HIGHLIGHTS

  • Historic empowerment transaction successfully concluded
  • Earnings not comparable
  • Good operating results
  • Coal production reaches
    24 million tonnes
  • Strong project pipeline for transformed group
  • Options to acquire Namakwa Sands and a 26% interest in Black Mountain/Gamsberg exercised post December 2006

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NOTES TO THE GROUP FINANCIAL RESULTS

1. Basis of preparation
This condensed report complies with International Accounting Standard 34, Interim Financial Reporting, and schedule 4 of the South African Companies Act.
The financial statements from which these group financial results have been derived are prepared on the historical basis excluding financial instruments and biological assets, which are fair valued, and conform to International Financial Reporting Standards. The accounting policies adopted are consistent with those applied in the annual financial statements for the year ended 31 December 2005 except for the change noted in note 4. Where applicable the prior year’s figures have been adjusted.
     
   
                   Year ended 31 December
   
2006  
2005  
   
Audited  
Restated  
   
Rm  
Rm  
2. Profit before taxation from continuing and discontinued
  operations is arrived at after
  Depreciation and amortisation of intangible assets
(813) 
(826) 
  Financing costs
(451) 
(432) 
  Interest received
115  
150  
  Net realised foreign exchange gains/(losses) on:
  – currency exchange differences
199  
225  
  – revaluation of derivative instruments
(278) 
(64) 
  Net unrealised foreign exchange gains/(losses) on:
  – currency exchange differences
(97) 
(76) 
  – revaluation of derivative instruments
51  
83  
  Fair value adjustment on financial assets
84  
43  
  Fair value adjustment on financial liabilities
5  
  Impairment charges (note 3)
(784) 
(28) 
  Excess of minority interest over cost of acquisition
36  
95  
  Net profit on disposal of investments
39  
1,179  
  Fair value adjustment on unbundling of subsidiary
17,963  
  Net deficit on disposal of property, plant and equipment
(3) 
(2) 
  Share based payment: BEE credential expense
(580) 
  Cost of empowerment transaction, unbundling, integration
  and branding
(241) 
3. Impairment charges and reversals
  Impairment of property, plant and equipment1
(784) 
(3) 
  Reversal of impairment of other fixed assets
2  
  Impairment of intangible assets
(20) 
  Impairment of investments
 
(7) 
   
(784) 
(28) 
  Taxation effect
227  
–  
   
(557) 
(28) 
  1 Impaired to value in use based on a 8,53% discount rate.
   
4. Accounting for arrangements that contain a lease
  In terms of IFRIC 4 (Determining whether an arrangement
  contains a lease) and IAS 17 (Leases), arrangements that convey
  the right to use an asset, are evaluated for recognition,
  classification as a finance or operating lease, and measured,
  and accounted for accordingly. The result is the recognition
  of a number of finance leases where Exxaro is either the
  lessee or the lessor.
   
  Income statement impact
  (Decrease) in revenue
(89) 
(81) 
  Decrease in depreciation
79  
72  
  Decrease in operating expenses
47  
42  
  (Increase) in financing cost
(38) 
(51) 
  Decrease in taxation
5  
  (Decrease) in profit for the period
(1) 
(13) 
  Impact on attributable earnings per share (cents)
(0) 
(4) 
  Impact on diluted attributable earnings per share (cents)
(0) 
(4) 
   
  Balance sheet impact
  (Decrease) in property, plant and equipment
(363) 
(357) 
  Increase in deferred tax asset
23  
  (Decrease) in retained earnings
(57) 
(58) 
  Increase in non-current interest bearing borrowings –
  Finance lease liability
246  
247  
  (Decrease) in other long-term payables:
  – Mittal Steel (South Africa) captive mines
(520) 
(604) 
  (Decrease) in deferred tax liabilities
(22) 
  (Decrease) in current interest-bearing borrowings
(9) 
  Increase in trade and other payables
 
80  
  The impact of the change on the 31 December 2004
  financial statements is a decrease in property, plant and
  equipment of R349 million, an increase in deferred tax assets
  of R18 million, a decrease in retained earnings of R45 million,
  an increase in finance lease liabilities of R212 million, a decrease
  in other long-term payables of R607 million and an increase
  in trade and other payables of R109 million.
   
5. Discontinued operations
  Exxaro unbundled its iron ore business effective 1 November
  2006 as part of an empowerment transaction and now holds
  only a 20.62% interest in Sishen Iron Ore Company (Pty) Limited
  which is equity accounted.
  Revenue
6,483  
6,573  
  Operating expenses(1)
(3,385) 
(2,642) 
  Net operating profit
3,098  
3,931  
  Net financing costs
(29) 
(120) 
  Profit before taxation
3,069  
3,811  
  Taxation
(746) 
(1,084) 
  Profit for the period from discontinued operations
2,323  
2,727  
  Cash flow attributable to operating activities
982  
1,205  
  Cash flow attributable to investing activities
(7,025) 
807  
  Cash flow attributable to financing activities
5,853  
(2,206) 
  Cash flow attributable to discontinued operations
(190) 
(194) 
  (1) 2005 includes pre-tax settlement proceeds of R1 163 million
  from the disposal of the interest in the Hope Downs project.
   
6. Investments
  Unlisted investments in associates – directors’ valuation
4,812  
130  
  Listed investments included in other financial assets –
  market value
92  
60  
  Unlisted investments included in other financial assets –
  directors’ valuation
93  
35  
7. Dividends paid:
  – Cash dividends
1,628  
1,430  
  – Share repurchase
1,763  
  – Paid to minorities
5  
17  
   
3,396  
1,447  
   
8. Business combination
  On 1 November 2006, the group acquired 100% of the issued
  share capital of Eyesizwe Coal (Pty) Limited, which is included in
  the coal business segment results. The acquired business
  contributed revenues of R329 million and operating profits of
  R7 million to the group for the period from 1 November 2006
  to 31 December 2006. Details of assets acquired are as follows:
  Cash paid on acquisition
1,607  
  Fair value of assets acquired
(1,607) 
  The assets and liabilities arising from the acquisition are as follows:
  – cash and cash equivalents
62  
  – property, plant and equipment
2,026  
  – financial assets
34  
  – investments
42  
  – inventories
53  
  – trade and other receivables
243  
  – trade and other payables
(222) 
  – interest-bearing borrowings
(120) 
  – non-current provisions
(68) 
  – Receiver of revenue
(13) 
  – deferred taxation
(430) 
  Fair value of net assets
1,607  
 
  Total purchase consideration
(1,607) 
 
  – Less: cash and cash equivalents acquired
62  
 
  Cash outflow on acquisition of subsidiary
(1,545) 
 
       
9. Net debt
  Net debt is calculated as being interest-bearing borrowings less cash and cash equivalents.
10. Related party transactions
  During the period the company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase transactions with associates and joint ventures. These transactions were subject to terms that are no less favourable than those arranged with third parties.
11. JSE Limited requirements
  The announcement has been prepared in accordance with the listings requirements of JSE Limited.
12. Corporate Governance
  The Group complies in all material respects with the Code of Corporate Practice and Conduct published in the King II Report on Corporate Governance.
13.
 Audit opinion
  The auditors, Deloitte & Touche, have issued their opinion on the group’s financial statements for the year ended 31 December 2006. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit opinion. A copy of their audit report is available for inspection at the company’s registered office. These summarised financial statements have been derived from the group financial statements and are consistent in all material respects, with the group annual financial statements.

 

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