Exxaro report selector 2019

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Exxaro Resources Limited
Group and company annual financial statements for the year ended 31 December 2019

Currently viewing: CHAPTER 16 / 16.3 Financial instruments

16.3 Financial instruments

16.3.1 CARRYING AMOUNTS AND FAIR VALUE AMOUNTS OF FINANCIAL INSTRUMENTS

The tables below set out the group and company’s classification of each category of financial assets and financial liabilities.

  Group  
At 31 December 2019 Financial
assets at
FVOCI
Rm
Financial
assets at
FVPL
Rm
Financial
assets at
amortised
cost
Rm
Financial
liabilities
at FVPL
Rm
Financial
liabilities at
amortised
cost
Rm
    Total
carrying
amount
Rm
 
Financial assets                  
Non-current                  
Financial assets, consisting of:                  
– Equity: unlisted – Chifeng 235             235  
– Debt: unlisted – environmental rehabilitation funds   2 039           2 039  
– ESD loans     124         124  
– Other financial assets at amortised cost     276         276  
Total non-current financial 235 2 039 400         2 674  
Current                  
Financial assets, consisting of:                  
– Loans to associates and joint ventures     133         133  
– ESD loans     82         82  
– Other financial assets at amortised cost     57         57  
Trade and other receivables, consisting of:                  
– Trade receivables     2 928         2 928  
– Other receivables     313         313  
Cash and cash equivalents     2 695         2 695  
Total current financial assets     6 208         6 208  
Total financial assets 235 2 039 6 608         8 882  
Financial liabilities                  
Non-current                  
Interest-bearing borrowings         6 991     6 991  
Other payables         121     121  
Total non-current financial liabilities         7 112     7 112  
Current                  
Interest-bearing borrowings         50     50  
Trade and other payables         2 603     2 603  
Financial liabilities, consisting of:                  
– Contingent consideration       191       191  
– Deferred consideration payable         307     307  
Overdraft         976     976  
Total current financial liabilities       191 3 936     4 127  
Total financial liabilities       191 11 048     11 239  

 

  Group  
At 31 December 2018 Financial
assets at
FVOCI
Rm
Financial
assets at
FVPL
Rm
Financial
assets at
amortised
cost
Rm
Financial
liabilities at
FVPL
Rm
Financial
liabilities at
amortised
cost
Rm
  Total
carrying
amount
Rm
 
Financial assets                
Non-current
Financial assets, consisting of:
– Equity: unlisted – Chifeng 185 185  
– Debt: unlisted – environmental rehabilitation funds 1 432         1 432  
– Loans to associates and joint ventures 250 250  
– ESD loans 80 80  
– Other financial assets at amortised cost     687       687  
Total non-current financial assets 185 1 432 1 017       2 634  
Current                
Financial assets, consisting of:
– Loans to associates and joint ventures 9 9  
– ESD loans 45 45  
– Other financial assets at amortised cost 80 80  
Trade and other receivables, consisting of:
– Trade receivables 2 971 2 971  
– Other receivables 169 169  
Cash and cash equivalents     2 080       2 080  
Total current financial assets     5 354       5 354  
Total financial assets 185 1 432 6 371       7 988  
Financial liabilities                
Non-current
Interest-bearing borrowings 3 843   3 843  
Other payables 152   152  
Financial liabilities, consisting of:
– Contingent consideration 488 488  
– Deferred consideration payable         225   225  
Total non-current financial liabilities       488 4 220   4 708  
Current                
Interest-bearing borrowings 571   571  
Trade and other payables 2 960   2 960  
Financial liabilities, consisting of:
– Derivative financial liabilities 1 1  
– Contingent consideration 361 361  
– Deferred consideration payable 395   395  
Overdraft         1 531   1 531  
Total current financial liabilities       362 5 457   5 819  
Total financial liabilities       850 9 677   10 527  

 

  Company
At 31 December 2019 Financial
assets at
FVOCI
Rm
Financial
sassets at
amortised
cost
Rm
Financial
liabilities
at FVPL
Rm
Financial
liabilities at
amortised
cost
Rm
    Total
carrying
amount
Rm
Financial assets Non-current              
Financial assets, consisting of:              
– Debt: unlisted – environmental rehabilitation funds 29           29
– ESD loans   124         124
– Interest-bearing loans to subsidiaries   7 000         7 000
Total non-current financial assets 29 7 124         7 153
Current              
Financial assets, consisting of:              
– ESD loans   82         82
– Interest-bearing loans to subsidiaries   60         60
– Non-interest-bearing loans to subsidiaries   359         359
– Treasury facilities with subsidiaries at amortised cost   4 038         4 038
Trade and other receivables, consisting of:              
– Other receivables   15         15
– Indebtedness by subsidiaries   615         615
Cash and cash equivalents   1 649         1 649
Total current financial assets   6 818         6 818
Total financial assets 29 13 942         13 971
Financial liabilities              
Non-current              
Interest-bearing borrowings       6 991     6 991
Total non-current financial liabilities       6 991     6 991
Current              
Interest-bearing borrowings       50     50
Trade and other payables       177     177
Financial liabilities, consisting of:              
– Contingent consideration     191        
– Deferred consideration payable       307     307
– Non-interest-bearing loans from subsidiary       8 452     8 452
– Treasury facilities with subsidiaries at amortised cost       5 448     5 448
Overdraft       976     976
Total current financial liabilities     191 15 410     15 601
Total financial liabilities     191 22 401     22 592

 

  Company  
At 31 December 2018 Financial
assets at
FVOCI
Rm
Financial
assets at
amortised
cost
Rm
Financial
liabilities
at FVPL
Rm
Financial
liabilities at
amortised
cost
Rm
  Total
carrying
amount
Rm
 
Financial assets              
Non-current
Financial assets, consisting of:
– Debt: unlisted – environmental rehabilitation funds 26 26  
– ESD loans 80 80  
– Interest-bearing loans to subsidiaries   3 500       3 500  
Total non-current financial assets 26 3 580       3 606  
Current              
Financial assets, consisting of:
– ESD loans 45 45  
– Interest-bearing loans to subsidiaries 586 586  
– Non-interest-bearing loans to subsidiaries 341 341  
– Treasury facilities with subsidiaries at amortised cost 1 611 1 611  
Trade and other receivables, consisting of:
– Other receivables 19 19  
– Indebtedness by subsidiaries 194 194  
Cash and cash equivalents   676       676  
Total current financial assets   3 472       3 472  
Non-current assets held-for-sale   408       408  
Total financial assets 26 7 460       7 486  
Financial liabilities              
Non-current              
Interest-bearing borrowings 3 233   3 233  
Non-current other payables
Financial liabilities, consisting of:
– Contingent consideration 488 488  
– Put option 584 584  
– Deferred consideration payable       225   225  
Total non-current financial liabilities     1 072 3 458   4 530  
Current              
Interest-bearing borrowings 572   572  
Trade and other payables 176   176  
Financial liabilities, consisting of:
– Contingent consideration 361 361  
– Deferred consideration payable 395   395  
– Non-interest-bearing loans from subsidiary 8 197   8 197  
– Treasury facilities with subsidiaries at amortised cost 1 886   1 886  
Overdraft       1 046   1 046  
Total current financial liabilities     361 12 272   12 633  
Total financial liabilities     1 433 15 730   17 163  

Due to the short-term nature of the current financial assets and current financial liabilities, the carrying amount is assumed to be the same as the fair value.

The carrying amounts of non-current financial instruments measured at amortised cost approximate fair value due to the nature and terms of these instruments.

16.3.2 FAIR VALUES

16.3.2.1 Fair value hierarchy

Financial assets and financial liabilities at fair value have been categorised in the following hierarchy structure, based on the input used in the valuation technique:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets that the group can access at the measurement date.

Level 2 – Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable.

Level 3 – Inputs that are not based on observable market data (unobservable inputs).

  Group
2019 Fair value 
Rm 
Level 2
Rm
Level 3 
Rm 
Financial assets at FVOCI 235    235 
Equity: unlisted – Chifeng 235    235 
Financial assets at FVPL 2 039  2 039  
Debt: unlisted – environmental rehabilitation funds 2 039  2 039  
Financial liabilities at FVPL (191)   (191)
Current contingent consideration (191)   (191)
Net financial assets held at fair value 2 083  2 039 44 

 

Reconciliation of Level 3 hierarchy Contingent 
consideration 
Rm 
Chifeng
Rm
Total 
Rm 
Opening balance (849) 185 (664)
Movement during the year      
Gains recognised in profit or loss 296    296 
Gains recognised in OCI (pre-tax effect)1   50 50 
Settlements 344    344 
Exchange gains recognised in profit or loss 18    18 
Closing balance (191) 235 44 

1 Tax on Chifeng amounts to nil.

  Group
2018 Fair value 
Rm 
Level 2  
Rm 
Level 3 
Rm 
Financial assets at FVOCI 185    185 
Equity: unlisted – Chifeng 185    185 
Financial assets at FVPL 1 432  1 432   
Debt: unlisted – environmental rehabilitation funds 1 432  1 432   
Financial liabilities at FVPL (849)   (849)
Non-current contingent consideration (488)   (488)
Current contingent consideration (361)   (361)
 Derivative financial liabilities (1) (1)
Net financial assets held at fair value 767  1 431  (664)

 

Reconciliation of Level 3 hierarchy Contingent 
consideration 
Rm 
Chifeng
Rm
Total 
Rm 
Opening balance (723) 152 (571)
Movement during the year      
Gains recognised in profit or loss (357)   (357)
Gains recognised in OCI (pre-tax effect)1   33 33 
Settlements 299    299 
Exchange gains recognised in profit or loss (68)   (68)
Closing balance (849) 185 (664)

1 Tax on Chifeng amounts to R12 million.

  Company
2019 Fair value 
Rm 
Level 2
Rm
Level 3
Rm
Financial assets at FVPL 29  29 185
Debt: unlisted – environmental rehabilitation funds 29  29 185
Financial liabilities at FVPL (191)   191
Current contingent consideration (191)   191
Net financial (liabilities)/assets held at fair value (162) 29 191

 

Reconciliation of Level 3 hierarchy Put option 
Rm 
Contingent 
consideration 
Rm 
Total 
Rm 
Opening balance (584) (849) (1 433)
Movement during the year      
Gains recognised in profit or loss 12  296  308 
Option lapsed1/settlements 572  344  916 
Exchange gains recognised in profit or loss   18  18 
Closing balance   (191) (191)
1 Tax on Chifeng amounts to R12 million.
  Company
2018 Fair value 
Rm 
Level 2
Rm
Level 3 
Rm 
Financial assets at FVPL 26  26  
Debt: unlisted – environmental rehabilitation funds 26  26  
Financial liabilities at FVPL (1 433)   (1 433)
Non-current contingent consideration (488)   (488)
Current contingent consideration (361)   (361)
Put option (584)   (584)
Net financial (liabilities)/assets held at fair value (1 407) 26 (1 433)

 

Reconciliation of Level 3 hierarchy Put option 
Rm 
Contingent 
consideration 
Rm 
Total 
Rm 
Opening balance (2 377) (723) (3 100)
Movement during the year      
Losses recognised in profit or loss (1) (357) (357)
Option lapsed/settlements 1 794  299  2 093 
Exchange gains recognised in profit or loss   (68) (68)
Closing balance (584) (849) (1 433)

16.3.2.2 Transfers

The group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the transfer has occurred. There were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 of the fair value hierarchy during the periods ended 31 December 2019 and 31 December 2018.

16.3.2.3 Valuation process applied

The fair value computations of the investments are performed by the group’s corporate finance department, reporting to the finance director, on a six-monthly basis. The valuation reports are discussed with the chief operating decision maker and the audit committee in accordance with the group’s reporting governance.

16.3.2.4 Current derivative financial instruments

Level 2 fair values for simple over-the-counter derivative financial instruments are based on market quotes. These quotes are assessed for reasonableness by discounting estimated future cash flows using the market rate for similar instruments at measurement date.

16.3.2.5 Environmental rehabilitation funds

Level 2 fair values for debt instruments held in the environmental rehabilitation funds are based on quotes provided by the financial institutions at which the funds are invested at measurement date. These financial institutions invest in instruments which are listed.

16.3.2.6 Valuation techniques used in the determination of fair values within Level 3 of the hierarchy, as well as significant inputs used in the valuation models

Contingent consideration

The potential undiscounted amount of the remaining future payments that the group could be required to make under the ECC acquisition is between nil and US$35 million. The amount of future payments is dependent on the API4 coal price.

During 2019, there was a decrease of US$20.4 million (R296 million) (2018: an increase of US$25.4 million (R357 million)) recognised in profit or loss for the contingent consideration arrangement.

  API4 coal price range
(US$/tonne)
    Future
payment
 
Reference year Minimum Maximum     US$ million  
2015 60 80     10  
2016 60 80     25  
2017 60 80     25  
2018 60 80     25  
2019 60 90     35  

The amount to be paid in each of the five years is determined as follows:

An additional payment to Total S.A. amounting to R344 million was required for the 2018 reference year, R299 million was required for the 2017 reference year and R74 million was required for the 2016 reference year as the API4 price was within the agreed range. No additional payment to Total S.A. was required for the 2015 reference year as the API4 price was below the range.

The contingent consideration is classified within Level 3 of the fair value hierarchy as there is no quoted market price or observable price available for this financial instrument. This financial instrument is valued as the present value of the estimated future cash flows, using a DCF model.

The significant observable and unobservable inputs used in the fair value measurement of this financial instrument are rand/US$ exchange rate, API4 export price and the discount rate.

16.3.3 RISK MANAGEMENT

16.3.3.1 Financial risk management

The group’s corporate treasury function provides financial risk management services to the business, coordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the group through internal risk reports which analyse exposure by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and price risk), credit risk and liquidity risk.

The group’s objectives, policies and processes for measuring and managing these risks are detailed below.

The group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of derivative financial instruments is governed by the group’s policies approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis and the results are reported to the audit committee.

The group does not enter into nor trade in financial instruments, including derivative financial instruments, for speculative purposes. The group enters into financial instruments to manage and reduce the possible adverse impact on earnings and cash flows of changes in interest rates, foreign currency exchange rates and commodity prices.

Capital management

In managing its capital, the group focuses on a sound net debt position, return on shareholders’ equity (or return on capital employed) and the level of dividends to shareholders. The group’s policy is to cover its annual net funding requirements through long-term loan facilities with maturities spread over time. Neither the company nor any of its subsidiaries are subject to externally imposed capital requirements.

16.3.3.2 Market risk management

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices, will affect the group’s income or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The group’s activities expose it primarily to the financial risks of changes in the environmental rehabilitation funds quoted prices (see 16.3.3.2.1 below), foreign currency exchange rates (see 16.3.3.2.2 below) and interest rates (see 16.3.3.2.3 following). The group enters into a variety of derivative financial instruments (which close out at year end) to manage its exposure to foreign currency risks and interest rate risks, including:

16.3.3.2.1 Price risk management

The group’s exposure to equity price risk arises from investments held by the group and classified either as at FVOCI or at FVPL. Currently, the group’s exposure to equity price risk is not considered to be significant as Chifeng is seen as a non-core investment.

The group’s exposure to price risk in relation to quoted prices of the environmental rehabilitation funds is not considered a significant risk as the funds are invested with reputable financial institutions in accordance with a strict mandate to ensure capital preservation and growth. The funds are held for strategic purposes rather than trading purposes.

16.3.3.2.2 Foreign currency risk management

The group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.

The currency in which transactions are entered into is mainly denominated in US dollar, euro and Australian dollar.

Exchange rate exposures are managed within approved policy parameters utilising FECs, currency options and currency swap agreements.

The group maintains a fully covered exchange rate position in respect of foreign balances (if any) and imported capital equipment resulting in these exposures being fully converted to rand. Trade-related import exposures are managed through the use of economic hedges arising from export revenue as well as through FECs. Trade-related export exposures are hedged using FECs and options with specific focus on short-term receivables.

Uncovered foreign debtors at 31 December 2019 amount to nil (2018: US$0.29), whereas uncovered cash and cash equivalents amount to US$89.81 million (2018: US$37.29 million).

All capital imports were fully hedged. Monetary items have been translated at the closing rate at the last day of the reporting period US$1:R14.13 (2018: US$1:R14.43).

The FECs which are used to hedge foreign currency exposure mostly have a maturity of less than one year from the reporting date. When necessary, FECs are rolled over at maturity.

The following significant exchange rates applied during the year:

  2019     2018  
  Average
spot rate
Average
achieved
rate
Closing
spot rate
    Average
spot rate
Average
achieved
rate
Closing
spot rate
 
US$ 14.44 14.73 14.13     13.24 12.93 14.43  
16.16   15.83     15.60   16.50  
AU$ 10.05   9.90     9.88   10.19  

16.3.3.2.3 Interest rate risk management

The group is exposed to interest rate risk as it borrows and deposits funds at floating interest rates on the money market and extended bank borrowings.

The financial institutions chosen are subject to compliance with the relevant regulatory bodies. The interest-bearing borrowings were entered into at floating interest rates in anticipation of a decrease in the interest rate cycle.

The interest rate repricing profile for interest-bearing borrowings is summarised below:

  1 to 6 months
Rm
Total
borrowings
Rm
 
At 31 December 2019      
Non-current interest-bearing borrowings 6 991 6 991  
Current interest-bearing borrowings 50 50  
  7 041 7 041  
Total borrowings (%) 100 100  
At 31 December 2018      
Non-current interest-bearing borrowings 3 843 3 843  
Current interest-bearing borrowings 571 571  
  4 414 4 414  
Total borrowings (%) 100 100  

Interest rate sensitivity

The following table reflects the potential impact on earnings, given an increase in interest rates of 50 basis points:

  Loss  
  2019 
Rm 
  2018 
Rm 
 
Increase of 50 basis points in interest rate (35)   (37)  

A decrease in interest rates of 50 basis points would have an equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant.

16.3.3.3 Liquidity risk management

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

The ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the group’s short, medium and long-term funding and liquidity management requirements.

The group manages liquidity risk by monitoring forecast cash flows in compliance with loan covenants and ensuring that adequate unutilised borrowing facilities are maintained.

Borrowing capacity is determined by the directors, from time to time.

  Group  
  2019 
Rm 
  2018 
Rm 
 
Amount approved1 43 470    52 308   
Total borrowings (7 041)   (4 414)  
Unutilised borrowing capacity 36 429    47 894   

1 Decrease mainly relates to the increase in NCI.

The group’s capital base, the borrowing powers of the company and group were set at 125% of shareholders’ funds attributable to owners of the parent for both the 2019 and 2018 financial years.

Standard payment terms for the majority of trade payables is the end of the month following the month in which the goods are received or services are rendered.

A number of trade payables do, however, have shorter contracted payment periods.

To avoid incurring interest on late payments, financial risk management policies and procedures are entrenched to ensure the timeous matching of orders placed with goods received notes or services acceptances and invoices.

16.3.3.3.1 Maturity profile of financial instruments

The following tables detail the contractual maturities of financial assets and financial liabilities:

   Group   
         Maturity   
2019  Carrying 
amount 
Rm
 
Contractual 
cash flows 
Rm
 
0 to 12 
months 
Rm
 
1 to 2 years 
Rm
 
2 to 5 years 
Rm
 
 
Financial assets                  
Loans to associates and joint ventures  133  133  133         
ESD loans  206  206  82  65  59   
Other financial assets at amortised cost  333  383  60  78  245   
Trade and other receivables  3 241  3 241  3 241         
Cash and cash equivalents  2 695  2 695  2 695         
Total financial assets  6 608  6 658  6 211  143  304   
Percentage profile (%)    100  93   
Financial liabilities                  
Interest-bearing borrowings  (7 041) (8 288) (716) (3 170) (4 402)  
Non-current other payables  (121) (121)    (112) (9)  
Contingent consideration  (191) (191) (191)        
Deferred consideration  (307) (307) (307)        
Trade and other payables  (2 603) (2 603) (2 603)        
Overdraft  (976) (976) (976)        
Total financial liabilities  (11 239) (12 486) (4 793) (3 282) (4 411)  
Percentage profile (%)    100  39  26  35   
Liquidity gap identified1  (4 631) (5 828) 1 418  (3 139) (4 107)  

1 The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place.

  Group    
        Maturity    
2018  Carrying 
amount 
Rm
 
Contractual 
cash flows 
Rm
 
0 to 12 
months 
Rm
 
1 to 2  years 
Rm
 
2 to 5  years 
Rm
 
More than 
5 years 
Rm 
  
Financial assets                      
Loans to associates and joint ventures  259  388  37  28  28  295    
ESD loans  125  125  45  31  48    
Other financial assets at amortised cost1  416  522  110  82  248  82    
Trade and other receivables  3 140  3 140  3 140         
Cash and cash equivalents  2 080  2 080  2 080             
Total financial assets  6 020  6 255  5 412  141  324  378    
Percentage profile (%)    100  87    
Financial liabilities                      
Interest-bearing borrowings  (4 414) (5 513) (915) (325) (4 273)    
Other payables  (152) (152)   (86) (66)    
Contingent consideration  (849) (849) (361) (488)      
Deferred consideration  (620) (620) (395) (225)      
Trade and other payables  (2 960) (2 960) (2 960)        
Derivative financial liabilities  (1) (1) (1)        
Overdraft  (1 531) (1 531) (1 531)            
Total financial liabilities  (10 527) (11 626) (6 163) (1 124) (4 339)      
Percentage profile (%)    100  53  10  37       
Liquidity gap identified2  (4 507) (5 371) (751) (983) (4 015) 378    

1 Excludes the environmental rehabilitation funds at amortised cost.

2 The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place.

   Company   
         Maturity   
2019  Carrying 
amount 
Rm
 
Contractual 
cash flows 
Rm
 
0 to 12 
months 
Rm
 
1 to 2 years 
Rm
 
2 to 5 years 
Rm
 
 
Financial assets                  
ESD loans  206  206  82  65  59   
Trade and other receivables  630  630  630         
Cash and cash equivalents  1 649  1 649  1 649         
Non-interest-bearing loans to                  
subsidiaries  359  359  359         
Interest-bearing loans to subsidiaries  7 060  8 358  761  3 192  4 405   
Treasury facilities with subsidiaries at amortised cost  4 038  4 038  4 038         
Total financial assets  13 942  15 240  7 519  3 257  4 464   
Percentage profile (%)    100  49  21  30   
Financial liabilities                  
Interest-bearing borrowings  (7 041) (8 288) (716) (3 170) (4 402)  
Contingent consideration  (191) (191) (191)        
Deferred consideration  (307) (307) (307)        
Trade and other payables  (177) (177) (177)        
Overdraft  (976) (976) (976)        
Non-interest-bearing loans from subsidiaries1  (8 452) (8 452) (8 452)        
Treasury facilities with subsidiaries at amortised cost  (5 448) (5 448) (5 448)        
Total financial liabilities  (22 592) (23 839) (16 267) (3 170) (4 402)  
Percentage profile (%)    100  68  13  19   
Liquidity gap identified2  (8 650) (8 599) (8 748) 87  62   

1 The majority of the non-interest-bearing loans from subsidiaries are not expected to be called upon in the foreseeable future.

2 The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place.

 

  Company    
        Maturity    
2018  Carrying 
amount 
Rm
 
Contractual 
cash flows 
Rm
 
0 to 12 
months 
Rm
 
1 to 2  years 
Rm
 
2 to 5  years 
Rm
 
More  than 
5 years 
Rm
 
  
Financial assets                      
ESD loans  125  125  45  31  48    
Trade and other receivables  213  213  213         
Cash and cash equivalents  676  676  676         
Non-interest-bearing loans to subsidiaries  341  341  341         
Interest-bearing loans to subsidiaries  4 086  5 214  965  354  3 756  139    
Treasury facilities with subsidiaries at amortised cost  1 611  1 611  1 611             
Total financial assets  7 052  8 180  3 851  385  3 804  140    
Percentage profile (%)    100  47  47    
Financial liabilities                      
Interest-bearing borrowings  (3 805) (4 676) (916) (326) (3 434)    
Contingent consideration  (849) (849) (361) (488)      
Put option  (584) (800)     (800)    
Deferred consideration  (620) (620) (395) (225)      
Trade and other payables  (176) (176) (176)        
Overdraft  (1 046) (1 046) (1 046)        
Non-interest-bearing loans from subsidiaries1  (8 197) (8 197) (8 197)        
Treasury facilities with subsidiaries at amortised cost  (1 886) (1 886) (1 886)            
Total financial liabilities  (17 163) (18 250) (12 977) (1 039) (4 234)      
Percentage profile (%)    100  71  23       
Liquidity gap identified2  (10 111) (10 070) (9 126) (654) (430) 140    

1 The majority of the non-interest-bearing loans from subsidiaries are not expected to be called upon in the foreseeable future.

2 The liquidity gap identified will be funded by cash generated from operations and the undrawn facilities in place.

16.3.3.4 Credit risk management

Credit risk relates to potential default by counterparties on cash and cash equivalents, loans, investments, trade receivables and other receivables.

Trade receivables consist of a number of customers with whom Exxaro has long-standing relationships. A high portion of term supply arrangements exists with such customers resulting in limited credit exposure which exposure is limited by performing customer creditworthiness or country risk assessments.

Trade receivables consist of a number of customers with whom Exxaro has long-standing relationships. A high portion of term supply arrangements exists with such customers resulting in limited credit exposure which exposure is limited by performing customer creditworthiness or country risk assessments.

The group strives to enter into sales contracts with customers which stipulate the required payment terms. It is expected of each customer that these payment terms are adhered to. Where trade receivables balances become past due, the normal recovery procedures are followed to recover the debt, where applicable new payment terms may be arranged to ensure that the debt is fully recovered.

Exxaro has concentration risk as a result of its exposure to one major customer. This is, however, not considered significant as the customer adheres to the stipulated payment terms.

Exxaro establishes an allowance for non-recoverability or impairment that represents its estimate of ECLs in respect of trade receivables, other receivables, loans, cash and cash equivalents and investments. The main components of these allowances are a 12-month ECL component that results from possible default events within the 12 months after the reporting date and a lifetime ECL component that results from all possible default events over the expected life of a financial instrument.

16.3.3.4.1 Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. None of the financial assets below were held as collateral for any security provided.

Detail of the trade receivables credit risk exposure:

  Group  
  2019
%
  2018
%
 
By geographical area        
RSA 65   66  
Europe 17   21  
Asia 16   11  
USA 2   2  
Total 100   100  
By industry        
Public utilities 53   45  
Structural metal 2  
Cement 1   1  
Mining 38   41  
Manufacturing 1   1  
Merchants 1   1  
Food and beverage 1   1  
Steel 3   10  
Total 100   100  

Detailed impairment analysis of financial assets measured at amortised cost:

   Group   
2019  Total
Rm
 
Performing
Rm
 
Under- 
performing 
Rm
 
Non- 
performing 
Rm
 
 
Loans to associates and joint ventures  133     133      
– Current – gross  182     182      
– Current – impairment allowances  (49)    (49)     
ESD loans  206  206         
– Non-current – gross  124  124         
– Current – gross  83  83         
– Current – impairment allowances  (1) (1)        
Other financial assets at amortised cost  333  333         
– Non-current – gross  279  279         
– Non-current – impairment allowances  (3) (3)        
– Current – gross  63  58      
– Current – impairment allowances  (6) (1)    (5)  
Lease receivables1  67  67         
Trade receivables  2 928  2 850  65  13   
– Gross  3 023  2 855  66  102   
– Impairment allowances  (95) (5) (1) (89)  
Other receivables  313  240  67   
– Gross  464  240  218   
– Impairment allowances  (151)       (151)  
Cash and cash equivalents  2 695  2 695         
Total financial assets at amortised cost  6 675  6 391  204  80   

1 Lease receivables are within the scope of the impairment requirements of IFRS 9.

  Company    
2018  Total 
Rm
 
Performing 
Rm
 
Under- 
performing 
Rm
 
Non- 
performing 
Rm
 
  
Loans to associates and joint ventures  259  259          
ESD loans  125  125       
Other financial assets at amortised cost  767  767          
– Non-current – gross  687  687          
– Current – gross  85  81      
– Impairment allowances  (5) (1)    (4)   
Lease receivables1  71  71          
Trade receivables  2 971  2 922  41    
– Gross  3 052  2 930  41  81    
– Impairment allowances  (81) (8)    (73)   
Other receivables  169  149  20       
– Gross  223  149  20  54    
– Impairment allowances  (54)       (54)   
Cash and cash equivalents  2 080  2 080          
Total financial assets at amortised cost  6 442  6 373  61    

1 Lease receivables are within the scope of the impairment requirements of IFRS 9.

   Company   
2019  Total 
Rm
 
Performing 
Rm
 
Under- 
performing 
Rm
 
Non- 
performing 
Rm
 
 
ESD loans  206  206         
– Non-current – gross  124  124         
– Current – gross  83  83         
– Current – impairment allowances  (1) (1)        
Other receivables  15  15         
– Gross  26  15     11   
– Impairment allowances  (11)       (11)  
Indebtedness to subsidiaries  615  615         
Non-interest-bearing loans to subsidiaries  359  359         
– Current – gross  421  360     61   
– Current – impairment allowances  (62) (1)    (61)  
Interest-bearing loans to subsidiaries  7 060  7 060         
Treasury facilities with subsidiaries at amortised cost  4 038  4 038         
Cash and cash equivalents  1 649  1 649         
Total financial assets at amortised cost  13 942  13 942         

 

  Company    
2018  Total 
Rm
 
Performing 
Rm
 
Under- 
performing 
Rm
 
Non- 
performing 
Rm
 
  
ESD loans
Other financial assets at amortised cost 
125  125          
– Current – gross          
– Current – impairment allowances  (4)       (4)   
Other receivables  19  11       
Indebtedness to subsidiaries  194  194       
Non-interest-bearing loans to subsidiaries  341  341          
– Current – gross  401  341     60    
– Current – impairment allowances  (60)       (60)   
Interest-bearing loans to subsidiaries  4 086  4 086          
Treasury facilities with subsidiaries at amortised cost  1 611  1 611       
Cash and cash equivalents  676  676          
Total financial assets at amortised cost  7 052  7 044       

16.3.3.4.2 Trade and other receivables age analysis

   Group   
   Current     Past due   
2019  Total 
Rm
 
1 to 30  days 
Rm
 
31 to 60  days 
Rm
 
   61 to 90  days 
Rm
 
90 to 180  days 
Rm
 
>180 days 
Rm
 
 
Trade receivables  2 928  2 806  94     19   
– Gross  3 023  2 811  95     19  89   
– Impairment allowances  (95) (5) (1)       (4) (85)  
Other receivables  313  238        67   
– Gross  464  239     124  93   
– Impairment allowances  (151) (1)          (124) (26)  
                 
Total carrying amount of trade and other receivables  3 241  3 044  99     22  71   
2018                        
Trade receivables  2 971  2 863  100      
– Gross  3 052  2 870  100     72   
– Impairment allowances  (81) (7)          (3) (71)  
Other receivables  169  69  82    11   
– Gross  223  78  86    41  11   
– Impairment allowances  (54) (9) (4)   (4) (37)    
Total carrying amount of trade and other receivables  3 140  2 932  182    12   

 

  Current   Past due
Company Total 
Rm 
1 to 30  days 
Rm 
31 to 60  days 
Rm 
  61 to 90  days 
Rm 
90 to 180  days 
Rm 
>180 days 
Rm 
2019              
Other receivables 15  13         
– Gross 26  13      11   
– Impairment allowances (11)         (11)  
Indebtedness by subsidiaries 615  615           
Total carrying amount of trade and other receivables 630  628         

 

    Current   Past due  
Company Total
Rm
1 to 30 days
Rm
  >180 days
Rm
 
2018          
Other receivables 19 11   8  
Indebtedness by subsidiaries 194 194      
Total carrying amount of trade and other receivables 213 205   8  

16.3.3.4.3 Credit quality of financial assets

The credit quality of cash and cash equivalents has been assessed by reference to external credit ratings available from Fitch and Standard & Poor’s.

  Group   Company  
At 31 December 2019
Rm
  2018
Rm
  2019
Rm
  2018
Rm
 
Cash and cash equivalents                
Fitch ratings                
F1+ 174   88   30   14  
Standard & Poor’s ratings                
A-1+ 2 485   1 457   1 619   662  
A-1 36   535          
Total cash and cash equivalents1 2 695   2 080   1 649   676  

1 Excludes overdraft and cash and cash equivalents classified as held-for-sale.

Fitch ratings

F1 Highest credit quality
“+” denotes any exceptionally strong credit feature

Standard & Poor’s

A-1+ Highest certainty of payment
A-1 Very high certainty of payment

16.3.3.4.4 Collateral

No collateral was held by the group as security and nor any other enhancements over the financial assets during the years ended 31 December 2019 and 2018.

Guarantees

The group did not obtain financial or non-financial assets by taking possession of collateral it holds as security or calling on guarantees during the financial year ended 31 December 2019 and 31 December 2018. The guarantees issued relate to operational liabilities (refer note 13.4 on contingent liabilities).

16.3.4 LOAN COMMITMENTS

The group and company have granted the following loan commitments:

  Group     Company  
At 31 December 2019
Rm
  2018
Rm
    2019
Rm
  2018
Rm
 
Total loan commitment 1 206   1 221     706   721  
Mafube1 500   500            
Insect Technology2 706   721     706   721  
Undrawn loan commitment 1 206   971     706   721  
Mafube 500   250            
Insect Technology 706   721     706   721  

1 Revolving credit facility available for five years, ending 2023.

2 A US$50 million term loan facility available from 2020 to 2025.