Exxaro Resources Limited · JSE:EXX
Exxaro Resources — H1 2022 Earnings Presentation
49 slides from Exxaro Resources's earnings presentation, August 2022
Slide 1: Interim Financial Results Presentation for Six-Month Period Ended 30 June 2022
1 INTERIM FINANCIAL RESULTS PRESENTATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2022
Slide 2: Presentation Outline
PRESENTATION OUTLINE Macro View and Performance Highlights Nombasa Tsengwa | Chief Executive Officer Minerals Operational Performance Kgabi Masia | Managing Director Minerals Financial Results Riaan Koppeschaar | Finance Director Outlook Nombasa Tsengwa | Chief Executive Officer
Slide 3: Macro View & Performance Highlights
MACRO VIEW & PERFORMANCE HIGHLIGHTS Nombasa Tsengwa | Chief Executive Officer
Slide 4: Welcome & Introduction
WELCOME & INTRODUCTION Exxdr0
Slide 5: Dynamic Market Shocks
MACRO CONTEXT DYNAMIC MARKET SHOCKS Million tonnes RBCT total exports to Europe 5 4.52 RBCT total exports to Europe 4 Tragedy of Russia/Ukraine war 3 2 1.66 1 0.44 Captured renewed European demand for thermal 0 1H21 2H21 1H22 coal Source: RBCT Weak global economic sentiment weighed on iron ore marke
Slide 6: ESG Highlights: Maintained Safe Operations
HIGHLIGHTS ESG* MAINTAINED SAFE OPERATIONS Record safety performance E Contribution to Africa's biodiversity 5 YEARS & Record safety performance 5 MONTHS S Direct social investments (R699 million) FATALITY FREE Committed to empowering communities 0.04 group LTIFR** (target = 0.06) Revision of the ca
Slide 7: Operational Highlights
OPERATIONAL HIGHLIGHTS Coal production Coal cost STEADY OPERATIONAL volumes maintained below PERFORMANCE 21.7Mt Inflation at 1.0% 4.7% Wind energy Turbine delivered maintenance 307 GWh Availability at Measured against 2H21 22% 97.4% 7
Slide 8: Financial Highlights
FINANCIAL HIGHLIGHTS RESILIENT FINANCIAL Core EBITDA Core HEPS PERFORMANCE R10.6bn R34.26 /share 67% 75% ROCE Interim dividend 39% R15.93 Measured against 2H21 8
Slide 9: Minerals Operational Performance
MINERALS OPERATIONAL PERFORMANCE Kgabi Masia | Managing Director Minerals
Slide 10: Safety, Health and Environment
SAFETY, HEALTH AND ENVIRONMENT OUR DRIVE FOR A SAFE SUSTAINABLE FUTURE Health Safety Lost Time Injury Occupational Health Fatality Free Covid-19 Frequency Rate Incident Frequency Rate 0.03 LTIFR 5 Years 89% 0.15 OHIFR 5 Months Vaccination Rate 57% lower Target 0.18 Target 0.06 Fatality Free Zero COV
Slide 11: Alternative Logistic Channels Enabling Production Uplift
COAL VOLUMES ALTERNATIVE LOGISTIC CHANNELS ENABLING PRODUCTION UPLIFT Total product Movement 1H22 vs 2H21 Product Sales Million tonnes + 1% + 6% Million tonnes Domestic Export 23.9 23.5 23.0 0.3 20.9 21.5 21.7 Waterberg (WB) 3.1 3.0 3.0 0.1 0.1 3.1 • Grootegeluk 0.8 0.3 0.2 2.7 3.2 5.7 6.5 5.1 5.1 4
Slide 12: Exports: Competitive Product Mix, Diversified Markets, Higher Prices
EXPORTS COMPETITIVE PRODUCT MIX, DIVERSIFIED MARKETS, HIGHER PRICES • Successfully responded to the strong European demand Exxaro export sales destinations (%) • Early Value Strategy continues to render high quality 15 6 10 11 product mix 7 12 32 18 • Optimising value through our product and quality
Slide 13: Cost Competitiveness: Outstanding Cost Performance
COST COMPETITIVENESS OUTSTANDING COST PERFORMANCE Cash cost per tonne* • Coal mining inflation at 11.6%, and only 4.7% realised Coal mining inflation R/tonne + 11.6% • Sustainable cost management through: 421 + 4.7% 404 - successfully maintaining reduced contractor cost 376 359 343 - absorbing elect
Slide 14: Capex: Disciplined Capital Execution
CAPEX DISCIPLINED CAPITAL EXECUTION Expansion capital profile Sustaining capital profile R million R million 500 3 000 2 500 390 2 500 400 2 000 1 787 300 1 500 200 361 1 091 1 000 100 2H 2H 500 00 696 1H 1H 0 29 0 FY22* FY23* FY22* FY23* Previous guidance** 390 Previous guidance** 1 802 • Expansion
Slide 15: Financial Results
FINANCIAL RESULTS Riaan Koppeschaar | Finance Director
Slide 16: Record Profits Fueled by Product Mix and Higher Prices
GROUP CORE PERFORMANCE RECORD PROFITS FUELED BY PRODUCT MIX AND HIGHER PRICES Revenue (Rm) EBITDA (Rm) + 27% + 67% 22 330 10 603 17 627 14 078 14 846 15 144 6 340 3 929 4 331 3 362 1H20 2H20 1H21 2H21 1H22 1H20 2H20 1H21 2H21 1H22 Equity income (Rm) HEPS (cents) + 75% 6 666 + 30% 3 426 4 102 4 142 2
Slide 17: Group Revenue
GROUP REVENUE LOGISTICAL CHALLENGES STILL WITH US R million 313 (1 187) 5 383 12 13 (143) 255 (5) (37) (555) (1) 22 330 655 17 627 2H21 1H22 Domestic Energy Ferrous Domestic Energy Ferrous Exchange Matla ECC * Export Export revenue & Other & Other Coal Coal Other Coal Coal Price Volume and product m
Slide 18: Group Core EBITDA
GROUP CORE EBITDA GOOD COST CONTAINMENT DESPITE INFLATIONARY PRESSURE R million 5 295 (517) 140 (171) (1 019) 186 (147) 346 (146) 10 603 Mafube JV 482 buy-ins (834) (186) 6 340 Rehabilitation 2H21 1H22 Inflation Commercial Selling and ECC * Employee Operational Forex Royalties General ** and buy-ins
Slide 19: Coal: Product Mix Enabling High Price Realisation
COAL PRODUCT MIX ENABLING HIGH PRICE REALISATION WITH GOOD COST CONTAINMENT R million 1H21 2H21 1H22 Revenue 14 525 16 870 21 692 Commercial Waterberg 8 168 8 684 11 692 Commercial Mpumalanga 3 960 5 479 7 334 Tied Mpumalanga 2 386 2 703 2 666 Other 11 4 EBITDA 4 355 6 316 10 525 Commercial Waterber
Slide 20: Cennergi: Solid Returns Despite Lower Wind Conditions
CENNERGI SOLID RETURNS DESPITE LOWER WIND CONDITIONS Average electricity generation Performance since acquisition Amakhala Tsitsikamma Unit 1H21 2H21 1H22 Capacity factor (historic)* 35% 39% Energy generation GWh 331 393 307 Contracted equipment availability 97% 97% Revenue Rm 539 654 523 Electricit
Slide 21: Group Core Earnings
GROUP CORE EARNINGS DIVERSIFIED PORTFOLIO DELIVERING RETURNS R million 1H21 % change 2H21 % change 1H22 Net operating profit 3 043 63 4 951 88 9 284 Income from investments 21 62 34 Net financing cost – Exxaro excluding Cennergi (139) 107 10 (27) Net financing cost – Cennergi (246) (246) 3 (239) Pos
Slide 22: Capital Allocation: Balancing Growth and Shareholder Returns
CAPITAL ALLOCATION BALANCING GROWTH AND SHAREHOLDER RETURNS Free cash flow Debt service Sustaining capex Dividends Expansion capex Growth Cash R million 10 476 (304) (710) Cennergi (4 102) (4 547) Cennergi SIOC Rest of (4 482) Exxaro (2 655) Rest of 5 679 Exxaro Operations 764 Rest of group 7 446 (1
Slide 23: Shareholder Return: Maintain Dividend Policy
SHAREHOLDER RETURN MAINTAIN DIVIDEND POLICY Interim Total Final Interim 1H22 FY21 2H21 1H21 Dividend cover - Group adjusted earnings* (times) 2.5 2.5 2.5 2.5 SIOC dividend declared (Rm) 2 498 8 984 2 655 6 329 Dividend declared per share (cents) 1 593 3 252 1 175 2 077 Dividend declared (Rm) 5 564 1
Slide 24: Outlook
OUTLOOK Nombasa Tsengwa | Chief Executive Officer
Slide 25: Macro Outlook 2H22: Operational Focus
MACRO OUTLOOK 2H22 OPERATIONAL FOCUS Safety is our first priority Diversity, Equity and Inclusivity embedded Operational excellence remains a key focus Possible longer-term TFR models and private participation Collaborating with Eskom to resolve the energy crisis Robust product mix to capitalise on
Slide 26: Macro Outlook 2H22: Continued Market Volatility
MACRO OUTLOOK 2H22 CONTINUED MARKET VOLATILITY Foresee strong thermal coal prices Pressure on margins and rising capital inflation European demand for Exxaro’s high calorific value coal is expected to increase Geopolitical tension and energy insecurity Global supply chain disruptions are expected to
Slide 27: Positioning Your Business for Impact and Sustainable Growth
27 Positioning your business for impact and sustainable growth
Slide 28: New Capital Allocation Model Enabling Sustainable Value Creation
STRATEGIC OUTLOOK Criteria to implement capital allocation model NEW CAPITAL ALLOCATION MODEL ENABLING SUSTAINABLE VALUE CREATION Strategic fit ENTERPRISE Financial A foundation built on asset Create shareholder value Markets and portfolio management Sustainable & resilient business Capabilities to
Slide 29: Concrete Plans to Drive Decarbonisation
STRATEGIC OUTLOOK CONCRETE PLANS TO DRIVE DECARBONISATION 900 Further opportunities to reduce emissions are being evaluated and considered including: 800 25.5 84.7 59.2 700 Expected reduction Divestment from current 208 initiatives 600 Biofuels Compressed Electric HD Carbon Capture 43% natural gas V
Slide 30: Responding to the National Energy Crisis
STRATEGIC OUTLOOK Global South Africa RESPONDING TO THE Accelerating energy transition Worsening national energy crisis NATIONAL ENERGY CRISIS Threats to energy security Liberalisation of the domestic energy market We are called to action • National energy crisis requires urgent action • Licensing t
Slide 31: Growth in Future Facing Minerals Has Become Urgent
Copper STRATEGIC OUTLOOK GROWTH IN FUTURE FACING MINERALS HAS BECOME URGENT Higher borrowing costs, geo-political relations due to inflation Manganese Favorable pricing for manganese & bauxite; elevated copper prices have moderated Elevated copper multiples Bauxite High M&A activity in copper 31
Slide 32: Conclusion: Tomorrow Today
STRATEGIC OUTLOOK CONCLUSION Sustainable, Growth and Impact strategy remains intact Coal and Renewable Energy businesses play a key role in We know there is a the energy security 1 better place to be Growth in Renewable Energy business goes beyond decarbonisation TOMORROW than where we are Prudent a
Slide 33: Thank You
THANK YOU exxaro
Slide 34: Additional Information
ADDITIONAL INFORMATION Exxaro
Slide 35: Sustainable Growth and Impact Strategy Remains Intact
STRATEGIC OUTLOOK SUSTAINABLE GROWTH AND IMPACT STRATEGY REMAINS INTACT Transition at speed Empower people to Be carbon neutral by and scale create impact 2050 Technology Capital, Diversity and Operating Partnerships and portfolio, inclusion model innovation Risk Become a catalyst for economic Make
Slide 36: Coal Product Volumes
COAL PRODUCT VOLUMES ‘000 tonnes 1H21 2H21 1H22 2H22* Thermal production 19 950 20 425 20 640 21 659 Grootegeluk 12 183 13 176 13 905 13 568 Matla 2 701 3 202 3 086 2 997 ECC 1 917 872 Leeuwpan 1 247 1 149 1 169 2 136 Belfast 1 236 1 285 1 515 1 756 Mafube Coal (buy-ins from Mafube JV) 666 741 965 1
Slide 37: Coal Sales Volumes
COAL SALES VOLUMES ‘000 tonnes 1H21 2H21 1H22 2H22* Sales to Eskom 14 679 15 682 15 899 15 944 Grootegeluk 11 984 12 478 12 815 12 950 Matla 2 695 3 204 3 084 2 994 Other domestic thermal coal sales 1 593 2 217 2 282 3 907 Grootegeluk 586 650 716 794 Mpumalanga 1 007 1 567 1 566 3 113 Exports 4 100
Slide 38: Domestic Market Volumes per Mine
COAL DOMESTIC MARKET VOLUMES PER MINE Million tonnes 20.3 18.4 18.6 17.4 17.2 16.8 1H20 2H20 1H21 2H21 1H22 2H22* Grootegeluk 13.4 13.2 13.1 13.6 13.9 14.2 Matla 3.1 3.1 2.7 3.2 3.1 3.0 Leeuwpan 0.8 0.6 0.4 0.8 0.9 1.8 ECC 0.1 0.2 0.5 0.5 Belfast 0.1 0.1 0.3 0.4 1.1 Mafube Coal 0.3 0.2 Total 17.4 17
Slide 39: Export Volumes per Mine
COAL EXPORT VOLUMES PER MINE Million tonnes 6.3 5.9 4.1 3.5 3.1 2.5 1H20 2H20 1H21 2H21 1H22 2H22* Grootegeluk 1.0 1.0 0.8 0.6 0.7 1.0 Leeuwpan 0.9 1.0 0.7 0.5 0.2 0.4 ECC 1.6 1.8 0.9 0.3 Mafube Coal 0.9 0.9 0.7 0.7 0.7 1.0 Belfast 1.2 1.5 0.9 1.0 0.8 0.7 Other ** 0.3 0.1 0.1 0.4 0.1 Total 5.9 6.3 4
Slide 40: Coal Sensitivities 1H22
COAL SENSITIVITIES 1H22 Measure Sensitivity Impact on NOP* (Rm) Environmental rehabilitation discount rate 1% (254) 225 Royalty cost 1% (217) 217 Export sales volumes 1% (61) 61 Exchange rate 10 cent (61) 61 Domestic sales volumes 1% (57) 57 Export price per tonne US$1 (39) 39 Labour 1% (15) 15 Rail
Slide 41: Group IFRS
FINANCIAL OVERVIEW GROUP IFRS R million 1H21 % change 2H21 % change 1H22 Revenue 15 144 16 17 627 27 22 330 Operating expenses (9 896) (33) (13 198) 1 (13 134) Net operating profit 5 248 (16) 4 429 108 9 196 Net operating profit margin (%) 35 (10) 25 16 41 Post-tax equity-accounted income 6 670 (52)
Slide 42: Non-Core Adjustments
FINANCIAL OVERVIEW NON-CORE ADJUSTMENTS* R million 1H21 2H21 1H22 Coal (10) (978) (78) Impairment of assets at Thabametsi (21) Loss on disposal of subsidiaries (946) Loss on disposal of non-core assets (10) (11) (78) TiO2: Disposal of Tronox investments 2 215 Other 456 (10) Realisation of FCTR** on
Slide 43: Group Core
FINANCIAL OVERVIEW GROUP CORE* R million 1H21 % change 2H21 % change 1H22 Revenue 15 144 16 17 627 27 22 330 Operating expenses (12 101) (5) (12 676) (3) (13 046) Add back: Depreciation 1 288 8 1 389 (5) 1 319 EBITDA 4 331 46 6 340 67 10 603 EBITDA margin (%) 29 7 36 11 47 Post-tax equity-accounted
Slide 44: Core EBITDA vs Cash Generated by Operations
FINANCIAL OVERVIEW CORE EBITDA VS CASH GENERATED BY OPERATIONS R million 1H21 2H21 1H22 Core EBITDA 4 331 6 340 10 603 Adjustments: Expected credit losses adjustment (65) 8 78 Write-off of trade and other receivables and ESD loans 79 13 2 Movement in provisions 194 (178) 45 Foreign currency differen
Slide 45: Group Capital Expenditure
GROUP CAPITAL EXPENDITURE R million 1H21 2H21 1H22 2H22* FY23* FY24* Sustaining 686 949 710 1 091 Average R2.5 billion per Coal 662 902 696 1 091 annum** Energy 1 Ferrous 1 Other 24 45 14 Expansion 488 348 34 362 Coal 488 348 29 362 ~R1.2 billion over two years Energy 5 starting in FY23# Total capit
Slide 46: Capital Funding Structure: Exxaro Excluding Cennergi
CAPITAL FUNDING STRUCTURE EXXARO EXCLUDING CENNERGI R million Facilities available Undrawn/ Undrawn/ Drawn committed unissued Term loan and revolving facility 4 300 3 250 DMTN* programme 643 4 000 Interest bearing borrowings 4 943 Interest capitalised 52 Lease liabilities 434 Capitalised transaction
Slide 47: Capital Funding Structure: Cennergi
CAPITAL FUNDING STRUCTURE CENNERGI R million Facilities available Undrawn/ Drawn committed Project financing 4 637 398 Interest bearing borrowings 4 637 Lease liabilities 55 Maturity profile of debt Total interest-bearing debt 4 692 Repayment period 4 692 Net cash and cash equivalents (145) Less tha
Slide 48: Net Debt 1H22
GROUP RESULTS NET DEBT 1H22 R million 3 718 (9 433) 744 (3 030) 4 102 (1 132) 790 (314) Cennergi 4 482 Cennergi Rest of 1 987 4 547 Exxaro Cennergi (764) Rest of 4 632 Exxaro (5 679) 304 Eyesizwe generated Dividends Dividends 31 Dec Tax Capex cost Other 30 Jun Net fin received 2022 2021 Cash paid 48
Slide 49: Key Indicators
PERFORMANCE KEY INDICATORS Target 1H21 2H21 1H22 Internal key performance indicators EBITDA interest cover* (times) (6 months) >4 28 (571) 380 Net debt/(cash): equity* (%) <40 6 (2) (10) Net debt/(cash): EBITDA* (times) (12 months) <1.5 0.4 (0.1) (0.4) Return on total capital employed (%) (12 months