ANNUAL FINANCIAL RESULTS PRESENTATION for the year ended 31 December 2017
Disclaimer The operational and financial information on which any outlook or forecast statements are based has not been reviewed nor reported on by the external auditors. These forward-looking statements are based on management’s current beliefs and expectations and are subject to uncertainty and changes in circumstances. The forward-looking statements involve risks that may affect the group’s operational and financial information. Exxaro undertakes no obligation to update or reverse any forward-looking statements, whether as a result of new information or future developments. Where relevant, comments exclude transactions which make the results not comparable. These exclusions are the responsibility of the group's board of directors and have been presented to illustrate the impact of these transactions on the core operations’ performance and hence may not fairly present the group’s financial position, changes in equity, results of operations or cash flows. These exclusions have not been reviewed nor reported on by the group’s external auditors. 2
Presentation outline 1 Delivering on our strategy Mxolisi Mgojo, Chief Executive Officer 2 Operational performance Nombasa Tsengwa, Executive Head - Coal Operations 3 Financial results Riaan Koppeschaar, Finance Director 4 Outlook Mxolisi Mgojo, Chief Executive Officer 3
DELIVERING ON OUR STRATEGY Mxolisi Mgojo
Market conditions | FY17 % change in market price • Solid year for commodity markets FY17 vs FY16 2H17 vs 1H17 • Globally, supply-side reforms supported thermal coal price 31 Coal (API4) 13 • World crude steel production growth was 22 Iron ore significant (62% Fe CFR China US$/t) (8) • The titanium dioxide pigment market – TiO2 pigment 26 2 (US$/t CIF US) 12 continued stable, improving and strong market fundamentals Zinc 38 (LME cash US$/t) 15 Average ZAR/US$ • Recovery in world real GDP, however, FY16: 14,68 FY17: 13,30 South Africa lagging 17 1H17: 13,20 2H17: 13,40 16 • Strong and steady business sentiment in developed world, less so in emerging world 15 • Optimism as South Africa’s political 14 sentiment improved towards end of 2017 13 12 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 5
Performance overview | FY17 SAFETY OPERATIONAL CORE FINANCIAL PERFORMANCE PERFORMANCE • 1 fatality at Matla in 1H17 • Coal tonnes produced: 5% • NOP: 18% • LTIFR: 0,12 • Coal tonnes sold: 2% • Equity income: 24% • ZAR export price realised: 25% • HEPS: 38% TRANSFORMATION PORTFOLIO SHAREHOLDER OPTIMISATION RETURN • BEE replacement transaction • Tronox first tranche • 1H17 dividend: 300 cps • Community and employee • NBC sales agreement signed • 2H17 dividend: 400 cps empowerment to be finalised • Special dividend:1 255 cps 6
Technology & Excellence drives performance • Challenge thinking and shift mindsets Digitalisation • Relentless focus on efficiency, & effectiveness and experience Innovation • Aligning operations and functions towards realising our strategy • Bolstered technology foundation • Innovation and Digitalisation programme Business • Programme Office managing and Excellence delivering initiatives utilising an agile methodology 7
Value distribution | FY17 OUR PEOPLE INVESTORS GOVERNMENT COMMUNITY R3 029m R2 214m R854m R51m Investment Salaries & Dividends Direct tax & & wages levies volunteerism R223m R434m Mpower VAT distribution R231m R133m Training & Royalties bursaries 8
OPERATIONAL PERFORMANCE Nombasa Tsengwa
SHEC performance varied Safety and health LTIFR • One fatality in March at Matla +33% 0,19 0,19 • 0,12 LTIFR* is above the target of 0,11 0,17 Target • OHIFR ** of 0,34, 10% above target of 0,31 0,15 Target 0,11 0,12 Integrated environmental management 0,09 • Climate change strategy revision being finalised • Carbon emission intensity 5,9%, lower against target of 5% improvement on 2016 FY13 FY14 FY15 FY16 FY17 • Overall water intensity performance is 35% above SLP spending per region (Rm) the target of 0,2193kl/ton 0,6 2,1 Community Development 14,3 KZN 8,1 • Delivery on SLP # projects 15% behind schedule National • Social spend primarily in Mpumalanga and Gauteng Limpopo Limpopo • ESD ## forum established Mpumalanga 13,8 Fatality * Lost Time Injury Frequency Rate ** Occupational Health Injury Frequency Rate # Social and labour plan 10 ## Enterprise and Supply Development
Coal production and sales volumes improved Tonnage movements (Mt) Total coal production (Mt) Commercial Tied Buy-ins Production Sales FY17 vs FY16 +5% 0,5 1,2 0,6 7,1 7,1 Medupi ramp up 2,8 2,2 7,4 7,9 9,3 40,8 40,9 37,6 34,9 Matla Mine 3 33,7 (0,5) (0,5) (shortwall stopped) FY15 FY16 FY17 FY18* FY19* Leeuwpan (0,4) (0,5) (nearing end of LOM) Total coal sales (Mt) Export Tied Domestic +2% Exports (0,3) 8,0 10,9 7,6 6,2 7,9 7,1 7,1 7,4 9,3 7,9 Other 0,2 (0,3) 33,1 29,4 29,9 28,0 28,0 Total 2,1 0,6 FY15 FY16 FY17 FY18* FY19* 11 * Based on latest internal forecast Additional information on slides 34 to 37
Coal export volumes stable • Exports only 3% lower despite mid year Export product mix (%) congestion at RBCT RB1 RB3 Power station coal • Lower buy-ins and production at Leeuwpan 6 also impacted lower exports 10 13 17 17 19 16 24 • Migration of markets from west to east 33 continues 50 50 94 • Product portfolio is quite diversified 67 63 57 • Discounts on subgrades tend to widen as 33 31 API4 price increases FY13 FY14 FY15 FY16 FY17 FY22* Export sales destinations (%) Average realised prices** Average Average API4 Exxaro average Europe India Other Asia Africa Other R/US$ rate export price $ R/$ 2 8 90 16 9 11 84 80 10 27 24 11 80 80 21 14 14 72 8 67 70 69 64 12 65 33 32 61 65 60 57 61 73 10 50 50 50 35 34 40 8 13 9 FY13 FY14 FY15 FY16 FY17 FY22* FY13 FY14 FY15 FY16 FY17 12 * Based on latest internal forecast ** FY22 prices in FY18 real US$ terms Additional information on slide 38
Operational excellence (OE) delivering value • Focus continues on OE to reduce cost and Coal cash cost (Rm indexed) achieve productivity and efficiency (1,8) improvements across all BU’s 4,3 (1,2) 108,1 1,0 5,8 • Geological challenges experienced at 100,0 Leeuwpan and Mafube due to mining in end of LOM areas • Digitalisation and innovation projects progressing well FY16 Inflation Variable Variable Fixed Arnot/ FY17 volume cost cost Inyanda Labour unit cost (%) Grootegeluk cash cost (R/ton indexed) Labour inflation at 7,11% 6,0 (4,5) (0,6) 3,8 104,7 0,3% ECC 100,0 NBC 2,9% Matla 3,5% GG 2,5% Mafube 50% 21,5% Leeuwpan 22,5% 0% 5% 10% 15% 20% 25% FY16 Inflation Labour Services General FY17 13
Coal projects driving growth Waterberg Mpumalanga GG6 Expansion Belfast • Capex: R4,8bn • Capex: R3,3bn • Product: Minimum 1,7Mtpa of semi-soft • Product: 2,7Mtpa of thermal coal coking coal • In construction • 1 st production: 1H20 • In construction • 1 st production: FY20 Matla Mine 1 Relocation Thabametsi Phase 1 • Capex: R3,2bn • Capex: R1,8bn • Product: 3,9Mtpa of thermal coal • Construction start pending Eskom approval • 1 st production: FY21 Leeuwpan Lifex* Grootegeluk Rapid Load Out Station • Capex: R1,3bn • Capex: R0,6bn • Load capacity: 12Mtpa • Product: 2,7Mtpa of thermal coal • In construction • In construction • 1 st production: 2H18 • Commissioning: 1H19 Grootegeluk Discard Inpit Phase 2 • Capex: R0,6bn • Commissioning 14 Orange text: Changes from August guidance Green text: Current status of the project * Life Expansion Additional information on slide 32
Capex adequately provided R million Expansion capital profile Sustaining capital profile 4 000 4 000 3 000 3 000 2 000 2 000 1 000 1 000 0 0 FY16 FY17 FY18* FY19* FY20* FY21* FY22* FY16 FY17 FY18* FY19* FY20* FY21* FY22* 312 440 2 821 2 108 2 009 851 148 Waterberg 1 940 2 687 2 430 1 783 1 534 1 665 1 113 55 161 1 035 1 495 505 5 Mpumalanga 440 516 1 244 924 860 684 540 37 38 21 21 23 Other 367 601 3 856 3 603 2 514 856 148 Total 2 380 3 203 3 711 2 745 2 415 2 370 1 676 Previous 762 3 592 4 100 2 402 483 3 345 3 202 2 200 2 187 2 136 1 771 guidance** 15 * Based on latest internal forecast ** FY17 based on FD pre-close, other years based on August guidance Additional information on slide 33
FINANCIAL RESULTS Riaan Koppeschaar
Financial overview | core group results 9% 18% 24% 38% 17% Revenue NOP Equity income HEPS EBITDA R million R million R million Cents per share R million FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 2H 12 077 11 135 2 741 2 960 1 559 2 192 1 108 1 150 3 459 3 594 1H 10 736 9 762 3 073 1 981 1 129 (26) 903 307 3 748 2 545 FY 22 813 20 897 5 814 4 941 2 688 2 166 2 011 1 457 7 207 6 139 17
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