EXX EXX EXX - Exxaro Resources Limited - Audited group financial results and unaudited physical information for the year ended 31 December 2011 Exxaro Resources Limited Registration Number: 2000/011076/06 JSE Share code: EXX ISIN: ZAE000084992 ADR code: EXXAY ("Exxaro" or "the company" or "the group") Audited group financial results and unaudited physical information for the year ended 31 December 2011 Highlights Lost time injury frequency rate (LTIFR) down 20% to 0,20 MPower scheme testimony to meaningful employee empowerment, distributing over R1 billion to 9 694 beneficiaries Revenue increased by 24% to R21,3 billion Net operating profit up 53% to R4 billion, excluding the impact of impairment reversals and charges Headline earnings per share up 40% to 2 098 cents per share Final dividend of 500 cents per share; total dividend of 800 cents per share for 2011 Lowlights Regrettably, three fatalities Cessation of zinc production at the Zincor refinery Condensed group income statement (audited) 2011 2010 For the year ended 31 December Rm Rm Revenue 12 471 10 116 Operating expenses (9 663) (7 628) Net operating profit 2 808 2 488 Interest income (note 4) 159 116 Interest expense (note 4) (590) (432) Income from investments 4 2 Share of income from equity-accounted investments 4 668 3 717 Profit before tax (note 2) 7 049 5 891 Income tax expense (note 5) (986) (732) Profit for the year from continuing operations 6 063 5 159 Profit for the year from discontinued operations (note 6) 1 594 76 Profit for the year 7 657 5 235 Profit attributable to: Owners of the parent 7 653 5 208 - continuing operations 6 073 5 167 - discontinued operations 1 580 41 Non-controlling interests 4 27 - continuing operations (10) (8) - discontinued operations 14 35 Profit for the year 7 657 5 235 Condensed group statement of comprehensive income (audited) 2011 2010 For the year ended 31 December Rm Rm Profit for the year 7 657 5 235 Other comprehensive income: Exchange differences on translating foreign operations 800 (44) Cash flow hedges (40) 204 Share of comprehensive income of associates (254) 40 Share of comprehensive income of non-controlling interests 35 (57) Net gain recognised in other comprehensive income 541 143 Total comprehensive income for the year 8 198 5 378 Total comprehensive income attributable to: Owners of the parent 8 159 5 408 - continuing operations 6 641 5 167 - discontinued operations 1 518 241 Non-controlling interests 39 (30) - continuing operations (6) (12) - discontinued operations 45 (18) Total comprehensive income for the year 8 198 5 378 Ordinary shares (million) - in issue 354 358 - weighted average number of shares 348 347 - diluted weighted average number of shares 353 361 Attributable earnings per share continuing operations (cents) - basic 1 745 1 489 - diluted 1 720 1 432 Attributable earnings per share discontinued operations (cents) - basic 454 12 - diluted 448 11 Aggregate attributable earnings per share (cents) - basic 2 199 1 501 - diluted 2 168 1 443 Condensed group statement of cash flows (audited) 2011 2010 For the year ended 31 December Rm Rm Cash flows from operating activities - cash retained from operations 6 503 4 106 - net financing costs (94) (256) - tax paid (502) (430) - dividends paid (2 123) (1 056) Cash flows from investing activities - capital expenditure (4 926) (2 677) - proceeds from disposal of property, plant and equipment 496 60 - investments in intangible assets (119) - dividends from investments and equity-accounted investments 3 525 1 817 - increase in investments (325) (149) - other 37 Net cash inflow 2 472 1 415 Net cash flows from financing activities - shares issued 15 29 - increase in non-controlling interests` loans 11 6 - net borrowings repaid (631) (304) Net increase in cash and cash equivalents 1 867 1 146 Cash and cash equivalents at beginning of year 2 140 1 023 Translation difference on movement in cash and cash equivalents 158 (29) Cash and cash equivalents at end of year 4 165 2 140 Cash and cash equivalents classified as non-current assets held for sale at end of year 3 100 Cash and cash equivalents per Statement of Financial Position 1 065 2 140 Cash and cash equivalents at end of year 4 165 2 140 Condensed group statement of financial position (audited) 2011 2010 At 31 December Rm Rm Assets Non-current assets Property, plant and equipment 10 695 13 305 Biological assets 66 46 Intangible assets 128 75 Investments in unlisted associates (note 8) 4 764 3 880 Deferred tax 228 726 Financial assets 1 538 1 375 17 419 19 407 Current assets Inventories 589 3 120 Trade and other receivables 2 763 3 752 Current tax receivable 105 105 Cash and cash equivalents 1 065 2 140 4 522 9 117 Non-current assets classified as held for sale (note 7) 14 979 85 Total assets 36 920 28 609 Equity and liabilities Capital and reserves Equity attributable to owners of the parent 23 588 17 437 Non-controlling interests 20 (23) Total equity 23 608 17 414 Non-current liabilities Interest-bearing borrowings 2 202 3 644 Non-current provisions 2 166 2 097 Post-retirement employee benefits 133 96 Deferred tax 1 845 1 353 6 346 7 190 Current liabilities Trade and other payables 3 334 3 057 Interest-bearing borrowings 866 716 Current tax payable 50 147 Current provisions 151 33 4 401 3 953 Non-current liabilities classified as held for sale (note 7) 2 565 52 Total equity and liabilities 36 920 28 609 Reconciliation of headline earnings (audited) Gross Tax Net For the year ended 31 December 2011 Rm Rm Rm Profit for the year attributable to owners of the parent 7 653 Adjusted for: - impairment of property, plant and equipment 516 516 - reversal of impairment of property, plant and equipment (869) (869) - gains on disposal of subsidiaries (1) (1) - gains or losses on disposal of property, plant and equipment 3 (2) 1 - share of associates` gains or losses on disposal of 2 2 property, plant and equipment Headline earnings (349) (2) 7 302 Headline earnings from continuing operations (34) 9 6 048 Headline earnings from discontinued operations (315) (11) 1 254 For the year ended 31 December 2010 Profit for the year attributable to owners of the parent 5 208 Adjusted for: - impairment of property, plant and equipment 4 (1) 3 - gains or losses on disposal of property, plant and equipment (26) (26) - share of associates` gains or losses on disposal of property, plant and equipment 1 1 Headline earnings (21) (1) 5 186 Headline earnings from continuing operations (39) 5 128 Headline earnings from discontinued operations 18 (1) 58 For the year ended 31 December 2011 2010 Headline earnings per share aggregate (cents) - basic 2 098 1 495 - diluted 2 069 1 437 Headline earnings per share from continuing operations (cents) - basic 1 738 1 478 - diluted 1 714 1 421 Headline earnings per share from discontinued operations (cents) - basic 360 17 - diluted 355 16 Group statement of changes in equity (audited) Other components of equity Foreign Financial Share currency instruments Equity- capital translation revaluation settled Rm Rm Rm Rm Balance at 1 January 2010 2 141 802 3 1 241 Profit for the year Other comprehensive income (43) 203 Share of associates` comprehensive income (43) 10 Issue of share capital 1 29 Share-based payments movements 148 Non-controlling interests additional contributions Dividends paid 2 Balance at 31 December 2010 2 170 716 216 1 389 Profit for the year Other comprehensive income 800 (40) Share of associates` comprehensive income 72 20 Issue of share capital 1 15 Employee share scheme (MPower) vesting issue of shares 174 Share-based payments movement 23 Non-controlling interests additional contributions Transfer to distributable reserve (3) Dividends paid 2 Balance at 31 December 2011 2 359 1 585 196 1 412 Final dividend paid per share (cents) in respect of the 2010 financial year 300 Dividend paid per share (cents) in respect of the 2011 interim period 300 Final dividend payable per share (cents) in respect of 2011 financial year 500 1 Issued to the Kumba Resources Management Share Trust due to options exercised. 2 The STC on these dividends amounts to Rnil million after taking into account STC credits. Group statement of changes in equity (audited) Attributable Other Retained to owners of reserves income the parent Rm Rm Rm Balance at 1 January 2010 8 721 12 908 Profit for the year 5 208 5 208 Other comprehensive income 160 Share of associates` comprehensive income 73 40 Issue of share capital 1 29 Share-based payments movements 148 Non-controlling interests additional contributions Dividends paid 2 (1 056) (1 056) Balance at 31 December 2010 12 946 17 437 Profit for the year 7 653 7 653 Other comprehensive income 760 Share of associates` comprehensive income 9 (355) (254) Issue of share capital 1 15 Employee share scheme (MPower) vesting issue of shares 174 Share-based payments movement 23 Non-controlling interests additional contributions Transfer to distributable reserve (3) Dividends paid 2 (2 217) (2 217) Balance at 31 December 2011 9 18 027 23 588 Final dividend paid per share (cents) in respect of the 2010 financial year Dividend paid per share (cents) in respect of the 2011 interim period Final dividend payable per share (cents) in respect of 2011 financial year 1 Issued to the Kumba Resources Management Share Trust due to options exercised. 2 The STC on these dividends amounts to Rnil million after taking into account STC credits. Group statement of changes in equity (audited) Non- controlling Total interests equity Rm Rm Balance at 1 January 2010 1 12 909 Profit for the year 27 5 235 Other comprehensive income (57) 103 Share of associates` comprehensive income 40 Issue of share capital 1 29 Share-based payments movements 148 Non-controlling interests additional contributions 6 6 Dividends paid 2 (1 056) Balance at 31 December 2010 (23) 17 414 Profit for the year 4 7 657 Other comprehensive income 35 795 Share of associates` comprehensive income (254) Issue of share capital 1 15 Employee share scheme (MPower) vesting issue of shares 174 Share-based payments movement 2 25 Non-controlling interests additional contributions 8 8 Transfer to distributable reserve (3) Dividends paid 2 (6) (2 223) Balance at 31 December 2011 20 23 608 Final dividend paid per share (cents) in respect of the 2010 financial year Dividend paid per share (cents)in respect of the 2011 interim period Final dividend payable per share (cents)in respect of 2011 financial year 1 Issued to the Kumba Resources Management Share Trust due to options exercised. 2 The STC on these dividends amounts to Rnil million after taking into account STC credits. Salient features 2011 2010 Rm Rm Net asset value per share (Rand) 67 49 Capital expenditure - incurred 4 926 2 677 - contracted 8 029 6 475 - authorised but not contracted 2 738 2 490 Capital expenditure contracted relating to captive mines, Tshikondeni, Arnot and Matla, which will be financed by ArcelorMittal South AfricaLimited (AMSA Limited) and Eskom 90 1 respectively Contingent liabilities (note 10) 1 198 1 007 Contingent assets (note 11) 82 63 Operating lease commitments 60 132 Operating sublease rentals receivable 4 6 Calculation of movement in net debt 2011 2010 Rm Rm Net cash inflow 2 472 1 415 - shares issued 15 29 - loans from non-controlling interests 11 6 - share-based payments (2) - investmentcapitalised to joint venture loan 21 - finance lease 125 - non-cash flow movements in net debt applicable to currency translation differences of transactions denominated in foreign currency (8) 187 - non-cash flow movements in net debt applicable to currency translation differences of net debt items of foreign entities (151) (126) Decrease in net debt 2 483 1 511 Notes to the group financial results (audited) 1. Basis of preparation This condensed report for the year ended 31 December 2011 has been prepared under the supervision of WA de Klerk (CA)SA, South African Institute of Chartered Accountants (SAICA) Registration number: 00133273, in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting, the requirements of the South African Companies Act, No 71 of 2008, as amended, the AC 500 standards issued by the Accounting Practices Board or its successor and in compliance with the Listings Requirements of the JSE Limited. The group financial statements have been prepared on the historical cost basis excluding financial instruments and biological assets, which are fairly valued, and conform to International Financial Reporting Standards (IFRS). The accounting policies adopted are in terms of IFRS and are consistent with those applied in the annual financial statements for the year ended 31 December 2010. During 2011 the following accounting pronouncements became effective: Amended IFRS 1 First-time Adoption of International Financial Reporting, Amended IFRS 7 Financial Instruments: Disclosures, Amended IAS 1 Presentation of Financial Statements, Amended IAS 24 Related Party Disclosures and Amended IAS 34 Interim Financial Reporting. These pronouncements had no material impact on the accounting of transactions or the disclosure thereof. The accounting standards, amendments to issued accounting standards and interpretations, which are relevant to the group, but not yet effective at 31 December 2011, have not been adopted. It is expected that, where applicable, these standards and amendments will be adopted on each respective effective date, except where specifically identified. The group continuously evaluates the impact of these pronouncements. 2. Profit before tax 2011 2010 For the year ended 31 December Rm Rm Profit before tax is arrived at after: Continuing operations Depreciation, and amortisation of intangible assets (735) (663) Net realised foreign currency exchange gains/(losses) 177 (30) Net unrealised foreign exchange (losses)/gains (20) 6 (Losses)/gains on derivative instruments held for trading (154) 152 Fair value gains adjustment on financial instruments 11 10 Impairment reversals/(charges) and write-offs of trade and other receivables 228 (44) Royalties (41) (50) Surplus on disposal of property, plant and equipment 38 48 Discontinued operations Depreciation, and amortisation of intangible assets (468) (717) Net realised foreign currency exchange gains/(losses) 361 (95) Net unrealised foreign exchange gains/(losses) 35 (36) Gains/(losses) on derivative instruments held for trading 196 300 Fair value gains adjustment on financial instruments 3 3 Impairment reversals/(charges) of property, plant and equipment(note 3) 353 (4) Impairment charges and write-offs of trade and other receivables (2) (1) Write-down to net realisable value of inventories (1) (50) Royalties (100) (64) Deficit on disposal of property, plant and equipment (37) (16) 3. Impairment reversals/(charges) Impairment of property, plant and equipment (516) Impairment of property, pl