Further to the trading statement published on SENS on 11 November 2015, the earnings range for the group attributable and headline earnings are now reasonably confirmed. As such, and in compliance with the Listings Requirements of the JSE Limited (“Listings Requirements”), Exxaro is required to issue a further trading statement informing shareholders of these ranges.
Shareholders are advised that Exxaro has completed the purchase price allocation accounting relating to the acquisition of Total Coal South Africa Proprietary Limited (“TCSA”) as required by the International Financial Reporting Standards. Exxaro acquired TCSA on 20 August 2015, where after TCSA was renamed Exxaro Coal Central Proprietary Limited (“ECC”). ECC is included in the coal commercial operations’ results with effect from 1 September 2015.
On finalisation of the purchase price allocation accounting, goodwill relating to the transaction amounting to R1 524 million was recognised.
The carrying value of the ECC operations was assessed to be sensitive to the coal index price and R/US$ exchange rate. At 31 December 2015, these operations were assessed against these indicators for impairment. The 12% decrease in the export coal prices from transaction signature date to the reporting date, partially offset by the weakening of the R/US$ exchange rate in the same period, and further assessment considerations, resulted in an impairment of R1 524 million goodwill at 31 December 2015.
The current weakness in the ferrochrome industry and the lack of demand for the semi-coke product has resulted in the group placing the Reductants business’s four retorts on care and maintenance for an indefinite period. This resulted in an impairment of the carrying value of Reductants property, plant and equipment of R225 million at 31 December 2015.
Table1: Expected earnings ranges
|Net operating profit/(loss) range||Attributable earnings/(loss) range||Headline earnings range||Weighted average number of shares||Attributable earnings/(losses) per share||Headline Earnings Per Share|
|2015 – expected||2 855||3 267||243||312||1 337||1 718||355||68||88||377||484|
|2014 – actual||(3 292)||(883)||4 869||355||(249)||1 372|
The group’s net operating loss reported for the year ended 31 December 2014 is expected to improve by between R6 147 million and R6 559 million (187% – 199%) for the year ended 31 December 2015, primarily due to the non-recurring pre-tax impairment loss recorded in 2014 for the Mayoko iron ore project of R5 760 million.
The coal business is expected to report a decrease in net operating profit for the year ended 31 December 2015 compared to 2014, mainly due to the:
- Impairment of the carrying value of ECC goodwill of R1 524 million, and the carrying value of property, plant and equipment of the reductants operation of R225 million
- Non-recurring Grootegeluk Medupi Expansion Project shortfall income of R1 466 million recorded in 2014 partly offset by higher
- Revenue as a result of higher Eskom sales due to the Medupi power station ramp-up in 2015
- Export volumes mainly due to the inclusion of ECC since September 2015, albeit at lower average rand selling prices.
Group headline earnings for the year ended 31 December 2015 are expected to be between R3 151 million and R3 532 million (65% – 73%) lower than the comparative year ended 31 December 2014, primarily due to the expected decrease in equity-accounted income from investments as a result of lower commodity prices (iron ore, mineral sands and pigment) as well as non-recurring items recorded by these investments in 2015. As such, headline earnings per share (“HEPS”) are also likely to be between 888 and 995 cents (65% – 73%) lower than the comparative year.
Group attributable losses for the year ended 31 December 2014 are likely to improve by between R1 126 million and R1 195 million (128% – 135%) for the year ended 31 December 2015, due to the reasons listed above. As such the attributable losses per share (“ALPS”) recorded in 2014 are also likely to improve by between 317 and 337 cents for the year ended 31 December 2015.
Shareholders are advised that Exxaro will release its reviewed annual financial results for the year ended 31 December 2015 on 3 March 2016.
The forecast financial information on which this trading statement is based has not been reviewed, audited nor reported on by Exxaro’s external auditors.
This statement is issued in compliance with the Listings Requirements.
Exxaro is one of the largest South African based diversified resources companies, with interests in the coal, titanium dioxide, ferrous and renewable energy commodities. www.exxaro.com
Wim de Klerk
Tel: + 27 12 307 4848
Mobile: +27 82 652 5145
25 February 2016
Absa Bank Limited (acting through its Corporate and Investment Banking Division)