CHAPTER 6:
Operational performance and working capital

6.1 OPERATIONAL PERFORMANCE

6.1.1 Accounting policies relating to operational performance

6.1.1.1 Revenue

For group, revenue is derived from contracts with customers for the supply of goods and rendering of services.

For company, as an investment holding and services company, revenue is derived from its ordinary activities which include dividend income and interest income received from subsidiaries, associates and JVs, as well as from its revenue from contracts with customers for the rendering of services (refer note 19.2).

Revenue from contracts with customers

Timing of recognition

Revenue is recognised when (or as) a performance obligation is satisfied by transferring a promised good or service to a customer. A promised good or service is transferred when (or as) the customer obtains control of that promised good or service.

Measurement on recognition

The amount of revenue recognised is the amount of the transaction price that is allocated to a satisfied performance obligation. The amount is determined on a gross basis, when acting as a principal, or on a net basis when acting as an agent.

The total transaction price in a customer contract is allocated to the performance obligations identified in the contract based on their standalone selling prices. The standalone selling prices are determined based on listed prices at which those goods or services are sold in separate transactions. The customer contracts generally contain only one performance obligation and therefore the contract consideration generally reflects the standalone selling price of the performance obligation.

As a permitted practical expedient, no adjustment is made to the transaction price for the effects of the time value of money as the period of time between the delivery of goods or rendering of services and receipt of payment ranges between two weeks and 60 days, which is considered not to result in a significant financing component.

Nature of goods and services

Below is a summary of the different types of revenue depicting the standard terms and performance obligations for each type:

Revenue type	Performance obligation	Timing of when performance obligation is satisfied	Payment terms
Coal (domestic supply)	Delivery of coal at a contractually agreed-upon delivery point	On delivery (point in time)	Range: 0 to 60 days
Coal (FOB export supply)	Delivery of coal at a contractually agreed-upon delivery point	On delivery (point in time)	Range: 15 to 60 days
Coal (CFR export supply)	Delivery of coal at a contractually agreed-upon delivery point	On delivery (point in time)	Range: 15 to 60 days
Coal (CFR export supply)	Rendering of freight services over time	As services are performed (over time)	Range: 15 to 60 days
Renewable energy (electricity sales)	Delivery of electricity over time measured at a contractually agreed-upon metering point (output method)	As consumed and measured at the metering point (over time)	Within 60 days
Ferrosilicon	Delivery of ferrosilicon at a contractually agreed-upon delivery point	On delivery (point in time)	Range: 15 to 60 days
Biological goods	Delivery of biological goods at a contractual agreed-upon delivery point	On delivery (point in time)	Range: 15 to 60 days
Stock yard management services	Rendering of stock yard management services over time	As services are performed (over time)	Within 30 days
Project engineering services	Rendering of project engineering services over time	As services are performed (over time)	Within 30 days
Other mine management services	Rendering of other mine management services over time	As services are performed (over time)	Within 30 days
Transportation services	Rendering of freight or other transportation services over time (Including CFR basis for exports and special transportation arrangements by customers)	As services are performed (over time)	Range: 15 to 60 days
Corporate management services (company)	Rendering of corporate services over time	As services are performed (over time)	Within 30 days
Other services	Mainly rendering of storage services over time	As services are performed (over time)	Within 30 days

Dividend revenue

For company, dividend revenue from subsidiaries, associates and JVs are recognised when the right to receive payment is established.

Interest revenue

For company, interest revenue received from subsidiaries is recognised as it accrues in profit or loss, using the effective interest rate method.

6.1.1.2 Discontinued operations

Discontinued operations are significant, distinguishable components of an operation that have been sold, abandoned or are the subject of formal plans for disposal or discontinuance. The profit or loss on the sale or abandonment of a discontinued operation is determined from the formalised discontinuance date and accounted for in profit or loss.

Management applies judgement on a case-by-case basis to determine whether an operation meets the criteria to be classified as a discontinued operation (disposal group). Refer note 6.1.4.

6.1.2 Revenue

The group derive revenue from its contracts with customers. Revenue has been disaggregated based on timing of revenue recognition, major type of goods and services, major geographic area and major customer industries.

	Group
	Coal					Ferrous	Other
	Commercial
For the year ended 31 December 2021	Waterberg Rm	Mpumalanga Rm	Tied Rm	Other Rm	Energy Rm	Alloys Rm	Other Rm	Total Rm
Segmental revenue reconciliation
Segmental revenue¹	16 852	9 439	5 089	15	1 193	168	15	32 771
Export sales allocated to selling entity	(2 495)	(8 328)		10 823
Total revenue	14 357	1 111	5 089	10 838	1 193	168	15	32 771
By timing and major type of goods and services
Revenue recognised at a point in time	14 357	1 111	3 953	10 823		162	14	30 420
Coal	14 357	1 111	3 953	10 823				30 244
Ferrosilicon						162		162
Biological goods							14	14
Revenue recognised over time			1 136	15	1 193	6	1	2 351
Renewable energy					1 193			1 193
Stock yard management services			177					177
Project engineering services			959					959
Other mine management services				15				15
Transportation services						2		2
Other services						4	1	5

Total revenue	14 357	1 111	5 089	10 838	1 193	168	15	32 771
By major geographic area of customer²
Domestic	14 357	1 111	5 089	15	1 193	168	14	21 947
Export				10 823			1	10 824
Europe				7 092			1	7 093
Asia				2 955				2 955
Other				776				776

Total revenue	14 357	1 111	5 089	10 838	1 193	168	15	32 771
By major customer industries
Public utilities	12 031		5 089		1 193			18 313
Merchants	235	752		10 449				11 436
Steel	1 147	119		15				1 281
Mining	165	153		52		134		504
Manufacturing	364					34		398
Food and beverage	197						5	202
Cement	175	3						178
Chemicals		80						80
Other	43	4		322			10	379
Total revenue	14 357	1 111	5 089	10 838	1 193	168	15	32 771

¹	Coal segmental revenue is based on the origin of coal production.
²	Determined based on the customer supplied by Exxaro.

	Group
	Coal					Ferrous	Other
	Commercial
For the year ended 31 December 2020	Waterberg Rm	Mpumalanga Rm	Tied Rm	Other Rm	Energy Rm	Alloys Rm	Other Rm	Total Rm
Segmental revenue reconciliation
Segmental revenue¹	15 449	8 037	4 355	34	889	147	13	28 924
Export sales allocated to selling entity	(2 002)	(7 357)		9 359
Total revenue	13 447	680	4 355	9 393	889	147	13	28 924
By timing and major type of goods and services
Revenue recognised at a point in time (Restated)²	13 447	680	3 744	9 293		139	12	27 315
Coal	13 447	680	3 744	9 293				27 164
Ferrosilicon						139		139
Biological goods							12	12
Revenue recognised over time (Restated)²			611	100	889	8	1	1 609
Renewable energy²					889			889
Stock yard management services			154					154
Project engineering services			457					457
Other mine management services				34				34
Transportation services				66		2		68
Other services						6	1	7

Total revenue	13 447	680	4 355	9 393	889	147	13	28 924
By major geographic area of customer³
Domestic	13 447	680	4 355	34	889	147	8	19 560
Export				9 359			5	9 364
Europe				3 904			3	3 907
Asia				4 539			2	4 541
Other				916				916

Total revenue	13 447	680	4 355	9 393	889	147	13	28 924
By major customer industries
Public utilities	11 508		4 355	260	889			17 012
Merchants	174	345		8 525		2		9 046
Steel	1 014	79		77				1 170
Mining	56	103		126		119		404
Manufacturing	275					26		301
Food and beverage	250						8	258
Cement	132							132
Chemicals		145						145
Other	38	8		405			5	456
Total revenue	13 447	680	4 355	9 393	889	147	13	28 924

¹	Coal segmental revenue is based on the origin of coal production.
²	The comparative information has been restated to correct the classification of the renewable energy revenue from contracts with customers. An amount of R889 million has been reclassified from revenue recognised at a point in time to revenue recognised over time as renewable energy revenue is a continuous flow as consumed. The reclassification has not impacted revenue recognition nor measurement, as the amount of energy delivered (passing control to the customer) occur at the same point (metering point). The reclassification provides disclosures which are more comparable to the industry norm.
³	Determined based on the customer supplied by Exxaro.

The group derives revenue from an external customer which accounts for at least 10% or more of the group's revenues, being 56% or R18 312 million (2020: 58% or R16 779 million).

The company derives the following revenue types from its ordinary activities as an investment holding company and services company:

		Company
For the year ended 31 December	Note	2021 Rm	(Restated)¹ 2020 Rm
Revenue from contracts with customers:		1 669	1 765
Rendering of services over time: Corporate management services rendered to subsidiaries	17.3.1	1 669	1 765
Dividend revenue¹:		19 556	3 832
Associates and JVs	9.3	9 991	3 263
Subsidiaries	17.3.1	9 565	569
Interest revenue¹:		2 389	2 002
Subsidiaries	17.3.1	2 389	2 002
– Interest-bearing back-to-back loans receivable	17.3.1	360	572
– Interest-bearing acquisition loans receivable	17.3.1	8	6
– Interest-bearing treasury facilities receivable	17.3.1	2 021	1 424


Total revenue		23 614	7 599

¹	Refer to note 19.2.

6.1.3 Operating expenses

		Group		Company
For the year ended 31 December	Note	2021 Rm	2020 Rm	2021 Rm	2020 Rm
Cost by nature
Operational expense items
Raw materials and consumables		4 339	3 744	14	24
Depreciation and amortisation		2 677	2 436	192	148
Movement in inventories		311	232
Staff costs		5 583	5 103	900	824
Other employee-related costs		204	195	29	37
Contract mining		1 675	2 409
Repairs and maintenance		2 628	2 421	10	15
Railage and transport		2 175	3 101	1	1
Insurance		352	253	2	2
Exploration expenditure		22	28
Royalties		970	530
Water		146	151
Energy		787	714	4	4
Information management costs		608	539	198	160
Legal and professional fees		491	653	242	321
Movement in provisions	13.3	4	(1 100)	(1)	(3)
Movement in retirement employee obligations	14.4	12	4
Travel and subsistence		66	78	9	11
Security and office cleaning services		106	115	3	4
Licences		6	5
Stock yard management services		177	154
Project engineering services		959	457

Financial gains and losses
Currency exchange differences		(546)	(50)	128	58
Write-off of trade and other receivables		80	35	79	10
Write-off of ESD loans		12		12
ECLs on financial assets at amortised cost		(57)	(144)	(18)	83
Fair value gains recognised on financial assets at FVPL		(186)	(114)	(71)	(1)
Fair value losses recognised on financial liabilities at FVPL		43	52		3
Losses on financial instruments revaluations recycled to profit or loss on deemed disposal of JV¹			59
Hedge ineffectiveness on cash flow hedges		10	57
General items and expenses
Gain on derecognition of financial asset at FVOCI²		(175)
Gain on deemed disposal of JV¹			(1 321)
Gain on transfer of operation	8.3		(4)
Gain on the disposal of joint operation	8.3		(17)
Net gain on disposal/deregistration of subsidiaries	8.3			(2)	(121)
Loss on dilution of investment in associates	9.5		20
Insurance recoveries for business interruption			(14)
Insurance recoveries for property, plant and equipment			(18)
Net losses on disposal of property, plant and equipment		46	92	25	14
Movement in indemnification asset			798
Write-down of inventories to net realisable value			9
Expenses relating to short-term leases		166	168	1	1
Expenses relating to leases of low value assets		9	12	2	9
Expenses relating to variable lease expenses of right-of-use assets		6	5
Operating lease income		(36)	(34)	(7)	(6)
Research and development costs		2	4		3
Own work capitalised³		(524)	(357)
General charges		1 207	1 289	149	196
Total operating expenses		24 343	22 749	1 901	1 797

¹	2020: Relates to the step-up acquisition of Cennergi.
²	During the year the four Chifeng refinery companies embarked on a process to consolidate the separate companies into one consolidated entity. The investments in the separate companies for certain of the phases were derecognised and the investment in the consolidated entity which includes all phases of the Chifeng refinery, was recognised on the consolidation date. Exxaro now holds an 8.81% shareholding in Chifeng.
³	Relates to operating expenses incurred that are capitalised to projects where qualifying criteria are met.

			Group		Company
For the year ended 31 December		Note	2021 Rm	2020 Rm	2021 Rm	2020 Rm
Further disaggregation of certain operating expense items:
Staff costs			5 583	5 103	900	824
– Salaries and wages			4 851	4 373	699	628
– Share-based payment expense			246	250	155	150
– Termination benefits¹			18	26	5	8
– Pension and medical costs			468	454	41	38
Consultancy fees²			365	526	176	249
Auditor's remuneration²			38	38	17	17
– Audit fees			30	30	12	12
– Other services			8	8	5	5
Depreciation and amortisation			2 677	2 436	192	148
– Depreciation of property, plant and equipment		10.1.3	2 445	2 237	134	91
– Depreciation of right-of-use assets		11.3	65	71	56	55
– Amortisation of intangible assets		10.2.3	167	128	2	2
ECL's on financial assets at amortised cost ((reversal of impairment losses)/impairment losses)			(57)	(144)	(18)	83
Non-current
Other financial assets at amortised cost				1
– Performing				1
ESD Loans			8		8
– Non-performing			8		8
Lease receivables				1
– Performing				1
Vendor finance loan			7		7
– Performing			7		7
Current
Trade and other receivables			(72)	(127)	(82)	74
Trade receivables			(74)
– Performing			6	10
– Under-performing				(1)
– Non-performing			(80)	(9)
Other receivables			2	(127)	(3)	(7)
– Non-performing			2	(127)	(3)	(7)

Indebtedness by subsidiaries					(79)	81
– Performing					(79)	81

Non-interest bearing loans to subsidiaries					(12)	10
– Performing					4	6
– Non-performing					(16)	4
Other financial assets at amortised cost			6	(1)	5	(1)
– Performing			6		5
– Non-performing				(1)		(1)
Loans to associates			(29)	(18)
– Under-performing			(29)	(18)
ESD loans			23		23
– Performing			1		1
– Non-performing			22		22
Treasury facilities with subsidiaries at amortised cost					33
– Performing					33

Fair value (gains)/losses recognised on financial assets at FVPL			(186)	(114)	(71)	(1)
– Derivative financial assets			(4)	10	(67)
– Debt investments			(182)	(124)	(4)	(1)
Fair value losses recognised on financial liabilities at FVPL			43	52		3
– Derivative financial liabilities			43	49
– Contingent consideration				3		3
Currency exchange differences			(546)	(50)	128	58
– Net realised (gains)/losses			(37)	167	156	196
– Net gains on translation differences recycled to profit or loss³			(482)	(103)
– Net gains on translation differences recycled to profit or loss on disposal of investment in foreign associate⁴				(13)
– Net unrealised gains			(27)	(101)	(28)	(138)

¹	Includes the following amounts for the TVPs:		7	19	3	8
²	Disclosed as part of legal and professional fees.
³	2021: Relates to the recycling of FCTR on deregistration of Exxaro International BV (Gain of R518 million) and the deregistration of Exxaro Base Metals International BV (Loss of R36 million). 2020: Relates to recycling of FCTR on liquidation of Exxaro Base Metals China Limited (R102 million) and deregistration of Exxaro Resources (Beijing) Commercial Company Limited (R1 million).
⁴	2020: Relates to the disposal of Curapipe.

6.1.4 Discontinued operations

The discontinued operations are:

Tronox SA

On 23 February 2021, Tronox Holdings plc exercised its "flip-in" call option over Exxaro's 26% shareholding in Tronox SA, for which Tronox Holdings plc delivered 7 246 035 newly issued Tronox Holdings plc Ordinary Shares to Exxaro on 24 February 2021. This resulted in the derecognition of the investment in Tronox SA and recognition of an additional investment in Tronox Holdings plc.

It was concluded that the related performance and cash flow information be presented as a discontinued operation as the investment in Tronox SA represents a separate geographical area of operation of the TiO₂ reportable segment.

Tronox Holdings plc

On 1 March 2021, Exxaro concluded a public offering in the United States of its 21 975 315 Tronox Holdings plc Ordinary Shares. The shares were sold at a public offering price of US$18.25 per share which was reduced by underwriting discounts and commissions resulting in an achieved price per share of US$17.43.

It was concluded that the related performance and cash flow information be presented as a discontinued operation as the investment in Tronox Holdings plc represents a major geographical area of operation as well as the majority of the TiO₂ reportable segment.

Financial information relating to the discontinued operations is set out below:

	Group
For the year ended 31 December		2021 Rm	(Re-presented)¹ 2020 Rm
Financial performance
Net gains on translation differences recycled to profit or loss on disposal of investment in foreign associate		876
Gain on financial instruments revaluations recycled to profit or loss on disposal of associate		2
Operating profit		878
Net gains on disposal of associates		1 339
– Total disposal consideration		7 781
– Carrying amount of investments sold		(6 442)

Net operating profit		2 217
Dividend income received from non-current assets held-for-sale			69
Share of income of equity-accounted investment¹		54	207
Profit before tax		2 271	276
Income tax expense		(379)
Profit for the year from discontinued operations		1 892	276
Other comprehensive loss, net of tax		(878)	(50)
Items that have subsequently been reclassified to profit or loss:		(878)
– Recycling of share of OCI of equity-accounted investments		(878)
Items that may subsequently be reclassified to profit or loss:			(50)
– Share of OCI of equity-accounted investments			(50)


Total comprehensive income for the year		1 014	226
Cash flow information
Cash flow attributable to investing activities
– Dividend income received from non-current assets held-for-sale			69
– Proceeds from disposal of associate classified as non-current asset held-for-sale		5 763
Cash flow attributable to discontinued operations		5 763	69

¹	Refer note 19.1.

	Group
For the year ended 31 December 2021	Tronox SA Rm	Tronox Holdings plc Rm	Total Rm
Consideration:
– Cash		5 763	5 763
– Tronox Holdings plc Ordinary Shares	2 018		2 018
Total disposal consideration	2 018	5 763	7 781
Carrying amount of net assets sold	(2 682)	(3 760)	(6 442)
– Investments in associates	(2 682)	(3 760)	(6 442)

(Loss)/gain on disposal of associates	(664)	2 003	(1 339)
Tax effect	(379)		(379)

	Company
For the year ended 31 December	2021 Rm	2020 Rm
Financial performance
Revenue		69
– Dividend revenue		69
Gain on remeasurement of associate to fair value less costs of disposal	1 449	756
Net gains on disposal of associates
– Total disposal consideration	7 781
– Carrying amount of investments sold	(6 332)

Profit before tax	1 449	825
Income tax expense	(379)
Profit for the year from discontinued operations	1 070	825
Cash flow information	5 763	69
Cash flow attributable to operating activities
– Dividend revenue received
Cash flow attributable to investing activities
– Proceeds from disposal of associate classified as non-current asset held-for-sale
Cash flow attributable to discontinued operations	5 763	69

¹	Refer note 19.1.

	Company
For the year ended 31 December 2021	Tronox SA Rm	Tronox Holdings plc Rm	Total Rm
Consideration:
– Cash received		5 763	5 763
– Tronox Holdings plc Ordinary Shares	2 018		2 018
Total disposal consideration	2 018	5 763	7 781
Carrying amount of net assets sold	(1 181)	(5 151)	(6 332)
– Investments in associates	(1 181)	(5 151)	(6 332)

Gain on disposal of associates	837	612	1 449
Tax effect	(379)		(379)

CHAPTER 6: Operational performance and working capital