable) according to the nature of the liabilities.
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 the 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), 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, management assessed whether contractual cash
flows on debt instruments were solely comprised of 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 IFRS 9 categories
At fair value through
profit or loss
Loans
and
receiv- Available-
ables for-sale FVOCI
Held- at financial equity
for- Desig- amortised assets at Amortised instru-
Financial trading nated cost fair value FVPL cost ment
assets1 Note Rm Rm Rm Rm Rm Rm Rm
Closing balance
at 31 December
2017 (IAS 39)
(Re-presented)2 4 1 391 10 175 152
Reclassify
non-trading
equities from
available-for-
sale to FVOCI a (152) 152
Reclassify
held-for-trading
FVPL financial
assets to FVPL b (4) 4
Reclassify
designated
FVPL financial
assets to FVPL b (1 391) 1 391
Reclassify loans
and receivables
financial assets
to amortised
cost c (10 175) 10 175
Reclassify loans
and receivables
at amortised
cost to a
financial asset
measured at
FVPL d
Opening
balance at
1 January 2018
(IFRS 9) 1 395 10 175 152
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.
2 Includes financial assets classified as non-current assets held-for-sale.
4.2.1 Classification and measurement continued
AS 39 categories IFRS 9 categories
At fair
value through
profit or loss
Financial
liabilities
at
Held-for- Desig- amortised Amortised
Financial trading nated cost FVPL cost
liabilities1 Note Rm Rm Rm Rm Rm
Closing balance at
31 December 2017 (IAS 39)
(Re-presented)2 6 723 8 991
Reclassify held-for-trading
FVPL financial liabilities
to FVPL e (6) 6
Reclassify designated FVPL
financial liabilities
to FVPL e (723) 723
Reclassify financial
liabilities to
amortised cost f (8 991) 8 991
Opening balance at
1 January 2018 (IFRS 9) 729 8 991
1 The closing balances as at 31 December 2017 are prior to any adjustments made in terms of IFRS 9
and IFRS 15.
2 Includes financial liabilities classified as non-current liabilities held-for-sale.
The impact of the changes on the group's equity is as follows:
IAS 39 IFRS 9
Financial
Available- asset
for-sale FVOCI
re- re-
valuation valuation
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 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.
(e) Reclassify held-for-trading and designated FVPL financial liabilities to FVPL
These reclassifications have no impact on the measurement categories.
(f) 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 the sale of goods and 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 to assess significant increase in credit risk.
The impairment allowances as at 1 January 2018 for trade receivables are as follows:
More More More
than than 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 R13 million to R81 million for trade
receivables during the year ended 31 December 2018. The increase would have been R1 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, amongst 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). The expected credit loss allowances increased
by a further R51 million to R59 million for other receivables and other financial assets at amortised
cost during the year ended 31 December 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 at 1 January 2018 (IFRS 9) 8
4.2.3 Accounting policies applied from 1 January 2018
(a) Financial assets
(a.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 investments when, and only when, its business model for managing those
assets changes.
(a.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 and
cash flow
Financial character- Movements in
Category instruments istics carrying amount Derecognition Impairment
Amortised - Trade and Financial Interest income Any gain or loss Impairment
cost other assets that from these arising on losses are
receivables are held for financial assets is derecognition is presented as a
- Loans to joint collection of included in finance recognised separate line
ventures and contractual income using the directly in profit item in the
associates cash flows effective interest or loss and notes to the
- ESD loans where those rate method. presented in statement of
- Other cash flows operating comprehensive
financial represent Foreign exchange expenses. income. The
assets SPPI. gains and losses impairment
are recognised in losses are
profit or loss. considered to be
immaterial and
therefore it has
not been
presented as a
separate line on
the face of the
statement of
comprehensive
income.
FVPL - Debt Financial Gains and losses Any gain or loss Debt instruments
securities assets that on a debt arising on measured at
- Derivative do not meet investment that is derecognition is FVPL are not
financial the criteria subsequently recognised subject to the
assets for measured at FVPL directly in profit impairment
amortised is recognised in or loss and model in terms
cost or profit or loss and presented in of IFRS 9.
FVOCI. presented net operating
within operating expenses.
expenses in the
period in which it
arises.
Interest income is
recognised in profit
or loss.
Equity instruments
Equity investments are subsequently measured at fair value. Where 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.
(a.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, amongst 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 to be 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 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 Revenue, 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 IFRS 15
restatement) (Refer note 4.2) 30 951
Adjustment from the adoption of IFRS 15 314
Decrease in deferred revenue liability due to earlier recognition of revenue
from a pricing adjustment 4.3.2 (a) 436
Increase in deferred tax liability relating to earlier recognition of revenue
from a 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 year ended 31 December 2018 had IAS 18 been applied
The following tables present a comparison of the financial results as reported under 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
For the year ended As reported Adjustments1 IAS 182
31 December 2018 Note Rm Rm Rm
Revenue 4.3.2 25 491 (162) 25 329
Operating expenses 4.3.2 (19 788) 224 (19 564)
Net operating profit 5 703 62 5 765
Finance income 283 283
Finance costs (605) (605)
Income from financial assets 6 6
Share of income of equity-accounted investments 3 259 3 259
Profit before tax 8 646 62 8 708
Income tax expense (1 653) (17) (1 670)
Profit for the year from continuing operations 6 993 45 7 038
Profit for the year from discontinued operations 69 69
Profit for the year 7 062 45 7 107
Other comprehensive income, net of tax 246 246
Total comprehensive income for the year 7 308 45 7 353
Profit attributable to:
Owners of the parent 7 030 45 7 075
Non-controlling interests 32 32
Profit for the year 7 062 45 7 107
Total comprehensive income attributable to:
Owners of the parent 7 276 45 7 321
Non-controlling interests 32 32
Total comprehensive income for the year 7 308 45 7 353
1 Adjustments comprise of:
- a contract modification consideration that would be recognised as revenue over seven years
under the previous revenue standards and interpretations (R62 million and tax of R17 million)
- a 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
(R224 million).
Refer 4.3.2 for details of the assessment.
2 Amounts without the adoption of IFRS 15.
Impact on the reviewed condensed group statement of comprehensive income continued
As reported Adjustments1 IAS 182
For the year ended 31 December 2018 cents cents cents
Attributable earnings per share
Aggregate
- Basic 2 801 18 2 819
- Diluted 2 156 14 2 170
1 Adjustments comprise of:
- a contract modification consideration that would be recognised as revenue over seven years under
the previous revenue standards and interpretations (R62 million and tax of R17 million)
- a 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 (R224 million).
Refer 4.3.2 for details of the assessment.
2 Amounts without the adoption of IFRS 15.
Impact on the reviewed condensed group statement of financial position
As reported Adjustments1 IAS 182
At 31 December 2018 Note Rm Rm Rm
ASSETS
Non-current assets 52 226 52 226
Current assets 7 641 7 641
Non-current assets held-for-sale 5 183 5 183
Total assets 65 050 65 050
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital 1 021 1 021
Other components of equity 8 028 8 028
Retained earnings 4.3.2 (a) 32 797 (269) 32 528
Equity attributable to owners of the parent 4.3.2 (a) 41 846 (269) 41 577
Non-controlling interests (701) (701)
Total equity 4.3.2 (a) 41 145 (269) 40 876
Non-current liabilities 4.3.2 (a) 15 745 207 15 952
Interest-bearing borrowings 3 843 3 843
Other payables 152 152
Provisions 3 952 3 952
Post-retirement employee obligations 193 193
Financial liabilities 713 713
Deferred tax 4.3.2 (a) 6 874 (105) 6 769
Other non-current liabilities 4.3.2 (a) 18 312 330
1 Relates to the reversal of the IFRS 15 initial application adjustment amounting to R314 million,
net of tax, (refer to table in note 4.3) and the impact for the year ended 31 December 2018 arising
from the contract modification consideration assessment of R45 million, net of tax,
(refer note 4.3.2 (a)).
2 Financial results without the adoption of IFRS 15.
Impact on the reviewed condensed group statement of financial position continued
As reported Adjustments1 IAS 182
At 31 December 2018 Note Rm Rm Rm
Current liabilities 4.3.2 (a) 6 823 62 6 885
Interest-bearing borrowings 573 573
Trade and other payables 2 960 2 960
Provisions 70 70
Financial liabilities 757 757
Current tax payable 209 209
Overdraft 1 531 1 531
Other current liabilities 4.3.2 (a) 723 62 785
Non-current liabilities held-for-sale 1 337 1 337
Total liabilities 4.3.2 (a) 23 905 269 24 174
Total equity and liabilities 65 050 65 050
1 Relates to the reversal of the IFRS 15 initial application adjustment amounting to R314 million,
net of tax, (refer to table in note 4.3) and the impact for the year ended 31 December 2018 arising
from the contract modification consideration assessment of R45 million, net of tax,
(refer note 4.3.2 (a)).
2 Financial results 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 and rendering
of 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 to 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
Performance performance
Revenue type obligation obligation is satisfied Payment terms
Coal (domestic Delivery of coal at a On delivery (point in Range: 15 to
supply) contractually agreed upon time) 60 days
delivery point
Coal (export Delivery of coal at a On delivery (point in Range: 15 to
supply) contractually agreed upon time) 60 days
delivery point (FOB)
Ferrosilicon Delivery of ferrosilicon at a On delivery (point in Range: 15 to
contractually agreed upon time) 60 days
delivery point
Biological goods Delivery of biological goods On delivery (point in Range: 15 to
at a contractually agreed time) 60 days
upon delivery point
Stock yard Rendering of stock yard As services are Within 30 days
management management services over performed (over time)
services time
Other mine Rendering of other mine As services are Within 30 days
management management services over performed (over time)
services 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.
During the current financial year, the chief operating decision maker revised the manner in which
the coal operations are reported on. The coal operations have been disaggregated based on the nature
of the operations (commercial, tied and other) as well as geographical location, between the Waterberg
and Mpumalanga regions.
The key changes to the coal reportable operating segment are:
- The commercial coal operations have been split by region into Waterberg and Mpumalanga
- The tied coal operation includes the Matla mine
- Coal other operations have been added which include the remaining coal operations not reported on
under the commercial or tied coal operations as well as Arnot and Tshikondeni (tied mines in closure).
The export revenue and related export cost items have been allocated between the coal operating segments
based on the origin of the initial coal production. The comparative segmental information has been
represented to reflect these changes.
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 operating segments at least quarterly.
Coal
The coal reportable operating segment is split between commercial (Waterberg and Mpumalanga), tied and
other coal operations. Mpumalanga commercial operations include a 50% (2017: 50%) investment in Mafube
(a joint venture with Anglo). The 10.82% (2017: 10.82%) effective equity interest in RBCT is included in
the other coal operations. The coal operations produce thermal coal, metallurgical coal and SSCC.
Ferrous
The ferrous segment mainly comprises the 20.62% (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
operation (referred to as Alloys).
TiO2
This segment has been renamed to TiO2 as the Alkali chemicals business was disposed of in 2017. Exxaro
holds a 23.35% (2017: 23.66%) equity interest in Tronox Limited. 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% (2017: 26%) equity interest in Tronox SA (both South African-based operations), as well as a 26%
(2017: 26%) member's interest in Tronox UK. The member's interest in Tronox UK has been classified as
a non-current asset held-for-sale on 30 November 2018 (refer note 16).
Energy
The energy segment comprises a 50% (2017: 50%) investment in Cennergi (a South African joint venture
with Tata Power), which operates two wind-farms, as well as an equity interest of 28.98% in LightApp.
Other
This reportable segment comprises the 26% (2017: 26%) equity interest in Black Mountain (located in the
Northern Cape province), an effective investment of 11.7% (2017: 11.7%) in Chifeng (located in the PRC),
an equity interests in Curapipe of 13.7% (2017: 13.7%), a 26.37% equity interest in 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
Commercial Other Base
Waterberg Mpumalanga Tied Other Alloys ferrous TiO2 Energy metals Other Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
For the year ended
31 December 2018 (Reviewed)
External revenue 13 289 7 984 3 665 364 169 20 25 491
Segment net operating
profit/(loss) 5 738 1 429 250 (966) 17 (3) (762) 5 703
- Continuing operations 5 738 1 429 250 (966) 17 (3) (762) 5 703
External finance income (note 9) 48 33 19 183 283
External finance costs (note 9) (47) (164) (47) (347) (605)
Income tax (expense)/benefit (1 572) (302) (48) 378 (4) (105) (1 653)
Depreciation and amortisation
(note 8) (1 204) (299) (13) (66) (1 582)
Gain on disposal of subsidiary 69 69
Gain on disposal of operation 102 102
Cash generated by/(utilised
in) operations 6 955 1 490 99 1 366) 60 (2) (212) 7 024
Share of income/(loss) of
equity-accounted investments
(note 10) 114 (36) 2 592 492 61 70 (34) 3 259
- Continuing operations 114 (36) 2 592 492 61 70 (34) 3 259
Capital expenditure (note 12) (3 890) (1 832) (68) (5 790)
At 31 December 2018 (Reviewed)
Segment assets and liabilities
Deferred tax1 6 (53) 164 8 1 397 523
Investments in associates
(note 13) 2 157 9 511 2 185 141 818 665 15 477
Investments in joint
ventures (note 14) 1 237 332 1 569
Loans to joint ventures 259 259
External assets2 26 514 8 059 1 062 4 192 265 25 1 922 42 039
Assets 26 514 9 302 1 009 6 772 273 9 537 2 185 473 818 2 984 59 867
Non-current assets
held-for-sale (note 16) 5 183 5 183
Total assets as per
statement of
financial position 26 514 9 302 1 009 6 772 273 9 537 7 368 473 818 2 984 65 050
External liabilities 2 463 2 631 757 2 348 23 5 7 258 15 485
Deferred tax1 6 009 866 39 (40) 6 874
Current tax payable1 104 5 (32) 99 33 209
Liabilities 8 576 3 502 725 2 486 23 5 7 251 22 568
Non-current liabilities
held-for-sale (note 16) 1 337 1 337
Total liabilities as per
statement of financial
position 8 576 4 839 725 2 486 23 5 7 251 23 905
1 Offset per legal entity and tax authority.
2 Excluding deferred tax, investments in associates and investments in and loans to joint ventures and
non-current assets held-for-sale.
The following table presents a summary of the group's segmental information:
Coal Ferrous Other
For the year ended Commercial Other Base
31 December 2017 Waterberg Mpumalanga Tied Other Alloys ferrous TiO2 Energy metals Other Total
(Audited)(Re-presented) Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
External revenue 11 328 7 970 2 837 418 243 17 22 813
Segment net operating
profit/(loss) 5 438 1 046 128 (603) 54 (1) 5 085 (5 087) 6 060
- Continuing operations 5 438 1 046 128 (603) 54 (1) (5 087) 975
- Discontinued operations 5 085 5 085
External finance income (note 9) 12 28 6 1 170 217
External finance costs (note 9) (50) (168) (36) (574) (828)
Income tax (expense)/benefit (1 401) (155) (40) 246 (13) (179) (1 542)
Depreciation and
amortisation (note 8) (970) (326) (12) (85) (1 393)
Gain on partial disposal
of associate 3 860 3 860
Cash generated by/
(utilised in) operations 6 389 1 138 182 (804) (54) (2) (23) 6 826
Share of income/(loss) of
equity-accounted
investments (note 10) 259 (24) 3 303 (1 643) 2 226 2 123
- Continuing operations 259 (24) 3 303 186 2 226 3 952
- Discontinued operations (1 829) (1 829)
Capital expenditure (note 12) (3 127) (677) (6) (111) (3 921)
At 31 December 2017
(Audited)(Re-presented)
Segment assets and liabilities
Deferred tax1 39 6 91 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
Loans to joint ventures 126 126
External assets2 23 202 6 068 971 3 364 309 25 6 579 40 518
Assets 23 202 7 212 977 5 648 320 9 393 3 477 500 747 7 028 58 504
Non-current assets
held-for-sale (note 16) 385 3 396 129 3 910
Total assets as per statement
of financial position 23 202 7 597 977 5 648 320 9 393 6 873 500 747 7 157 62 414
External liabilities 2 394 1 838 649 2 468 27 4 7 662 15 042
Deferred tax1 5 225 757 49 (43) 5 988
Current tax payable1 217 25 50 76 368
Liabilities 7 836 2 620 649 2 567 27 4 7 695 21 398
Non-current liabilities
held-for-sale (note 16) 1 651 1 651
Total liabilities as per
statement of financial position 7 836 4 271 649 2 567 27 4 7 695 23 049
1 Offset per legal entity and tax authority.
2 Excluding deferred tax, investments in associates and investments in and loans to joint ventures and
non-current assets held-for-sale.
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 discontinued operations is set out below:
For the year ended
31 December
2018 2017
Reviewed Audited
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
Loss on dilution of investment in associate (106)
Operating profit 1 225
Gain on partial disposal of associate 3 860
Net operating profit 5 085
Dividend income 69
Share of loss of equity-accounted investment (1 829)
Profit for the year from discontinued operations 69 3 256
Cash flow information
Cash flow attributable to investing activities 69 6 634
Cash flow attributable to discontinued operation 69 6 634
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
Commercial
For the year ended 31 December 2018 (Reviewed) Waterberg Mpumalanga Tied Other Alloys Other Total
Rm Rm Rm Rm Rm Rm Rm
Segment revenue reconciliation
Segment revenue based on origin of coal production 13 289 7 984 3 665 364 169 20 25 491
Export sales allocated to selling entity (1 796) (6 254) 8 050
Total revenue from contracts with customers 11 493 1 730 3 665 8 414 169 20 25 491
By timing and major type of goods and services
Sale of goods at a point in time 11 493 1 730 3 441 8 050 163 16 24 893
Coal 11 493 1 730 3 441 8 050 24 714
Ferrosilicon 163 163
Biological goods 16 16
Rendering of services
over time 224 364 6 4 598
Stock yard management services 224 224
Other mine management services 364 364
Other services 6 4 10
Total revenue from contracts with customers 11 493 1 730 3 665 8 414 169 20 25 491
By major geographic area of customer1
Domestic 11 493 1 730 3 665 364 169 15 17 436
Export 8 050 5 8 055
Europe 4 920 2 4 922
Asia 2 455 3 2 458
Other 675 675
Total revenue from contracts with customers 11 493 1 730 3 665 8 414 169 20 25 491
By major customer industries
Public utilities 9 101 301 3 665 701 13 768
Merchants 141 835 6 458 7 434
Steel 1 557 165 36 1 758
Mining 88 43 747 144 1 022
Manufacturing 291 33 101 22 447
Cement 156 202 358
Other 159 151 371 3 20 704
Total revenue from contracts with customers 11 493 1 730 3 665 8 414 169 20 25 491
1 Geographic area is determined based on the customer supplied by Exxaro.
7. REVENUE continued
Coal Ferrous Other
Commercial
For the year ended 31 December 2017 (Audited) Waterberg Mpumalanga Tied Other Alloys Other Total
Rm Rm Rm Rm Rm Rm Rm
Segment revenue reconciliation
Segment revenue based on origin of coal production 11 328 7 970 2 837 418 243 17 22 813
Export sales allocated to selling entity (1 330) (5 688) 7 018
Total revenue from contracts with customers 9 998 2 282 2 837 7 436 243 17 22 813
By timing and major type of goods and services
Sale of goods at a point in time 9 998 2 282 2 837 7 018 243 10 22 388
Coal 9 998 2 282 2 837 7 018 22 135
Ferrosilicon 243 243
Biological goods 10 10
Rendering of services
over time 418 7 425
Other mine management services1 418 418
Other services 7 7
Total revenue from contracts with customers 9 998 2 282 2 837 7 436 243 17 22 813
By major geographic area of customer2
Domestic 9 998 2 282 2 837 418 243 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 9 998 2 282 2 837 7 436 243 17 22 813
By major customer industries
Public utilities 8 086 950 2 837 1 209 13 082
Merchants 74 652 4 911 5 637
Steel 1 135 143 44 1 322
Mining 137 31 685 243 1 096
Manufacturing 325 46 97 468
Cement 153 187 340
Other 88 273 490 17 868
Total revenue from contracts with customers 9 998 2 282 2 837 7 436 243 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
For the year ended
31 December
2018 2017
Reviewed Audited
Rm Rm
Raw materials and consumables (3 175) (3 058)
Staff costs (4 622) (4 086)
Royalties (427) (143)
Contract mining (1 818) (1 451)
Repairs and maintenance (2 213) (1 749)
Railage and transport (1 787) (2 065)
Depreciation and amortisation (1 582) (1 393)
Fair value adjustments on contingent consideration (357) (354)
Legal and professional fees (776) (510)
Net gains/(losses) on disposal or scrapping of property, plant and equipment 122 (61)
Expected credit losses (64)
Gain on disposal of subsidiaries1 69
Gain on disposal of operation2 102
1 During 2018 Exxaro concluded a sale of share agreement with Universal Coal Development IV Proprietary Limited
for ECC's 100% shareholding in Manyeka, which includes a 51% interest in Eloff. The transaction became effective
on 31 July 2018. Exxaro received net cash of R75 million resulting in a gain on the disposal of subsidiaries of
R69 million.
2 On 2 March 2018, Exxaro concluded a sale of asset agreement with North Block Complex Proprietary Limited
(a subsidiary of Universal Coal plc) for certain assets and liabilities of the NBC operation. Though the
Section 11 for the Paardeplaats right has not been granted yet, it was agreed with the buyer to conclude and
close the transaction on 31 October 2018, on which date the proceeds of R17 million, relating to the Glisa
and Eerstelingsfontein reserves, were received.
9. NET FINANCING COSTS
For the year ended
31 December
2018 2017
Reviewed Audited
Rm Rm
Finance income 283 217
Interest income 256 207
Finance lease interest income 10 10
Commitment fee income 1
Interest income from loan to joint venture 16
Finance costs (605) (828)
Interest expense (514) (600)
Unwinding of discount rate on rehabilitation cost (408) (410)
Recovery of unwinding of discount rate on rehabilitation cost 158 163
Finance lease interest expense (1) (3)
Amortisation of transaction costs (27) (9)
Borrowing costs capitalised1 187 31
Total net financing costs (322) (611)
1 Borrowing costs capitalisation rate: 10.13% 8.98%
10. SHARE OF INCOME/(LOSS) OF EQUITY-ACCOUNTED INVESTMENTS
For the year ended
31 December
2018 2017
Reviewed Audited
Rm Rm
Associates
Unlisted investments 3 079 3 691
SIOC 2 592 3 303
Tronox SA 382 67
Tronox UK1 110 119
RBCT (36) (24)
Black Mountain 70 226
AgriProtein (31)
LightApp (5)
Curapipe (3)
Joint ventures
Unlisted investments 180 261
Mafube 114 259
Cennergi 66 2
Share of income of equity-accounted investments 3 259 3 952
1 Application of the equity method ceased on 30 November 2018 when the investment was classified
as a non-current asset held-for-sale.
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 dividend of 530 cents per share (R1 330 million to external
shareholders) was paid in September 2018.
A final cash dividend, number 32, for 2018 of 555 cents per share, was approved by the board of
directors on 12 March 2019. The dividend is payable on 13 May 2019 to shareholders who will be on
the register on 10 May 2019. This final dividend, amounting to approximately R1 393 million (to
external shareholders), has not been recognised as a liability in these condensed annual financial
statements. It will be recognised in shareholders' equity in the year ending 31 December 2019.
The final 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
444 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 31 December
2018 2017
Reviewed Audited
Issued share capital (number of shares) 358 706 754 358 706 754
Ordinary shares (million)
- Weighted average number of shares 251 311
- Diluted weighted average number of shares 326 347
12. CAPITAL COMMITMENTS
At 31 December
2018 2017
Reviewed Audited
Rm Rm
Contracted 4 508 5 409
Contracted for the group (owner-controlled) 3 533 4 313
Share of capital commitments of equity-accounted investments 975 1 096
Authorised, but not contracted 2 914 2 838
13. INVESTMENTS IN ASSOCIATES
At 31 December
2018 2017
Reviewed Audited
Rm Rm
Unlisted investments
SIOC 9 511 9 367
Tronox SA 2 185 1 800
Tronox UK1 1 677
RBCT 2 157 2 193
Black Mountain 818 747
AgriProtein2 643
LightApp3 141
Curapipe 22 26
Total carrying value of investments in associates 15 477 15 810
1 The investment in Tronox UK was classified as a non-current asset held-for-sale on 30 November 2018 (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. 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 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.
3 On 18 September 2018 Exxaro entered into a share purchase agreement to obtain an equity interest in the
shareholding of LightApp. The purchase price amounted to US$10 million, comprising an initial cash consideration
of US$5 million (R71.9 million) paid on 27 September 2018 and deferred consideration amounting to US$5 million
(R70.7 million) which will be paid over the next two years. Transaction costs of R0.6 million were capitalised
to the cost of the investment. LightApp is one of the leading start-ups in the industrial energy analytic space.
14. INVESTMENTS IN JOINT VENTURES
At 31 December
2018 2017
Reviewed Audited
Rm Rm
Unlisted investments
Mafube1 1 237 1 105
Cennergi2 332 374
Total carrying value of investments in joint ventures 1 569 1 479
1 Included in financial assets is a loan to Mafube (refer note 20): 259
2 Included in financial assets is a loan to Cennergi (refer note 20): 126
15. OTHER ASSETS
At 31 December
2018 2017
Reviewed Audited
Rm Rm
Non-current
Reimbursements1 1 723 1 692
Indemnification asset2 1 337 1 268
Other non-current assets 27 4
Total non-current other assets 3 087 2 964
Current
VAT 480 293
Royalties 46 39
Prepayments 110 88
Other current assets 19 19
Total current other assets 655 439
Total other assets 3 742 3 403
1 Amounts recoverable from Eskom in respect of the rehabilitation, environmental expenditure and post-retirement
employee obligations of the Matla and Arnot mines at the end of life of these mines.
2 Upon the acquisition of ECC in 2015, Total SA indemnified Exxaro from any obligations relating to the EMJV.
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 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 sold 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. On 31 December 2018, management concluded that the investment
continues to meet the criteria to be classified as a non-current asset held-for-sale in terms of IFRS 5.
Exxaro continues to assess market conditions for further possible sell downs of the remaining 28 729 280
Class B Tronox Limited ordinary shares.
The Tronox Limited investment is presented within the total assets of the TiO2 reportable operating segment
and is presented as a discontinued operation (refer note 6).
Tronox UK
During November 2018, Exxaro and Tronox reached an agreement in relation to the disposal of Exxaro's 26%
member's interest in Tronox UK. It was concluded that Exxaro's investment in Tronox UK should be classified
as a non-current asset held-for-sale as all the requirements in terms of IFRS 5 have been met. As of
30 November 2018, Exxaro's 26% investment in Tronox UK was classified a non-current asset held-for-sale and
the application of the equity method ceased.
The Tronox UK investment is presented within the total assets of the TiO2 reportable operating segment.
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 31 December 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 31 December
2018 2017
Reviewed Audited
Rm Rm
Assets
Property, plant and equipment 282
Investments in associates 5 183 3 396
Deferred tax 9
Inventories 133
Trade receivables 39
Current tax receivable 27
Cash and cash equivalents 14
Other current assets 10
Non-current assets held-for-sale 5 183 3 910
Liabilities
Non-current provisions (1 320) (1 494)
Post-retirement employee obligations (17) (22)
Trade and other payables (62)
- Trade payables (54)
- Other payables (8)
Shareholder loans (18)
Current provisions (18)
Other current liabilities (37)
Non-current liabilities held-for-sale (1 337) (1 651)
Net non-current assets held-for-sale 3 846 2 259
17. INTEREST-BEARING BORROWINGS
At 31 December
(Re-presented)
2018 2017
Reviewed Audited
Rm Rm
Non-current1 3 843 6 480
Loan facility 3 233 3 474
Bonds issue 520
Preference share liability2 610 2 483
Finance leases 3
Current3 573 68
Loan facility 47 52
Bonds issue 525 5
Preference share liability (1) (5)
Finance leases 2 16
Total interest-bearing borrowings 4 416 6 548
Summary of loans and finance leases by period of redemption:
- Less than six months 578 67
- Six to 12 months (5) 1
- Between one and two years (10) 509
- Between two and three years 3 242 (13)
- Between three and four years 611 3 239
- Between four and five years 2 620
- Over five years 125
Total interest-bearing borrowings 4 416 6 548
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. 20 44
2 Capital redemption on preference share liability 1 889
3 The current portion represents: 573 68
- Capital repayments 522 16
- Interest capitalised 61 66
- Reduced by the amortisation of transaction costs (10) (14)
Overdraft
Bank overdraft 1 531 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 2018 or 2017.
Loan facility
The loan facility comprises a:
- R3 250 million bullet term loan facility with a term of five years (term loans)
- R1 750 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% (31 December 2017: 3.25%) for the bullet term loan
facility (R3 250 million), JIBAR plus a margin of 3.60% (31 December 2017: 3.60%) for the amortised
term loan facility (R1 750 million) and JIBAR plus a margin of 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 (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 (31 December 2017:
R1 750 million). The undrawn portion of the revolving credit facility amounts to R2 750 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% (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% (31 December 2017: 0.08%).
Preference share liability
The preference share liability relates to the consolidation of Eyesizwe. The preference share liability
represents 249 069 Class A variable rate cumulative redeemable preference shares issued on 11 December 2017
by Eyesizwe 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
At 31 December
(Re-presented)
2018 2017
Reviewed Audited
Rm Rm
Net (debt)/cash is presented by the following items on the statement of
financial position:
Total net (debt)/cash (3 867) 69
Non-current interest-bearing borrowings (3 843) (6 480)
Current interest-bearing borrowings (573) (68)
Net cash 549 6 617
- Cash and cash equivalents 2 080 6 657
- Cash and cash equivalents classified as held-for-sale 14
- Overdraft (1 531) (54)
Analysis of movement in net (debt)/cash:
Liabilities from
financing activities
Non-current Current
Cash and interest- interest-
cash 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 1 416 (472) 515 1 459
Operating activities 3 326 3 326
Investing activities 4 451 4 451
Financing activities (6 361) (472) 515 (6 318)
- Interest-bearing borrowings raised 2 491 (2 491)
- Interest-bearing borrowings repaid (2 534) 2 019 515
- Shares acquired in the market to settle share-based payments (99) (99)
- Repurchase of share capital (6 219) (6 219)
Non-cash movements (47) (6) (14) (67)
Amortisation of transaction costs (9) (9)
Preference dividend accrued (11) (11)
Transfers between non-current and current liabilities 5 (5)
Reclassifications to non-current assets held-for-sale (14) (14)
Translation difference on movement in cash and cash equivalents (33) (33)
Net cash at 31 December 2017
(previously presented) 6 552 (6 480) (2) 70
Reclassifications1 65 (66) (1)
Net cash at 31 December 2017 (Re-presented) 6 617 (6 480) (68) 69
Cash flows (6 110) 2 139 8 (3 963)
Operating activities (54) (54)
Investing activities (3 195) (3 195)
Financing activities (2 861) 2 139 8 (714)
- Interest-bearing borrowings raised 14 (14)
- Interest-bearing borrowings repaid (2 161) 2 139 22
- Shares acquired in the market to settle share-based payments (467) (467)
- Dividends paid to BEE Parties (247) (247)
Non-cash movements 42 498 (513) 27
Amortisation of transaction costs (27) (27)
Preference dividend accrued (1) (1)
Interest accrued 5 5
Lease payable cancelled 5 3 8
Transfers between non-current and current liabilities 494 (494)
Translation difference on movement in cash and cash equivalents 42 42
Net debt at 31 December 2018 549 (3 843) (573) (3 867)
1 The reclassification to cash and cash equivalents and overdrafts consists of a R51 million reclassification
adjustment for interest accrued on bank accounts and bank accounts that were incorrectly classified as well
as a R14 million adjustment for the bank balance which was classified as a non-current asset held-for-sale.
The reclassification to current interest-bearing borrowings relates to the R66 million reclassification
adjustment for interest accrued on the loans and bonds.
19. OTHER LIABILITIES
At 31 December
(Re-presented)
2018 2017
Reviewed Audited
Rm Rm
Non-current
Income received in advance 18 6
Deferred revenue1 374
Total non-current other liabilities 18 380
Current
Deferred revenue1 62
Leave pay 171 157
VAT 86 101
Royalties 50 29
Bonuses 305 373
Other current liabilities 111 95
Total current other liabilities 723 817
Total other liabilities 741 1 197
1 During 2017, a deferred pricing adjustment was recognised in relation to a coal supply agreement
which would be released to profit or loss over seven years. However, under IFRS 15 this was
accelerated and recognised as part of the 1 January 2018 opening balances transition impact
(refer note 4.3).
20. FINANCIAL INSTRUMENTS
The group holds the following financial instruments:
At 31 December
(Re-presented)
2018 2017
Reviewed Audited
Rm Rm
Non-current
Financial assets 2 634 2 351
Financial assets at fair value through other comprehensive income 185 152
Equity: unlisted 185 152
- Chifeng (previously classified as available-for-sale financial asset at fair value) 185 152
Financial assets at fair value through profit or loss 1 432 1 391
Equity: listed 34
- KIO (previously classified as designated at fair value through profit or loss)1 34
Debt: unlisted 1 432 1 357
- Environmental rehabilitation funds (previously classified as designated at fair
value through profit or loss) 1 432 1 357
Loans to associates and joint ventures 250 128
Associates 2
- Curapipe (previously classified as loans and receivables at amortised cost) 2
Joint ventures 250 126
- Cennergi (previously classified as loans and receivables at amortised cost) 126
- Mafube2 250
ESD loans3 80
Other financial assets at amortised cost 687 680
Environmental rehabilitation funds (previously classified as loans and receivables at
amortised cost) 351 291
Deferred pricing receivable (previously classified as loans and receivables at
amortised cost)4 336 389
Interest-bearing borrowings (excluding finance leases) (3 843) (6 477)
Non-current other payables (152) (89)
Financial liabilities (713) (414)
Financial liabilities at fair value through profit or loss (488) (414)
Contingent consideration (previously classified as designated at fair value through
profit or loss)5 (488) (414)
Financial liabilities at amortised cost (225)
Deferred consideration payable6 (225)
At 31 December
(Re-presented)
2018 2017
Reviewed Audited
Rm Rm
Current
Derivative financial assets (previously classified as held-for-trading at fair
value through profit or loss. Included under trade and other receivables in 2017) 4
Financial assets 134 48
Loans to joint ventures 9
- Mafube2 9
ESD loans3 45
Other current financial assets at amortised cost 80 48
Deferred pricing receivable (previously classified as loans and receivables
at amortised cost)4 52 48
Deferred consideration receivable7 29
Employee receivables 4
Impairment allowances of other current financial assets at amortised cost (5)
Trade and other receivables 3 140 2 609
Trade receivables 2 971 2 506
- Trade receivables - gross 3 052 2 567
- Impairment allowances of trade receivables (81) (61)
Other receivables 169 103
- Other receivables - gross 223 173
- Impairment allowances of other receivables (54) (70)
Cash and cash equivalents 2 080 6 657
Interest-bearing borrowings (excluding finance leases) (571) (52)
Trade and other payables (2 960) (2 239)
Trade payables (1 456) (1 085)
Other payables (1 504) (1 154)
Financial liabilities (757) (315)
Derivative financial liabilities (previously classified as held-for-trading at fair
value through profit or loss. Included under trade and other payables in 2017) (1) (6)
Financial liabilities at fair value through profit or loss (361) (309)
Contingent consideration (previously classified as designated at fair value through
profit or loss)5 (361) (309)
Financial liabilities at amortised cost (395)
Deferred consideration payable6 (395)
Overdraft (1 531) (54)
1 During 2018, the KIO shares were sold.
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 Interest-free loans advanced to applicants in terms of the Exxaro ESD programme.
4 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%.
5 Relates to the ECC acquisition.
6 Deferred consideration payable in relation to the acquisition of the investment in AgriProtein and LightApp.
7 Relates to deferred consideration receivable which arose on the disposal of a mining right.
The group has granted the following loan commitments:
At 31 December
2018 2017
Reviewed Audited
Rm Rm
Total loan commitment 1 221
Mafube1 500
AgriProtein2 721
Undrawn loan commitment 971
Mafube 250
AgriProtein 721
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 31 December 2018 (Reviewed) Rm Rm Rm Rm
Financial assets at fair value through other comprehensive income 185 185
Equity - unlisted 185 185
- Chifeng 185 185
Financial assets at fair value through profit or loss 1 432 1 432
Debt - unlisted 1 432 1 432
- Environmental rehabilitation funds 1 432 1 432
Financial liabilities at fair value through profit or loss (849) (849)
Non-current contingent consideration (488) (488)
Current contingent consideration (361) (361)
Derivative financial liabilities (1) (1)
Net financial assets/(liabilities) held at fair value 767 1 431 (664)
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
Contingent
consideration Chifeng1 Total
Rm Rm Rm
At 31 December 2016 (Audited) (483) 178 (305)
Movement during the year
Losses recognised in other comprehensive income (pre-tax effect)2 (26) (26)
Losses recognised in profit or loss (354) (354)
Settlements 74 74
Exchange gains recognised in profit or loss 40 40
At 31 December 2017 (Audited) (723) 152 (571)
Movement during the year
Gains recognised in other comprehensive income (pre-tax effect)2 33 33
Losses recognised in profit or loss (357) (357)
Settlements 299 299
Exchange losses recognised in profit or loss (68) (68)
At 31 December 2018 (Reviewed) (849) 185 (664)
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 (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 31 December 2018 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. These financial
institutions invest in instruments which are listed.
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
Sensitivity of in the inputs is
inputs and demonstrated
fair value below2
Inputs measurement1 Rm
At 31 December 2018 (Reviewed)
Observable inputs
Strengthening
of the rand
Rand/RMB exchange rate R2.10/RMB1 to the RMB 19
Strengthening
RMB6.56 to of the RMB
RMB/US$ exchange rate RMB7.01/US$1 to the US$ 110
Increase in
Zinc LME price (US$ per tonne in US$2 200.00 to price of zinc
real terms) US$2 474.72 concentrate 110
Unobservable inputs
Increase in
production
Production volumes 85 000 tonnes volumes 31
Decrease in
Operational costs (US$ million per US$60.59 to operational
annum in real terms) US$70.92 costs (83)
Decrease in the
Discount rate 11.11% discount rate (16)
At 31 December 2017 (Audited)
Observable inputs
Strengthening
of the rand
Rand/RMB exchange rate R1.90/RMB1 to the RMB 15
Strengthening
RMB6.52 to of the RMB
RMB/US$ exchange rate RMB7.28/US$1 to the US$ 100
Increase in
Zinc LME price (US$ per tonne in US$2 100 to price of zinc
real terms) US$3 000 concentrate 100
Unobservable inputs
Increase in
production
Production volumes 85 000 tonnes volumes 29
Decrease in
Operational costs (US$ million per US$58.46 to operational
annum in real terms) US$70.20 costs (75)
Decrease in the
Discount rate 11.05% discount rate (12)
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 the remaining future payments that the group could be required to make
under the ECC acquisition is between nil and US$60 million. The amount of future payments is dependent on the
API4 coal price.
At 31 December 2018, there was an increase of US$25.4 million (R357 million) (31 December 2017: US$28.5 million
(R354 million)) recognised in profit or loss for the contingent consideration arrangement.
API4 coal price range
(US$/tonne) Future 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 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
- 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 S.A. 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 S.A. 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
Sensitivity of in the inputs is
inputs and demonstrated
fair value below2
Inputs measurement1 Rm
At 31 December 2018 (Reviewed)
Observable inputs
Strengthening
of the rand
Rand/US$ exchange rate R14.43/US$1 to the US$ 85
Increase in
US$90.00 to API4 export
API4 export price (price per tonne)3 US$98.10 price per tonne
Unobservable inputs
Decrease in the
Discount rate 3.44% discount rate (16)
At 31 December 2017 (Audited)
Observable inputs
Strengthening
of the rand
Rand/US$ exchange rate R12.37/US$1 to the US$ 72
Increase in
US$74.41 to API4 export
API4 export price (price per tonne) US$84.35 price per tonne 180
Unobservable inputs
Decrease in the
Discount rate 3.44% discount rate (19)
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 R167 million
(31 December 2017: R245 million), on the basis that all other variables remain constant.
3 A 10% increase in the API4 export price would not have an impact on the fair value of the contingent
consideration as the API4 export price is in excess of the maximum API4 coal price range.
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 31 December
2018 2017
Reviewed Audited
Rm Rm
Pending litigation and other claims1 1 155 876
Operational guarantees2 3 062 3 346
- Guarantees ceded to the DMR 2 971 2 918
- Other operational guarantees 91 428
Share of contingent liabilities of equity-accounted investments3 726 1 084
Total contingent liabilities 4 943 5 306
1 Consists of legal cases as well as tax disputes with Exxaro as 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 costs. The decrease mainly relates to Cennergi guarantees cancelled after construction was
finalised and the liabilities settled.
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 which
was subsequently postponed to 15 March 2019.
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 year ended 31 December 2018, the latest board approved budget for 2019,
as well as the available banking facilities and cash generating capability, Exxaro satisfies the criteria
of a going concern.
24. JSE LISTINGS REQUIREMENTS
The condensed annual financial statements have been prepared in accordance with the Listings Requirements of
the JSE.
25. EVENTS AFTER THE REPORTING PERIOD
Details of the final dividend are provided in note 11.
The group entered into the following transactions subsequent to 31 December 2018:
- On 15 February 2019, Exxaro received a cash dividend of R460 million from Tronox UK and Exxaro's 26%
membership interest was redeemed for an amount of R1 597 million.
- On 22 February 2019, Exxaro signed a transfer agreement with the Arnot OpCo Proprietary Limited consortium,
whose shareholders are former employees of Arnot and Wescoal, for the transfer of the Arnot mine. This
transfer is subject to regulatory and three party approvals.
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 annual financial statements for the year ended 31 December 2018, as set out
here, have been reviewed by the company's external auditors, PricewaterhouseCoopers Inc., who expressed an
unmodified review conclusion. A copy of the auditor's review report on the condensed group annual financial
statements is available for inspection at Exxaro's registered office, together with the financial statements
identified in the auditor's report.
27. KEY MEASURES1
At 31 December
2018 2017
Closing share price (rand per share) 137.87 162.50
Market capitalisation (Rbn) 49.45 58.29
Average rand/US$ exchange rate (for the year ended) 13.24 13.30
Closing rand/US$ spot exchange rate 14.43 12.37
1 Non-IFRS numbers.
Corporate information
REGISTERED OFFICE
Exxaro Resources Limited
Roger Dyason Road
Pretoria West, 0183
Tel: +27 12 307 5000
Fax: +27 12 323 3400
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 the 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.
Annexure: 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 Eyesizwe
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
EBITDA Earnings before interest and tax, depreciation, amortisation,
impairment charges and net loss or gain on the disposal of
investments and assets
ECC Exxaro Coal Central Proprietary Limited
ECL(s) Expected credit loss(es)
Eloff Eloff Mining Company Proprietary Limited
EMJV Ermelo joint venture
ESD Enterprise and supplier development
ESG Environmental, Social and Governance
Eyesizwe Eyesizwe (RF) Proprietary Limited, special purpose private
company which has a 30% shareholding in Exxaro
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 Standard(s)
JIBAR Johannesburg Interbank Average Rate
JSE JSE Limited
kcal kilocalorie
KIO Kumba Iron Ore Limited
Kt Kilo tonnes
LightApp LightApp Technologies Limited
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
NCI Non-controlling interests
NEMA National Environmental Management Act, 1998
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 implemented 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
This report is available at: http://www.exxaro.com
Date: 14/03/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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