JSE share code: EXX ISIN: ZAE000084992 ADR code: EXXAY
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EXXARO RESOURCES LIMITED
Reviewed condensed group
annual financial statements and unreviewed
production and sales volumes information
for the year ended 31 December 2018
CONTENTS
2 COMMENTARY
16 CONDENSED GROUP STATEMENT OF COMPREHENSIVE
INCOME
18 CONDENSED GROUP STATEMENT OF FINANCIAL
POSITION
20 CONDENSED GROUP STATEMENT OF CHANGES IN
EQUITY
22 CONDENSED GROUP STATEMENT OF CASH FLOWS
23 RECONCILIATION OF GROUP HEADLINE EARNINGS
24 NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS
CORPORATE BACKGROUND AND COMPLIANCE
24 Corporate background
24 Basis of preparation
25 Accounting policies
25 Changes in accounting policies and re-presentation of
comparative information
PERFORMANCE FOR THE YEAR
44 Segmental information
50 Discontinued operations
51 Revenue
53 Significant items included in operating profit
53 Net financing costs
54 Share of income/(loss) of equity-accounted investments
DIVIDEND DISTRIBUTION
54 Dividend distribution
ASSETS
55 Capital commitments
56 Investments in associates
56 Investments in joint ventures
57 Other assets
57 Non-current assets and liabilities held-for-sale
LIABILITIES
59 Interest-bearing borrowings
61 Net (debt)/cash
63 Other liabilities
FINANCIAL INSTRUMENTS
64 Financial instruments
OTHER INFORMATION
72 Contingent liabilities
72 Related party transactions
72 Going concern
73 JSE Listings Requirements
73 Events after the reporting period
73 Review conclusion
73 Key measures
74 CORPORATE INFORMATION
75 ANNEXURE: ACRONYMS
POWERING POSSIBILITY
INTO THE FUTURE THROUGH . . .
Coal as energy
Water
Renewable energy
Agri
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
Reviewed condensed group annual financial statements and unreviewed production
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
and sales volumes information for the year ended 31 December 2018
1
1
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
Segment
Description
EBITDA
Adjustments:
Other
Core EBITDA
– Receivable for Mayoko iron ore project written off
– BEE credentials expense and transaction costs
– Fair-value adjustment on contingent consideration
relating to the acquisition of ECC
FY18
Rm
6 924
357
357
7 281
FY17
Rm
2 487
4 720
27
4 339
354
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.
2
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
COMMENTARY CONTINUED
for the year ended 31 December 2018
ROBUST PERFORMANCE continued
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
Segment
Description
Unadjusted equity-accounted income
Adjustments:
Coal
Ferrous
TiO2
Energy
– Post-tax share of equity-accounted investments’
remeasurements1
– Post-tax share of SIOC’s loss on disposal of
property, plant and equipment1
– Post-tax share of SIOC’s reversal of impairment
of property, plant and equipment1
– Post-tax share of Tronox’s gain on disposal of
property, plant and equipment1
– Post-tax share of Tronox Limited’s loss on
disposal of Alkali chemical business1
– Post-tax share of Cennergi’s net gain on
disposal of property, plant and equipment1
FY17
Rm
2 123
565
11
(716)
(1)
1 271
FY18
Rm
3 259
12
1
13
(1)
(1)
Core equity-accounted income
1 Excluded from headline earnings.
3 271
2 688
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
3
COMMENTARY CONTINUED
for the year ended 31 December 2018
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
Total EBITDA impact (refer table 1)
Coal
– Insurance claim received from external parties1
TiO2
– Gain on disposal of non-core investments1, 2
– Gain/(loss) on disposal of property, plant and
equipment1, 3
– Loss on dilution of shareholding in Tronox Limited1
– 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
Other
– Loss on disposal of property, plant and equipment1
– Loss on disposal of financial asset
– Recycling of the foreign currency translation reserve on
liquidation of foreign entities to profit or loss1
Total net operating profit impact
Total post-tax equity-accounted income impact1 (refer table 2)
Net financing
cost
Net tax
adjustments
– Eyesizwe preference dividend accrued (consolidation
impact)
– Tax on non-core adjustments
Total attributable earnings impact
FY18
(357)
57
171
121
(2)
14
4
(12)
(100)
(29)
(137)
FY17
(4 720)
3
(62)
(106)
5 191
(2)
(58)
246
(565)
(11)
17
(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.
4
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
COMMENTARY CONTINUED
for the year ended 31 December 2018
COMMODITY PRICE PERFORMANCE AND GROUP SEGMENT RESULTS
Commodity price movements impacting Exxaro’s performance are summarised below.
Change in commodity prices
Commodity price
API4 coal
Iron ore fines 62% Fe ((CFR) China)
Group segment results (Rm)
Coal
Commercial – Waterberg
Commercial – Mpumalanga
Tied1
Other
Ferrous
Alloys
Other
Other
Total
Average US$ per tonne
FY18
98
70
FY17
% change
84
71
+17
-1
Revenue
Core EBITDA1
(Re-
presented)
FY17
22 553
11 328
7 970
2 837
418
243
243
17
22 813
FY18
25 302
13 289
7 984
3 665
364
169
169
20
25 491
FY18
7 617
6 882
1 558
144
(967)
15
18
(3)
(351)
7 281
FY17
7 374
6 461
1 388
140
(615)
52
53
(1)
(219)
7 207
1 Core EBITDA is calculated after adjusting for non-core transactions reflected in table 3.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
5
COMMENTARY CONTINUED
for the year ended 31 December 2018
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)
Coal: Mafube
Coal: RBCT
Ferrous: SIOC
TiO2: Tronox SA and UK operations1
TiO2: Tronox Limited2
Energy3
Other: Other4
Total
Equity-accounted
income/(loss)
FY18
113
(34)
2 605
491
60
36
FY17
259
(24)
2 598
186
(559)
2
226
Dividends received
FY18
FY17
2 569
1 390
69
58
109
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).
6
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
COMMENTARY CONTINUED
for the year ended 31 December 2018
FINANCIAL AND OPERATIONAL RESULTS continued
Group financial results continued
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)
Cash generated by operations
Dividends from investments in associates and joint ventures
Net finance costs
Capital expenditure
Tax paid
Final/interim ordinary dividends paid
Net surplus
FY18
7 024
2 696
(289)
(5 790)
(1 007)
(2 334)
300
FY17
6 826
1 499
(409)
(3 921)
(790)
(2 227)
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
7
COMMENTARY CONTINUED
for the year ended 31 December 2018
FINANCIAL AND OPERATIONAL RESULTS continued
Coal business performance
Unreviewed coal production and sales volumes ('000 tonnes)
Thermal
Commercial – Waterberg
Commercial – Mpumalanga
Exports commercial
Tied
Metallurgical
Commercial – Waterberg
Total coal
Semi-coke
Total coal (excluding buy-ins)
Thermal coal buy-ins
Total coal (including buy-ins)
Production
Sales
FY18
44 417
27 375
10 433
6 609
2 323
2 323
46 740
23
46 763
1 049
47 812
FY17
42 843
23 406
12 037
7 400
2 132
2 132
44 975
86
45 061
504
45 565
FY18
43 967
25 364
4 033
7 965
6 605
1 197
1 197
45 164
33
45 197
FY17
43 258
22 466
5 777
7 612
7 403
1 190
1 190
44 448
88
44 536
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.
8
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
COMMENTARY CONTINUED
for the year ended 31 December 2018
FINANCIAL AND OPERATIONAL RESULTS continued
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).
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
9
COMMENTARY CONTINUED
for the year ended 31 December 2018
FINANCIAL AND OPERATIONAL RESULTS continued
Coal Capex (Rm)
Sustaining
Commercial: Waterberg
Commercial: Mpumalanga
Expansion
Commercial: Waterberg
Commercial: Mpumalanga
Total coal capex
FY18
2 779
1 904
875
2 943
1 987
956
5 722
FY17
3 203
2 687
516
601
440
161
3 804
% change
-13
-29
+70
+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.
10
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
COMMENTARY CONTINUED
for the year ended 31 December 2018
FINANCIAL AND OPERATIONAL RESULTS continued
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
11
COMMENTARY CONTINUED
for the year ended 31 December 2018
FINANCIAL AND OPERATIONAL RESULTS continued
Energy business continued
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.
12
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
COMMENTARY CONTINUED
for the year ended 31 December 2018
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
13
COMMENTARY CONTINUED
for the year ended 31 December 2018
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
First trading day ex dividend on the JSE
Record date
Payment date
Monday, 6 May 2019
Tuesday, 7 May 2019
Friday, 10 May 2019
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 www.exxaro.com.
On behalf of the board
Jeff van Rooyen
Chairman
12 March 2019
Mxolisi Mgojo
Chief executive officer
Riaan Koppeschaar
Finance director
14
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
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
Value distribution (Rm)
247
77
13
51
3 486
2 214
5 483
2018
2 930
2017
1 143
597
518
1 657
1 433
882
• Salaries, wages and benefits
• Employees’ tax
• Payments to government
• Cost of finance
• Cash dividend paid, excluding Mpower 2012 beneficiaries
• Dividend paid to BEE Parties
• Cash dividend paid to Mpower 2012 beneficiaries
• Community investments and volunteerism
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
15
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2018
Revenue (note 7)
Operating expenses
Operating profit (note 8)
BEE credentials
Net operating profit
Finance income (note 9)
Finance costs (note 9)
Income from financial assets
Share of income of equity-accounted investments (note 10)
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued operations (note 6)
Profit for the year
Other comprehensive income/(loss), net of tax
Items that will not be reclassified to profit or loss:
– Remeasurement of post-retirement employee obligations
– Changes in fair value of equity investments at fair value through
other comprehensive income
– Share of other comprehensive income of equity-accounted
investments
Items that may subsequently be reclassified to profit or loss:
– Unrealised gains/(losses) on translation of foreign operations
– Revaluation of financial assets available-for-sale
– Share of other comprehensive income/(loss) of equity-accounted
investments
Items that have subsequently been reclassified to profit or loss:
– Recycling of exchange differences on translation of foreign operations
– Share of recycling of other comprehensive income of
equity-accounted investments
2018
Reviewed
Rm
25 491
(19 788)
5 703
5 703
283
(605)
6
3 259
8 646
(1 653)
6 993
69
7 062
246
66
39
21
6
194
67
127
(14)
(14)
2017
Audited
Rm
22 813
(17 593)
5 220
(4 245)
975
217
(828)
2
3 952
4 318
(1 542)
2 776
3 256
6 032
(1 352)
13
(29)
42
(92)
(62)
(14)
(16)
(1 273)
58
(1 331)
Total comprehensive income for the year
7 308
4 680
16
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
Profit attributable to:
Owners of the parent
– Continuing operations
– Discontinued operations
Non-controlling interests
– Continuing operations
Profit for the year
Total comprehensive income attributable to:
Owners of the parent
– Continuing operations
– Discontinued operations
Non-controlling interests
– Continuing operations
2018
Reviewed
Rm
2017
Audited
Rm
7 030
6 961
69
32
32
5 982
2 726
3 256
50
50
7 062
6 032
7 276
7 207
69
32
32
4 630
2 487
2 143
50
50
Total comprehensive income for the year
7 308
4 680
Attributable earnings per share
Aggregate
– Basic
– Diluted
Continuing operations
– Basic
– Diluted
Discontinued operations
– Basic
– Diluted
2018
Reviewed
cents
2017
Audited
cents
2 801
2 156
2 774
2 135
27
21
1 923
1 724
876
786
1 047
938
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
17
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
at 31 December 2018
ASSETS
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in associates (note 13)
Investments in joint ventures (note 14)
Financial assets (note 20)
– Financial assets at fair value through other comprehensive income
– Financial assets at fair value through profit or loss
– Loans to associates and joint ventures
– Enterprise and supplier development loans
– Other financial assets at amortised cost
Lease receivables
Deferred tax
Other non-current assets (note 15)
Current assets
Inventories
Financial assets (note 20)
– Loans to associates and joint ventures
– Enterprise and supplier development loans
– Other financial assets at amortised cost
Trade and other receivables
Lease receivables
Current tax receivables
Cash and cash equivalents
Other current assets (note 15)
Non-current assets held-for-sale (note 16)
Total assets
(Re-presented)
2017
Audited
Rm
47 660
24 362
34
17
15 810
1 479
2 351
72
571
2 964
10 844
1 055
48
2018
Reviewed
Rm
52 226
28 825
30
15
15 477
1 569
2 634
185
1 432
250
80
687
66
523
3 087
7 641
1 604
134
9
45
80
3 140
2 613
5
23
2 080
655
5 183
65 050
4
28
6 657
439
3 910
62 414
18
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital
Other components of equity
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing borrowings (note 17)
Non-current other payables
Provisions
Post-retirement employee obligations
Financial liabilities (note 20)
– Financial liabilities at fair value through profit or loss
– Financial liabilities at amortised cost
Deferred tax
Other non-current liabilities (note 19)
Current liabilities
Interest-bearing borrowings (note 17)
Trade and other payables
Provisions
Financial liabilities (note 20)
– Financial liabilities at fair value through profit or loss
– Financial liabilities at amortised cost
– Derivative financial instruments
Current tax payable
Overdraft (note 17)
Other current liabilities (note 19)
Non-current liabilities held-for-sale (note 16)
Total liabilities
Total equity and liabilities
(Re-presented)
2018
Reviewed
Rm
2017
Audited
Rm
1 021
8 028
32 797
41 846
(701)
41 145
15 745
3 843
152
3 952
193
713
488
225
6 874
18
6 823
573
2 960
70
757
361
395
1
209
1 531
723
1 337
23 905
65 050
1 021
8 120
30 962
40 103
(738)
39 365
17 442
6 480
89
3 864
227
414
5 988
380
3 956
68
2 245
95
309
368
54
817
1 651
23 049
62 414
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
19
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
At 31 December 2016 (Audited)
Profit for the year
Other comprehensive loss for the year
Share of other comprehensive (loss)/income of
equity-accounted investments
Issue of share capital1
Share-based payments movement2
Dividends paid
Share repurchase3
Treasury shares4
Disposal of an associate5
Liquidation of subsidiary6
Reclassification within equity
At 31 December 2017 (Audited)
Adjustment on initial application of IFRS 15
(net of tax)7
Adjustment on initial application of IFRS 9
(net of tax)7
Adjusted balance at 1 January 2018
Profit for the year
Other comprehensive income for the year
Share of other comprehensive income of
equity-accounted investments
Adjustment to NCI8
Share-based payments movement2
Dividends paid
Disposal of subsidiaries9
Liquidation of subsidiary6
At 31 December 2018 (Reviewed)
Other components of equity
Share
capital
Rm
Foreign
currency
translation
Rm
Financial
instruments
revaluation
Rm
Equity-
settled
Rm
2 509
4 010
23
1 898
10 705
(1 951)
(10 242)
(62)
(154)
(65)
203
4 057
(1 332)
58
1
(286)
1 021
2 520
(41)
5 872
1 021
2 520
(41)
5 872
67
118
9
(338)
1 021
(14)
2 691
(32)
5 534
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.
20
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
Post-
retirement
employee
obligations
Rm
Available-
for-sale
revaluation
Rm
Financial
asset
FVOCI
revaluation
Rm
(60)
(14)
(262)
(29)
42
91
(158)
(74)
74
(74)
(74)
21
(158)
39
6
Other
Rm
(3 524)
Retained
earnings
Rm
31 281
5 982
(2 227)
(4 268)
195
(1)
3 524
1
1
314
(11)
1
31 265
7 030
(15)
(5 483)
Attributable
to owners
of the
parent
Rm
35 875
5 982
(105)
26
10 705
4 057
(2 227)
(2 695)
(10 242)
(1 331)
58
Non-
controlling
interests
Rm
(788)
50
Total
equity
Rm
35 087
6 032
(105)
26
10 705
4 057
(2 227)
(2 695)
(10 242)
(1 331)
58
314
(11)
40 406
7 030
127
133
(15)
(338)
(5 483)
(14)
41 846
314
(11)
39 668
7 062
127
133
(338)
(5 483)
(10)
(14)
41 145
(738)
32
15
(10)
(701)
30 962
40 103
(738)
39 365
(113)
(53)
1
32 797
cents
1 255
400
530
555
Dividend distribution
Dividend per share paid in respect of a special dividend declared during 2018
Final dividend per share paid in respect of the 2017 financial year
Dividend per share paid in respect of the 2018 interim period
Final dividend per share payable in respect of the 2018 financial year
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
21
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December 2018
(Re-presented)
Cash flows from operating activities
Cash generated by operations
Settlement of contingent consideration (note 20.2)1
Interest paid
Interest received
Tax paid
Dividends paid
Cash flows from investing activities
Property, plant and equipment acquired to maintain operations (note 12)
Property, plant and equipment acquired to expand operations (note 12)
Intangible assets acquired
Proceeds from disposal of property, plant and equipment
Decrease in loans to Main Street 333
Interest received on loans to Main Street 333
Decrease in other financial assets at amortised cost
Increase in Enterprise and supplier development loans
Decrease in loan to joint venture
Increase in loan to joint venture
Decrease in lease receivables
Proceeds from disposal of operation
Proceeds from disposal of subsidiaries2
Proceeds from disposal of a financial asset
Increase in loan to associate
Acquisition of associates (note 13)
Dividend income from investments in associates and joint ventures
Proceeds from disposal of equity-accounted investments
Decrease in non-current financial assets
Increase in non-current financial assets
Increase in environmental rehabilitation funds
Dividend income from financial assets and non-current assets
classified as held-for-sale
Cash flows from financing activities
Interest-bearing borrowings raised
Interest-bearing borrowings repaid
Shares acquired in the market to settle share-based payments
Dividends paid to BEE Parties
Repurchase of share capital
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Reclassifications of cash and cash equivalents
Translation difference on movement in cash and cash equivalents
Cash and cash equivalents at end of the year
Cash and cash equivalents
Cash and cash equivalents classified as held-for-sale
Overdraft
2018
Reviewed
Rm
(54)
7 024
(299)
(518)
229
(1 007)
(5 483)
(3 195)
(2 847)
(2 943)
(1)
268
82
(125)
186
(250)
14
17
75
24
(263)
2 627
(135)
76
(2 861)
14
(2 161)
(467)
(247)
(6 110)
6 617
42
549
2 080
(1 531)
2017
Audited
Rm
3 326
6 826
(74)
(597)
188
(790)
(2 227)
4 451
(2 977)
(944)
(1)
11
400
84
(1)
(26)
1 499
6 525
14
(4)
(130)
1
(6 361)
2 491
(2 534)
(99)
(6 219)
1 416
5 183
51
(33)
6 617
6 657
14
(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.
22
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
RECONCILIATION OF GROUP HEADLINE EARNINGS
For the year ended 31 December 2018 (Reviewed)
Profit attributable to owners of the parent
Adjusted for:
– IFRS 10 Gain on disposal of subsidiaries
– IAS 16 Gain on disposal of operation
– IAS 16 Net gains on disposal of property, plant and equipment
– IAS 16 Compensation from third parties for items of property,
plant and equipment impaired, abandoned or lost
– IAS 21 Net gains on translation differences recycled to profit or loss on
the liquidation of a foreign subsidiary
– IAS 28 Share of equity-accounted investments’ separate identifiable
remeasurements
Headline earnings
Continuing operations
Discontinued operations
For the year ended 31 December 2017 (Audited)
Profit attributable to owners of the parent
Adjusted for:
– IAS 16 Net losses on disposal of property, plant and equipment
– IAS 16 Compensation from third parties for items of property, plant and
equipment impaired, abandoned or lost
– 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
– IAS 28 Loss on dilution of investment in associate
– IAS 28 Share of equity-accounted investments’ separate identifiable
remeasurements
– IAS 28 Share of equity-accounted investments’ impairment reversal of
property, plant and equipment
– IAS 28 Share of equity-accounted investments’ loss on disposal of
a subsidiary
– IAS 28 Gain on partial disposal of an associate
Headline earnings/(loss)
Continuing operations
Discontinued operations
Headline earnings/(loss) per share
Aggregate
– Basic
– Diluted
Continuing operations
– Basic
– Diluted
Discontinued operations
– Basic
– Diluted
Gross
Rm
Tax
Rm
Net
Rm
(348)
(69)
(102)
(122)
(57)
(14)
16
25
13
16
(4)
(4 674)
61
252
(18)
7 030
(323)
(69)
(102)
(109)
(41)
(14)
12
6 707
6 638
69
5 982
(4 422)
43
(3)
1
(2)
(1 274)
106
(1 274)
106
12
(2)
10
(987)
271
(716)
1 271
(3 860)
2018
Reviewed
cents
2 672
2 057
2 645
2 036
27
21
1 271
(3 860)
1 560
2 120
(560)
2017
Audited
cents
502
450
682
611
(180)
(161)
Refer to note 11 for details regarding the number of shares.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
23
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS
CORPORATE BACKGROUND
1.
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.
2.1
BASIS OF PREPARATION
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).
24
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
25
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
4.1
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact on the financial statements continued
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.
Statement of financial position (extract)
ASSETS
Non-current assets
Property, plant and equipment
Biological assets
Intangible assets
Investments in associates
Investments in joint ventures
Financial assets
– Financial assets at fair value through other
comprehensive income
31 December 2017
Previously
presented
Rm
47 706
24 362
34
17
15 810
1 479
5 433
Reclassi-
fications
Rm
(46)
(3 082)
571
– Financial assets at fair value through profit or loss
– Loans to associates and joint ventures
– Other financial assets at amortised cost
Lease receivables1
Deferred tax
Other non-current assets2
Current assets
Inventories
Financial assets
– Other current financial assets at amortised cost
– Derivative financial instruments
Trade and other receivables
Lease receivables3
Current tax receivable
Cash and cash equivalents4
Other current assets5
Non-current assets held-for-sale
Total assets
1 Lease receivables of R118 million were reclassified from non-current financial assets to non-current lease
10 936
1 055
48
3 910
62 552
28
6 606
3 199
72
2 964
(92)
(586)
4
51
439
(138)
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.
26
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
31 December 2017
Re-presented
Rm
IFRS 9
Rm
IFRS 15
Rm
1 January 2018
Restated
Rm
47 660
24 362
34
17
15 810
1 479
2 351
72
571
2 964
10 844
1 055
48
2 613
4
28
6 657
439
3 910
62 414
(2 351)
152
1 391
128
678
2
(11)
(48)
48
4
(15)
(11)
47 660
24 362
34
17
15 810
1 479
152
1 391
128
678
72
573
2 964
10 833
1 055
48
4
2 598
4
28
6 657
439
3 910
62 403
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
27
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact on the financial statements continued
4.1
Statement of financial position (extract) continued
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital
Other components of equity
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing borrowings
Non-current other payables1
Provisions
Post-retirement employee obligations
Financial liabilities
– Financial liabilities at fair value through profit or loss
Deferred tax
Other non-current liabilities2
Current liabilities
Interest-bearing borrowings3
Trade and other payables
Provisions
Financial liabilities
– Financial liabilities at fair value through profit or loss
– Derivative financial instruments
Current tax payable
Overdraft
Other current liabilities4
Non-current liabilities held-for-sale
Total liabilities
Total equity and liabilities
31 December 2017
Previously
presented
Rm
Reclassi-
fications
Rm
1 021
8 120
30 962
40 103
(738)
39 365
17 409
6 480
3 864
227
850
5 988
4 127
2
3 237
95
371
368
54
1 651
23 187
62 552
33
89
(436)
380
(171)
66
(992)
(62)
817
(138)
(138)
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.
28
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
31 December 2017
Re-presented
Rm
IFRS 9
Rm
IFRS 15
Rm
1 January 2018
Restated
Rm
1 021
8 120
30 962
40 103
(738)
39 365
17 442
6 480
89
3 864
227
414
5 988
380
3 956
68
2 245
95
309
368
54
817
1 651
23 049
62 414
(11)
(11)
(11)
(2)
(414)
414
(2)
2
(4)
(309)
309
6
(11)
314
314
314
(252)
122
(374)
(62)
(62)
(314)
1 021
8 120
31 265
40 406
(738)
39 668
17 188
6 480
89
3 864
227
414
6 108
6
3 896
68
2 241
95
309
6
368
54
755
1 651
22 735
62 403
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
29
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9
4.2
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
Increase in impairment allowances for trade receivables
Increase in impairment allowances for financial assets at amortised cost
Increase in deferred tax assets relating to impairment allowances
Decrease in deferred tax liabilities relating to impairment allowances
Opening balance at 1 January 2018 (after IFRS 9 before IFRS 15
restatement)
4.2.2
4.2.2
4.2.2
4.2.2
(11)
(7)
(8)
2
2
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.
30
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
4.
4.2
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
4.2.1 Classification and measurement continued
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
Financial
assets1
Note
Held-
for-
trading
Rm
Desig-
nated
Rm
Loans
and
receiv-
ables
at
amortised
cost
Rm
Available-
for-sale
financial
assets at
fair value
Rm
FVPL
Rm
Amortised
cost
Rm
FVOCI
equity
instru-
ment
Rm
Closing balance
at 31 December
2017 (IAS 39)
(Re-presented)2
Reclassify
non-trading
equities from
available-for-
sale to FVOCI
Reclassify
held-for-trading
FVPL financial
assets to FVPL
Reclassify
designated
FVPL financial
assets to FVPL
Reclassify loans
and receivables
financial assets
to amortised
cost
Reclassify loans
and receivables
at amortised
cost to a
financial asset
measured at
FVPL
Opening
balance at
1 January 2018
(IFRS 9)
a
b
b
c
d
4 1 391
10 175
152
(152)
152
(4)
4
(1 391)
1 391
(10 175)
10 175
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
31
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
4.2
4.2.1 Classification and measurement continued
IAS 39 categories
IFRS 9 categories
At fair
value through
profit or loss
Held-for-
trading
Rm
Desig-
nated
Rm
Note
Financial
liabilities
at
amortised
cost
Rm
Amortised
cost
Rm
FVPL
Rm
e
e
f
723
8 991
6
(6)
(723)
6
723
(8 991)
8 991
729
8 991
Financial
liabilities1
Closing balance
at 31 December 2017
(IAS 39) (Re-presented)2
Reclassify held-for-trading
FVPL financial liabilities to FVPL
Reclassify designated FVPL
financial liabilities to FVPL
Reclassify financial liabilities to
amortised cost
Opening balance at
1 January 2018 (IFRS 9)
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:
Other components of equity1
Note
Closing balance at 31 December 2017 (IAS 39)
Reclassify non-trading equities from available-for-sale to FVOCI
a
Opening balance at 1 January 2018 (IFRS 9)
1 Reserves which were impacted by IFRS 9.
IAS 39
IFRS 9
Available-
for-sale
re-
valuation
reserve
Rm
(74)
74
Financial
asset
FVOCI
re-
valuation
reserve
Rm
(74)
(74)
32
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
4.
4.2
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
4.2.1 Classification and measurement continued
(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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
33
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
4.2
4.2.2
Impairment of financial assets continued
The impairment allowances as at 1 January 2018 for trade receivables are as follows:
More
than
30 days
past due
Rm
More
than
60 days
past due
Rm
More
than
90 days
past due
Rm
69
22
5
5
35
35
Current
Rm
2 458
6
Total
Rm
2 567
68
Gross carrying amount
Impairment allowance
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
Closing balance at 31 December 2017 (IAS 39)
Amounts restated through opening retained earnings
Opening balance at 1 January 2018 (IFRS 9)
Rm
61
7
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
Closing balance at 31 December 2017 (IAS 39)
Amount reclassified on a financial asset classified as FVPL
Amounts restated through opening retained earnings
Opening balance at 1 January 2018 (IFRS 9)
Rm
70
(70)
8
8
34
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
4.
4.2
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
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 on the following page.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
35
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
4.2
4.2.3 Accounting policies applied from 1 January 2018 continued
Category
Financial
instruments
Amortised
cost
– Trade and
other
receivables
– Loans to joint
ventures and
associates
– ESD loans
– Other
financial
assets
Business
model and
cash flow
character-
istics
Financial
assets that
are held for
collection of
contractual
cash flows
where those
cash flows
represent
SPPI.
FVPL
– Debt
securities
– Derivative
financial
assets
Financial
assets that
do not meet
the criteria
for
amortised
cost or
FVOCI.
Movements in
carrying amount
Derecognition
Impairment
Impairment
losses are
presented as a
separate line
item in the notes
to the statement
of
comprehensive
income. The
impairment
losses are
considered to be
immaterial and
therefore it has
not been
presented as a
separate line on
the face of the
statement of
comprehensive
income.
Debt instruments
measured at
FVPL are not
subject to the
impairment
model in terms
of IFRS 9.
Any gain or loss
arising on
derecognition is
recognised
directly in profit
or loss and
presented in
operating
expenses.
Interest income
from these
financial assets is
included in finance
income using the
effective interest
rate method.
Foreign exchange
gains and losses
are recognised in
profit or loss.
Any gain or
loss arising on
derecognition
is recognised
directly in profit
or loss and
presented in
operating
expenses.
Gains and losses
on a debt
investment that
is subsequently
measured at FVPL
is recognised in
profit or loss and
presented net
within operating
expenses in the
period in which it
arises.
Interest income
is recognised in
profit or loss.
36
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
4.
4.2
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
4.2.3
Accounting policies applied from 1 January 2018 continued
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
37
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 9 continued
4.2
4.2.3
Accounting policies applied from 1 January 2018 continued
(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.
38
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
4.
4.3
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
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)
Adjustment from the adoption of IFRS 15
Decrease in deferred revenue liability due to earlier recognition
of revenue from a pricing adjustment
Increase in deferred tax liability relating to earlier recognition
of revenue from a pricing adjustment
Opening balance at 1 January 2018 (after IFRS 9 and
IFRS 15 restatements)
4.3.2 (a)
4.3.2 (a)
30 951
314
436
(122)
31 265
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
39
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 15 continued
4.3
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
As reported
Adjustments1
Note
4.3.2
4.3.2
For the year ended
31 December 2018
Revenue
Operating expenses
Net operating profit
Finance income
Finance costs
Income from financial assets
Share of income of equity-
accounted investments
Profit before tax
Income tax expense
Profit for the year from continuing
operations
Profit for the year from discontinued
operations
Profit for the year
Other comprehensive income,
net of tax
Total comprehensive income for
the year
Profit attributable to:
Owners of the parent
Non-controlling interests
Profit for the year
Total comprehensive income
attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income
for the year
1 Adjustments comprise of:
Rm
25 491
(19 788)
5 703
283
(605)
6
3 259
8 646
(1 653)
6 993
69
7 062
246
7 308
7 030
32
7 062
7 276
32
7 308
Rm
(162)
224
62
62
(17)
45
45
45
45
45
45
IAS 182
Rm
25 329
(19 564)
5 765
283
(605)
6
3 259
8 708
(1 670)
7 038
69
7 107
246
7 353
7 075
32
7 107
7 321
32
45
7 353
– 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.
40
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
4.
4.3
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 15 continued
4.3.1
Financial results for the year ended 31 December 2018 had IAS 18 been applied continued
Impact on the reviewed condensed group statement of comprehensive income continued
For the year ended 31 December 2018
cents
cents
As reported
Adjustments1
IAS 182
cents
Attributable earnings per share
Aggregate
– Basic
– Diluted
1 Adjustments comprise of:
2 801
2 156
18
14
2 819
2 170
– 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
At 31 December 2018
ASSETS
Non-current assets
Current assets
Non-current assets
held-for-sale
Total assets
EQUITY AND LIABILITIES
Capital and other components
of equity
Share capital
Other components of equity
Retained earnings
Equity attributable to owners
of the parent
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing borrowings
Other payables
Provisions
Post-retirement employee
obligations
Financial liabilities
Deferred tax
Other non-current liabilities
As reported
Adjustments1
IAS 182
Note
Rm
Rm
Rm
52 226
7 641
5 183
65 050
1 021
8 028
32 797
41 846
(701)
41 145
15 745
3 843
152
3 952
193
713
6 874
18
52 226
7 641
5 183
65 050
1 021
8 028
32 528
41 577
(701)
40 876
15 952
3 843
152
3 952
193
713
6 769
330
(269)
(269)
(269)
207
(105)
312
4.3.2 (a)
4.3.2 (a)
4.3.2 (a)
4.3.2 (a)
4.3.2 (a)
4.3.2 (a)
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
41
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 15 continued
4.3
4.3.1
Financial results for the year ended 31 December 2018 had IAS 18 been applied continued
Impact on the reviewed condensed group statement of financial position continued
At 31 December 2018
Current liabilities
Interest-bearing borrowings
Trade and other payables
Provisions
Financial liabilities
Current tax payable
Overdraft
Other current liabilities
Non-current liabilities
held-for-sale
Total liabilities
Total equity and liabilities
Note
4.3.2 (a)
4.3.2 (a)
4.3.2 (a)
As reported
Rm
6 823
573
2 960
70
757
209
1 531
723
1 337
23 905
65 050
Adjustments1
Rm
62
62
269
IAS 182
Rm
6 885
573
2 960
70
757
209
1 531
785
1 337
24 174
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.
42
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
4.
4.3
4.3.2
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 15 continued
Impact assessment of customer contract terms and conditions continued
(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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
43
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
4.
CHANGES IN ACCOUNTING POLICIES AND RE-PRESENTATION OF
COMPARATIVE INFORMATION continued
Impact of adopting IFRS 15 continued
Accounting policies applied from 1 January 2018 continued
4.3
4.3.3
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:
Revenue type
Coal (domestic
supply)
Coal (export
supply)
Ferrosilicon
Performance
obligation
Delivery of coal at a
contractually agreed upon
delivery point
Delivery of coal at a
contractually agreed upon
delivery point (FOB)
Delivery of ferrosilicon at a
contractually agreed upon
delivery point
Biological goods Delivery of biological goods
Stock yard
management
services
Other mine
management
services
at a contractually agreed
upon delivery point
Rendering of stock yard
management services over
time
Rendering of other mine
management services over
time
Timing of when
performance
obligation is satisfied
On delivery (point in
time)
Payment terms
Range: 15 to 60
days
On delivery (point in
time)
Range: 15 to 60
days
On delivery (point in
time)
Range: 15 to 60
days
On delivery (point in
time)
Range: 15 to 60
days
As services are
performed (over time)
Within 30 days
As services are
performed (over time)
Within 30 days
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).
44
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
5.
SEGMENTAL INFORMATION continued
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
45
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
SEGMENTAL INFORMATION continued
5.
The following table presents a summary of the group’s segmental information:
For the year ended 31 December
2018 (Reviewed)
External revenue
Segment net operating profit/
(loss)
– Continuing operations
External finance income (note 9)
External finance costs (note 9)
Income tax (expense)/benefit
Depreciation and amortisation
(note 8)
Gain on disposal of subsidiary
Gain on disposal of operation
Cash generated by/(utilised in)
operations
Share of income/(loss) of equity-
accounted investments (note 10)
– Continuing operations
Capital expenditure (note 12)
At 31 December 2018 (Reviewed)
Segment assets and liabilities
Deferred tax1
Investments in associates (note 13)
Investments in joint ventures (note 14)
Loans to joint ventures
External assets2
Assets
Non-current assets held-for-sale
(note 16)
Total assets as per statement
of financial position
External liabilities
Deferred tax1
Current tax payable1
Liabilities
Non-current liabilities held-for-sale
(note 16)
Total liabilities as per statement
of financial position
Coal
Commercial
Waterberg
Rm
Mpumalanga
Rm
Tied
Rm
Other
Rm
13 289
7 984
3 665
364
5 738
5 738
48
(47)
(1 572)
(1 204)
1 429
1 429
33
(164)
(302)
(299)
69
102
(966)
(966)
19
(47)
378
250
250
(48)
(13)
6 955
1 490
99
(1 366)
114
114
(1 832)
(3 890)
6
(53)
1 237
8 059
9 302
9 302
2 631
866
5
3 502
1 337
1 062
1 009
1 009
757
(32)
725
26 514
26 514
26 514
2 463
6 009
104
8 576
(36)
(36)
164
2 157
259
4 192
6 772
6 772
2 348
39
99
2 486
8 576
4 839
725
2 486
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.
46
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
Ferrous
Alloys
Rm
Other
ferrous
Rm
TiO2
Rm
Energy
Rm
Other
Base
metals
Rm
169
17
17
(4)
(3)
(3)
Other
Rm
Total
Rm
20
25 491
(762)
(762)
183
(347)
(105)
(66)
5 703
5 703
283
(605)
(1 653)
(1 582)
69
102
60
(2)
(212)
7 024
2 592
2 592
492
492
61
61
70
70
8
1
9 511
2 185
265
273
25
9 537
2 185
5 183
141
332
818
473
818
273
23
9 537
5
7 368
473
818
23
23
5
5
(34)
(34)
(68)
397
665
1 922
2 984
2 984
7 258
(40)
33
7 251
3 259
3 259
(5 790)
523
15 477
1 569
259
42 039
59 867
5 183
65 050
15 485
6 874
209
22 568
1 337
7 251
23 905
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
47
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
SEGMENTAL INFORMATION continued
5.
The following table presents a summary of the group’s segmental information:
For the year ended 31 December
2017 (Audited)(Re-presented)
External revenue
Segment net operating profit/
(loss)
– Continuing operations
– Discontinued operations
External finance income (note 9)
External finance costs (note 9)
Income tax (expense)/benefit
Depreciation and amortisation
(note 8)
Gain on partial disposal of associate
Cash generated by/(utilised in)
operations
Share of income/(loss) of equity-
accounted investments (note 10)
– Continuing operations
– Discontinued operations
Capital expenditure (note 12)
At 31 December 2017 (Audited)
(Re-presented)
Segment assets and liabilities
Deferred tax1
Investments in associates (note 13)
Investments in joint ventures (note 14)
Loans to joint ventures
External assets2
Assets
Non-current assets held-for-sale
(note 16)
Total assets as per statement of
financial position
External liabilities
Deferred tax1
Current tax payable1
Liabilities
Non-current liabilities held-for-sale
(note 16)
Total liabilities as per statement
of financial position
Coal
Commercial
Waterberg
Rm
Mpumalanga
Rm
Tied
Rm
Other
Rm
11 328
7 970
2 837
418
5 438
5 438
12
(50)
(1 401)
(970)
1 046
1 046
28
(168)
(155)
(326)
(603)
(603)
6
(36)
246
128
128
(40)
(12)
6 389
1 138
182
(804)
259
259
(677)
(24)
(24)
39
6
91
2 193
1 105
6 068
7 212
385
7 597
1 838
757
25
2 620
1 651
4 271
971
977
3 364
5 648
977
649
649
5 648
2 468
49
50
2 567
649
2 567
(3 127)
23 202
23 202
23 202
2 394
5 225
217
7 836
7 836
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.
48
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
Ferrous
Alloys
Rm
Other
ferrous
Rm
TiO2
Rm
Energy
Rm
Other
Base
metals
Rm
243
54
54
1
(13)
(1)
(1)
5 085
5 085
(54)
(2)
3 303
3 303
3 860
(1 643)
186
(1 829)
(6)
11
1
9 367
3 477
3 477
3 396
6 873
309
320
25
9 393
320
27
9 393
4
27
27
4
4
2
2
226
226
374
126
500
747
747
500
747
Other
Rm
Total
Rm
17
22 813
(5 087)
(5 087)
170
(574)
(179)
(85)
6 060
975
5 085
217
(828)
(1 542)
(1 393)
3 860
(23)
6 826
2 123
3 952
(1 829)
(3 921)
571
15 810
1 479
126
40 518
58 504
(111)
423
26
6 579
7 028
129
3 910
7 157
7 662
(43)
76
7 695
62 414
15 042
5 988
368
21 398
1 651
7 695
23 049
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
49
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
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:
Financial performance
Losses on financial instruments revaluations recycled to
profit or loss
Gains on translation differences recycled to profit or loss on partial
disposal of investment in foreign associate
Loss on dilution of investment in associate
Operating profit
Gain on partial disposal of associate
Net operating profit
Dividend income
Share of loss of equity-accounted investment
Profit for the year from discontinued operations
Cash flow information
Cash flow attributable to investing activities
Cash flow attributable to discontinued operation
For the year ended
31 December
2018
Reviewed
Rm
2017
Audited
Rm
(1)
1 332
(106)
1 225
3 860
5 085
(1 829)
3 256
6 634
6 634
69
69
69
69
50
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
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.
For the year ended 31 December
2018 (Reviewed)
Waterberg
Rm
Mpumalanga
Rm
Tied
Rm
Other
Rm
Alloys
Rm
Other
Rm
Total
Rm
Coal
Ferrous
Other
Commercial
Segment revenue reconciliation
Segment revenue based on origin
of coal production
Export sales allocated to selling
entity
Total revenue from contracts
with customers
By timing and major type of
goods and services
Sale of goods at a point in time
Coal
Ferrosilicon
Biological goods
Rendering of services
over time
Stock yard management services
Other mine management services
Other services
Total revenue from contracts
with customers
By major geographic area of
customer1
Domestic
Export
Europe
Asia
Other
Total revenue from contracts
with customers
By major customer industries
Public utilities
Merchants
Steel
Mining
Manufacturing
Cement
Other
13 289
7 984
3 665
364
169
20
25 491
(1 796)
(6 254)
8 050
11 493
1 730
3 665
8 414
169
20
25 491
11 493
11 493
1 730
1 730
3 441
3 441
8 050
8 050
163
16
163
6
6
16
4
4
224
224
364
364
24 893
24 714
163
16
598
224
364
10
11 493
1 730
3 665
8 414
169
20
25 491
11 493
1 730
3 665
364
8 050
4 920
2 455
675
169
15
17 436
5
2
3
8 055
4 922
2 458
675
11 493
1 730
3 665
8 414
169
20
25 491
9 101
141
1 557
88
291
156
159
3 665
301
835
165
43
33
202
151
701
6 458
36
747
101
371
13 768
7 434
1 758
1 022
447
358
704
144
22
3
20
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
51
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
7.
REVENUE continued
For the year ended 31 December
2017 (Audited)
Segment revenue reconciliation
Segment revenue based on origin
of coal production
Export sales allocated to selling
entity
Total revenue from contracts
with customers
By timing and major type of
goods and services
Sale of goods at a point in time
Coal
Ferrosilicon
Biological goods
Rendering of services
over time
Other mine management services1
Other services
Total revenue from contracts
with customers
By major geographic area of
customer2
Domestic
Export
Europe
Asia
Other
Coal
Ferrous
Other
Commercial
Waterberg
Rm
Mpumalanga
Rm
Tied
Rm
Other
Rm
Alloys
Rm
Other
Rm
Total
Rm
11 328
7 970
2 837
418
243
17
22 813
(1 330)
(5 688)
7 018
9 998
2 282
2 837
7 436
243
17
22 813
9 998
9 998
2 282
2 282
2 837
2 837
7 018
7 018
243
243
418
418
10
10
7
7
22 388
22 135
243
10
425
418
7
9 998
2 282
2 837
7 436
243
17
22 813
9 998
2 282
2 837
418
7 018
3 670
2 629
719
243
17
15 795
7 018
3 670
2 629
719
243
2 282
2 837
2 837
7 436
9 998
Total revenue from contracts
with customers
By major customer industries
Public utilities
Merchants
Steel
Mining
Manufacturing
Cement
Other
Total revenue from contracts
with customers
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.
8 086
74
1 135
137
325
153
88
1 209
4 911
44
685
97
950
652
143
31
46
187
273
9 998
7 436
2 837
2 282
490
243
243
17
22 813
13 082
5 637
1 322
1 096
468
340
868
22 813
17
17
52
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
8.
SIGNIFICANT ITEMS INCLUDED IN OPERATING PROFIT
Raw materials and consumables
Staff costs
Royalties
Contract mining
Repairs and maintenance
Railage and transport
Depreciation and amortisation
Fair value adjustments on contingent consideration
Legal and professional fees
Net gains/(losses) on disposal or scrapping of property, plant
and equipment
Expected credit losses
Gain on disposal of subsidiaries1
Gain on disposal of operation2
For the year ended
31 December
2017
Audited
Rm
(3 058)
(4 086)
(143)
(1 451)
(1 749)
(2 065)
(1 393)
(354)
(510)
(61)
2018
Reviewed
Rm
(3 175)
(4 622)
(427)
(1 818)
(2 213)
(1 787)
(1 582)
(357)
(776)
122
(64)
69
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 R5 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
Finance income
Interest income
Finance lease interest income
Commitment fee income
Interest income from loan to joint venture
Finance costs
Interest expense
Unwinding of discount rate on rehabilitation cost
Recovery of unwinding of discount rate on rehabilitation cost
Finance lease interest expense
Amortisation of transaction costs
Borrowing costs capitalised1
Total net financing costs
1 Borrowing costs capitalisation rate:
For the year ended
31 December
2018
Reviewed
Rm
283
256
10
1
16
(605)
(514)
(408)
158
(1)
(27)
187
(322)
10.13%
2017
Audited
Rm
217
207
10
(828)
(600)
(410)
163
(3)
(9)
31
(611)
8.98%
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
53
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
10.
SHARE OF INCOME/(LOSS) OF EQUITY-ACCOUNTED INVESTMENTS
Associates
Unlisted investments
SIOC
Tronox SA
Tronox UK1
RBCT
Black Mountain
AgriProtein
LightApp
Curapipe
Joint ventures
Unlisted investments
Mafube
Cennergi
For the year ended
31 December
2018
Reviewed
Rm
2017
Audited
Rm
3 079
2 592
382
110
(36)
70
(31)
(5)
(3)
180
114
66
3 691
3 303
67
119
(24)
226
261
259
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.
54
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
11.
DIVIDEND DISTRIBUTION continued
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.
Issued share capital (number of shares)
Ordinary shares (million)
– Weighted average number of shares
– Diluted weighted average number of shares
12.
CAPITAL COMMITMENTS
Contracted
Contracted for the group (owner-controlled)
Share of capital commitments of equity-accounted investments
Authorised, but not contracted
At 31 December
2018
Reviewed
2017
Audited
358 706 754
358 706 754
251
326
311
347
At 31 December
2018
Reviewed
Rm
4 508
3 533
975
2 914
2017
Audited
Rm
5 409
4 313
1 096
2 838
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
55
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
13.
INVESTMENTS IN ASSOCIATES
At 31 December
2018
Reviewed
Rm
2017
Audited
Rm
Unlisted investments
SIOC
Tronox SA
Tronox UK1
RBCT
Black Mountain
AgriProtein2
LightApp3
Curapipe
9 511
2 185
2 157
818
643
141
22
Total carrying value of investments in associates
15 477
9 367
1 800
1 677
2 193
747
26
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
Unlisted investments
Mafube1
Cennergi2
Total carrying value of investments in joint ventures
1 Included in financial assets is a loan to Mafube (refer note 20):
2 Included in financial assets is a loan to Cennergi (refer note 20):
At 31 December
2018
Reviewed
Rm
2017
Audited
Rm
1 237
332
1 569
259
1 105
374
1 479
126
56
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
15.
OTHER ASSETS
Non-current
Reimbursements1
Indemnification asset2
Other non-current assets
Total non-current other assets
Current
VAT
Royalties
Prepayments
Other current assets
Total current other assets
Total other assets
At 31 December
2018
Reviewed
Rm
2017
Audited
Rm
1 723
1 337
27
3 087
480
46
110
19
655
3 742
1 692
1 268
4
2 964
293
39
88
19
439
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).
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
57
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
16.
NON-CURRENT ASSETS AND LIABILITIES HELD-FOR-SALE continued
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:
Assets
Property, plant and equipment
Investments in associates
Deferred tax
Inventories
Trade receivables
Current tax receivable
Cash and cash equivalents
Other current assets
Non-current assets held-for-sale
Liabilities
Non-current provisions
Post-retirement employee obligations
Trade and other payables
– Trade payables
– Other payables
Shareholder loans
Current provisions
Other current liabilities
Non-current liabilities held-for-sale
Net non-current assets held-for-sale
At 31 December
2018
Reviewed
Rm
2017
Audited
Rm
5 183
5 183
(1 320)
(17)
(1 337)
3 846
282
3 396
9
133
39
27
14
10
3 910
(1 494)
(22)
(62)
(54)
(8)
(18)
(18)
(37)
(1 651)
2 259
58
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
17.
INTEREST-BEARING BORROWINGS
Non-current1
Loan facility
Bonds issue
Preference share liability2
Finance leases
Current3
Loan facility
Bonds issue
Preference share liability
Finance leases
At 31 December
2018
Reviewed
Rm
3 843
3 233
610
573
47
525
(1)
2
(Re-presented)
2017
Audited
Rm
6 480
3 474
520
2 483
3
68
52
5
(5)
16
Total interest-bearing borrowings
4 416
6 548
Summary of loans and finance leases by period of redemption:
– Less than six months
– Six to 12 months
– Between one and two years
– Between two and three years
– Between three and four years
– Between four and five years
– Over five years
Total interest-bearing borrowings
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.
2 Capital redemption on preference share liability
3 The current portion represents:
– Capital repayments
– Interest capitalised
– Reduced by the amortisation of transaction costs
Overdraft
Bank overdraft
578
(5)
(10)
3 242
611
4 416
20
1 889
573
522
61
(10)
1 531
67
1
509
(13)
3 239
2 620
125
6 548
44
68
16
66
(14)
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
59
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
17.
INTEREST-BEARING BORROWINGS continued
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.
60
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
18.
NET (DEBT)/CASH
Net (debt)/cash is presented by the following items on the
statement of financial position:
Total net (debt)/cash
Non-current interest-bearing borrowings
Current interest-bearing borrowings
Net cash
– Cash and cash equivalents
– Cash and cash equivalents classified as held-for-sale
– Overdraft
At 31 December
2018
Reviewed
Rm
(Re-presented)
2017
Audited
Rm
(3 867)
(3 843)
(573)
549
2 080
(1 531)
69
(6 480)
(68)
6 617
6 657
14
(54)
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
61
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
18.
NET (DEBT)/CASH continued
Analysis of movement in net (debt)/cash:
Liabilities from
financing activities
Cash and
cash
equivalents/
overdraft
Rm
5 183
1 416
Non-current
interest-
bearing
borrowings
Rm
(6 002)
(472)
Current
interest-
bearing
borrowings
Rm
(503)
515
Net debt at 31 December 2016
Cash flows
Operating activities
Investing activities
Financing activities
– Interest-bearing borrowings raised
– Interest-bearing borrowings repaid
– Shares acquired in the market to settle share-based
payments
– Repurchase of share capital
Non-cash movements
Amortisation of transaction costs
Preference dividend accrued
Transfers between non-current and current liabilities
Reclassifications to non-current assets held-for-sale
Translation difference on movement in cash and
cash equivalents
Net cash at 31 December 2017
(previously presented)
Reclassifications1
Net cash at 31 December 2017 (Re-presented)
Cash flows
Operating activities
Investing activities
Financing activities
– Interest-bearing borrowings raised
– Interest-bearing borrowings repaid
– Shares acquired in the market to settle share-
based payments
– Dividends paid to BEE Parties
Non-cash movements
Amortisation of transaction costs
Preference dividend accrued
Interest accrued
Lease payable cancelled
Transfers between non-current and current liabilities
Translation difference on movement in cash and
cash equivalents
Net debt at 31 December 2018
3 326
4 451
(6 361)
2 491
(2 534)
(99)
(6 219)
(47)
(14)
(33)
6 552
65
6 617
(6 110)
(54)
(3 195)
(2 861)
14
(2 161)
(467)
(247)
42
42
549
Total
Rm
(1 322)
1 459
3 326
4 451
(6 318)
(99)
(6 219)
(67)
(9)
(11)
(14)
(33)
70
(1)
69
(3 963)
(54)
(3 195)
(714)
(467)
(247)
27
(27)
(1)
5
8
42
(472)
(2 491)
2 019
(6)
(11)
5
(6 480)
(6 480)
2 139
2 139
2 139
498
(1)
5
494
515
515
(14)
(9)
(5)
(2)
(66)
(68)
8
8
(14)
22
(513)
(27)
5
3
(494)
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.
62
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
(3 843)
(573)
(3 867)
19.
OTHER LIABILITIES
Non-current
Income received in advance
Deferred revenue1
Total non-current other liabilities
Current
Deferred revenue1
Leave pay
VAT
Royalties
Bonuses
Other current liabilities
Total current other liabilities
Total other liabilities
At 31 December
2018
Reviewed
Rm
(Re-presented)
2017
Audited
Rm
18
18
171
86
50
305
111
723
741
6
374
380
62
157
101
29
373
95
817
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).
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
63
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
20.
FINANCIAL INSTRUMENTS
The group holds the following financial instruments:
Non-current
Financial assets
Financial assets at fair value through other comprehensive
income
Equity: unlisted
– Chifeng (previously classified as available-for-sale financial
asset at fair value)
Financial assets at fair value through profit or loss
Equity: listed
– KIO (previously classified as designated at fair value
through profit or loss)1
Debt: unlisted
– Environmental rehabilitation funds (previously classified as
designated at fair value through profit or loss)
Loans to associates and joint ventures
Associates
– Curapipe (previously classified as loans and receivables
at amortised cost)
Joint ventures
– Cennergi (previously classified as loans and receivables
at amortised cost)
– Mafube2
ESD loans3
Other financial assets at amortised cost
Environmental rehabilitation funds (previously classified
as loans and receivables at amortised cost)
Deferred pricing receivable (previously classified as loans
and receivables at amortised cost)4
Interest-bearing borrowings (excluding finance leases)
Non-current other payables
Financial liabilities
Financial liabilities at fair value through profit or loss
Contingent consideration (previously classified as designated
at fair value through profit or loss)5
Financial liabilities at amortised cost
Deferred consideration payable6
At 31 December
2018
Reviewed
Rm
(Re-presented)
2017
Audited
Rm
2 634
2 351
152
152
152
1 391
34
34
1 357
1 357
128
2
2
126
126
680
291
389
(6 477)
(89)
(414)
(414)
(414)
185
185
185
1 432
1 432
1 432
250
250
250
80
687
351
336
(3 843)
(152)
(713)
(488)
(488)
(225)
(225)
64
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
20.
FINANCIAL INSTRUMENTS continued
At 31 December
2018
Reviewed
Rm
(Re-presented)
2017
Audited
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)
Financial assets
Loans to joint ventures
– Mafube2
ESD loans3
Other current financial assets at amortised cost
Deferred pricing receivable (previously classified as loans
and receivables at amortised cost)4
Deferred consideration receivable7
Employee receivables
Impairment allowances of other current financial assets
at amortised cost
Trade and other receivables
Trade receivables
– Trade receivables – gross
– Impairment allowances of trade receivables
Other receivables
– Other receivables – gross
– Impairment allowances of other receivables
Cash and cash equivalents
Interest-bearing borrowings (excluding finance leases)
Trade and other payables
Trade payables
Other payables
Financial liabilities
Derivative financial liabilities (previously classified as
held-for-trading at fair value through profit or loss. Included
under trade and other payables in 2017)
Financial liabilities at fair value through profit or loss
Contingent consideration (previously classified as designated
at fair value through profit or loss)5
Financial liabilities at amortised cost
Deferred consideration payable6
134
9
9
45
80
52
29
4
(5)
3 140
2 971
3 052
(81)
169
223
(54)
2 080
(571)
(2 960)
(1 456)
(1 504)
(757)
(1)
(361)
(361)
(395)
(395)
4
48
48
48
2 609
2 506
2 567
(61)
103
173
(70)
6 657
(52)
(2 239)
(1 085)
(1 154)
(315)
(6)
(309)
(309)
Overdraft
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
(1 531)
(54)
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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
65
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
FINANCIAL INSTRUMENTS continued
20.
The group has granted the following loan commitments:
Total loan commitment
Mafube1
AgriProtein2
Undrawn loan commitment
Mafube
AgriProtein
At 31 December
2017
Audited
Rm
2018
Reviewed
Rm
1 221
500
721
971
250
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.
At 31 December 2018 (Reviewed)
Financial assets at fair value
through other comprehensive
income
Equity – unlisted
– Chifeng
Financial assets at fair value
through profit or loss
Debt – unlisted
– Environmental rehabilitation funds
Financial liabilities at fair value
through profit or loss
Non-current contingent consideration
Current contingent consideration
Derivative financial liabilities
Net financial assets/(liabilities)
held at fair value
Fair value
Rm
Level 1
Rm
Level 2
Rm
Level 3
Rm
185
185
185
1 432
1 432
1 432
(849)
(488)
(361)
(1)
767
185
185
185
(849)
(488)
(361)
1 432
1 432
1 432
(1)
1 431
(664)
66
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
20.
20.1
FINANCIAL INSTRUMENTS continued
Fair value hierarchy continued
At 31 December 2017 (Audited)
Financial assets held-for-trading
at fair value through profit or loss
– Current derivative financial assets
Financial assets designated at fair
value through profit or loss
– Environmental rehabilitation funds
– KIO
Available-for-sale financial assets
– Chifeng
Financial liabilities held-for-
trading at fair value through profit
or loss
– Current derivative financial liabilities
Financial liabilities designated at
fair value through profit or loss
– Non-current contingent
consideration
– Current contingent consideration
Net financial assets/(liabilities)
held at fair value
Fair value
Rm
Level 1
Rm
Level 2
Rm
Level 3
Rm
1 391
1 357
34
4
4
1 391
1 357
34
152
152
(6)
(6)
(723)
(414)
(309)
4
4
(6)
(6)
152
152
(723)
(414)
(309)
818
1 391
(2)
(571)
Reconciliation of financial assets and financial liabilities within Level 3 of the hierarchy
At 31 December 2016 (Audited)
Movement during the year
Losses recognised in other comprehensive income
(pre-tax effect)2
Losses recognised in profit or loss
Settlements
Exchange gains recognised in profit or loss
At 31 December 2017 (Audited)
Movement during the year
Gains recognised in other comprehensive income
(pre-tax effect)2
Losses recognised in profit or loss
Settlements
Exchange losses recognised in profit or loss
At 31 December 2018 (Reviewed)
Contingent
consideration
Rm
(483)
Chifeng1
Rm
178
(354)
74
40
(723)
(357)
299
(68)
(849)
(26)
152
33
185
Total
Rm
(305)
(26)
(354)
74
40
(571)
33
(357)
299
(68)
(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).
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
67
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
FINANCIAL INSTRUMENTS continued
20.
Fair value hierarchy continued
20.1
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.
68
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
20.
20.2
FINANCIAL INSTRUMENTS continued
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 continued
Chifeng continued
Sensitivity of
inputs and
fair value
measurement1
Inputs
Sensitivity
analysis of a
10% increase
in the inputs is
demonstrated
below2
Rm
At 31 December 2018 (Reviewed)
Observable inputs
Rand/RMB exchange rate
R2.10/RMB1
RMB/US$ exchange rate
RMB6.56 to
RMB7.01/US$1
Zinc LME price (US$ per tonne in real
terms)
US$2 200.00 to
US$2 474.72
Unobservable inputs
Production volumes
85 000 tonnes
Operational costs (US$ million per annum
in real terms)
US$60.59 to
US$70.92
Strengthening
of the rand
to the RMB
Strengthening
of the RMB
to the US$
Increase in
price of zinc
concentrate
Increase in
production
volumes
Decrease in
operational
costs
Discount rate
At 31 December 2017 (Audited)
Observable inputs
11.11%
Decrease in the
discount rate
Rand/RMB exchange rate
R1.90/RMB1
RMB/US$ exchange rate
RMB6.52 to
RMB7.28/US$1
Zinc LME price (US$ per tonne in real
terms)
US$2 100 to
US$3 000
Unobservable inputs
Production volumes
85 000 tonnes
Operational costs (US$ million per annum
in real terms)
US$58.46 to
US$70.20
Strengthening
of the rand
to the RMB
Strengthening
of the RMB
to the US$
Increase in
price of zinc
concentrate
Increase in
production
volumes
Decrease in
operational
costs
Discount rate
11.05%
Decrease in the
discount rate
19
110
110
31
(83)
(16)
15
100
100
29
(75)
(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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
69
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
FINANCIAL INSTRUMENTS continued
20.
Valuation techniques used in the determination of fair values within Level 3 of the
20.2
hierarchy, as well as significant inputs used in the valuation models continued
Chifeng continued
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$28.5 million (R354 million)) recognised in profit or loss for the contingent consideration
arrangement.
Reference year
Minimum
Maximum
US$ million
API4 coal price range
(US$/tonne)
Future payment
2015
2016
2017
2018
2019
60
60
60
60
60
80
80
80
90
90
10
25
25
25
35
The amount to be paid in each of the five years is determined as follows (refer table above):
– If the average API4 price in the reference year is below the minimum API4 price of the agreed
range, then no payment will be made
– If the average API4 price falls within the range, then the amount to be paid is determined based on
a formula contained in the agreement
– If the average API4 price is above the maximum API4 price of the range, then Exxaro is liable for
the full amount due for that reference year.
An additional payment to Total S.A. amounting to R299 million was required for the 2017 reference
year and R74 million was required for the 2016 reference year as the API4 price was within the
agreed range. No additional payment to Total S.A. was required for the 2015 reference year as the
API4 price was below the range.
The contingent consideration is classified within Level 3 of the fair value hierarchy as there is no
quoted market price or observable price available for this financial instrument. This financial
instrument is valued as the present value of the estimated future cash flows, using a discounted
cash flow model.
The significant observable and unobservable inputs used in the fair value measurement of this
financial instrument are rand/US$ exchange rate, API4 export price and the discount rate.
70
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
20.
20.2
FINANCIAL INSTRUMENTS continued
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 continued
Contingent consideration continued
Sensitivity of
inputs and
fair value
measurement1
Inputs
Sensitivity
analysis of a
10% increase
in the inputs is
demonstrated
below2
Rm
At 31 December 2018 (Reviewed)
Observable inputs
Rand/US$ exchange rate
R14.43/US$1
API4 export price (price per tonne)3
Unobservable inputs
Discount rate
At 31 December 2017 (Audited)
Observable inputs
API4 export price (price per tonne)
Unobservable inputs
Discount rate
Rand/US$ exchange rate
R12.37/US$1
Strengthening
of the rand
to the US$
Increase in
API4 export
price per tonne
US$90.00 to
US$98.10
3.44%
Decrease in the
discount rate
Strengthening
of the rand
to the US$
Increase in
API4 export
price per tonne
US$74.41 to
US$84.35
3.44%
Decrease in the
discount rate
85
(16)
72
180
(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.
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
71
NOTES TO THE REVIEWED CONDENSED GROUP
ANNUAL FINANCIAL STATEMENTS CONTINUED
21.
CONTINGENT LIABILITIES
Pending litigation and other claims1
Operational guarantees2
– Guarantees ceded to the DMR
– Other operational guarantees
Share of contingent liabilities of equity-accounted investments3
Total contingent liabilities
At 31 December
2018
Reviewed
Rm
1 155
3 062
2 971
91
726
4 943
2017
Audited
Rm
876
3 346
2 918
428
1 084
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.
23.
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.
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.
72
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
24.
25.
26.
JSE LISTINGS REQUIREMENTS
The condensed annual financial statements have been prepared in accordance with the Listings
Requirements of the JSE.
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.
REVIEW CONCLUSION
These reviewed condensed group annual financial statements for the year ended
31 December 2018, as set out on pages 16 to 73, 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
Closing share price (rand per share)
Market capitalisation (Rbn)
Average rand/US$ exchange rate (for the year ended)
Closing rand/US$ spot exchange rate
1 Non-IFRS numbers.
At 31 December
2018
137.87
49.45
13.24
14.43
2017
162.50
58.29
13.30
12.37
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
73
CORPORATE INFORMATION
REGISTERED OFFICE
Exxaro Resources Limited
Roger Dyason Road
Pretoria West, 0183
Tel: +27 12 307 5000
Fax: +27 12 323 3400
This report is available at: www.exxaro.com
DIRECTORS
J van Rooyen*** (chairman), MDM Mgojo* (chief executive officer), PA Koppeschaar* (finance director),
GJ Fraser-Moleketi (lead independent director)***, MW Hlahla**, D Mashile-Nkosi**, L Mbatha**,
VZ Mntambo**, MJ Moffett***, LI Mophatlane***, EJ Myburgh***, V Nkonyeni***, A Sing***, PCCH Snyders***
*Executive
**Non-executive
***Independent non-executive
PREPARED UNDER 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
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”)
If you have any queries regarding your shareholding in Exxaro Resources Limited, please contact the
transfer secretaries at +27 11 370 5000.
74
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
ANNEXURE: ACRONYMS
AgriProtein
Anglo
API4
B-BBEE
BEE
BEE Parties
Black Mountain
Cennergi
CFR
Chifeng
Cps
Curapipe
DCM
DEA
DMR
DMTN
EBITDA
ECC
ECL(s)
Eloff
EMJV
ESD
ESG
Eyesizwe
FOB
FVOCI
FVPL
HDSA
HEPS
IAS
IASB
IFRS
JIBAR
JSE
kcal
KIO
Kt
AgriProtein Holdings UK Limited
Anglo South Africa Capital Proprietary Limited
All publications index 4 (FOB Richards Bay 6000kcal/kg)
Broad-based black economic empowerment
Black Economic Empowerment
External shareholders of Eyesizwe
Black Mountain Proprietary Limited
Cennergi Proprietary Limited
Cost and freight
Chifeng Kumba Hongye Corporation Limited
Cents per share
Curapipe Systems Limited
Dorstfontein
Department of Environmental Affairs
Department of Mineral Resources
Domestic medium term note
Earnings before interest and tax, depreciation, amortisation, impairment
charges and net loss or gain on the disposal of investments and assets
Exxaro Coal Central Proprietary Limited
Expected credit loss(es)
Eloff Mining Company Proprietary Limited
Ermelo joint venture
Enterprise and supplier development
Environmental, Social and Governance
Eyesizwe (RF) Proprietary Limited, special purpose private company
which has a 30% shareholding in Exxaro
Free on board
Fair value through other comprehensive income
Fair value through profit or loss
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
Headline earnings per share
International Accounting Standard
International Accounting Standards Board
International Financial Reporting Standard(s)
Johannesburg Interbank Average Rate
JSE Limited
kilocalorie
Kumba Iron Ore Limited
Kilo tonnes
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018
75
ANNEXURE: ACRONYMS CONTINUED
LightApp
LME
LOM
LTIFR
Mafube
Main Street 333
Manyeka
Mpower 2012
MPRDA
Mt
Mtpa
NBC
NCI
NEMA
OCI
PRC
Prime Rate
Rb
RB1
RBCT
Replacement BEE Transaction
Rm
RMB
SAICA
SARS
SIOC
SPPI
SSCC
Tata Power
TiO2
Tronox
Tronox SA
Tronox UK
UK
Universal
US$
VAT
LightApp Technologies Limited
London Metal Exchange
Life of Mine
Lost-time injury frequency rate
Mafube Coal Proprietary Limited
Main Street 333 Proprietary Limited
Manyeka Coal Mines Proprietary Limited
Exxaro Employee Empowerment Trust
Mineral and Petroleum Resources Development Act, 2002
Million tonnes
Million tonnes per annum
North Block Complex
Non-controlling interests
National Environmental Management Act, 1998
Other comprehensive income
Peoples Republic of China
South African prime bank rate
Rand billion
Richards Bay export product 1
Richards Bay Coal Terminal Proprietary Limited
BEE transaction which was implemented in 2017 and resulted in
Exxaro being held 30% by HDSAs
Rand million
Chinese Renminbi
South African Institute of Chartered Accountants
South African Revenue Service
Sishen Iron Ore Company Proprietary Limited
Solely payments of principal and interest
Semi-soft coking coal
Tata Power Company Limited
Titanium dioxide
Exxaro’s investment in Tronox entities
Tronox KZN Sands Proprietary Limited and Tronox Mineral Sands
Proprietary Limited
Tronox Sands Limited Liability Partnership in the United Kingdom
United Kingdom
Universal Coal Development IV Proprietary Limited
United States Dollar
Value Added Tax
76
Reviewed condensed group annual financial statements and unreviewed production
and sales volumes information for the year ended 31 December 2018