The board of directors (board) is pleased to present the group and company annual financial statements of Exxaro Resources Limited for the year ended 31 December 2023 (group and company annual financial statements 2023).
Exxaro is a South African-based diversified resources group with an existing coal and energy business and acquisitive growth prospects in minerals and energy solutions. Exxaro is evolving into a sustainable and impactful business that catalyses economic growth, environmental stewardship and positive change.
Exxaro's investments in associates include a 20.62% (2022: 20.62%) equity interest in SIOC, which extracts and processes iron ore, a 26% (2022: 26%) equity interest in Black Mountain, which produces zinc, lead, copper and silver in the Northern Cape; and a 10.26% (2022: 10.26%) effective equity interest in RBCT, which is an export terminal, as well as a 50% (2022: 50%) joint venture in Mafube with Thungela, which produces coal.
Exxaro is a public company incorporated in South Africa and is listed on the JSE. It is also a constituent of the JSE's Top 40 index, and among the top 30 in the FTSE/JSE Responsible Investment Index with headquarters in Centurion, South Africa.
As part of the ongoing portfolio optimisation strategy, the FerroAlloys operation was no longer considered to be a strategic fit within our envisaged minerals business portfolio. A sale process to dispose of FerroAlloys has commenced.
The integrated report and supplementary information contain material information on the activities and performance of the group and its various divisions. These reports are unaudited. The board acknowledges its responsibility to ensure the integrity of the integrated report and supplementary information. We have accordingly applied our minds to the integrated report and believe the report addresses all material issues, and fairly presents the integrated performance, impact and sustainability of the organisation.
Exxaro's board is the focal point and custodian of good corporate governance for the group. The board assumes ultimate accountability and responsibility for the group's performance and affairs. In so doing, it effectively represents and promotes the group's legitimate interests. As a responsible corporate citizen, Exxaro considers its material stakeholders' legitimate interests and expectations to ensure it contributes positively to society and the environment.
Exxaro's corporate governance is underpinned by principles that guide the board in meeting its responsibilities to the company, the group and its stakeholders. These principles enable Exxaro to achieve the King IVTM governance outcomes and fulfil its purpose to power better lives in Africa and beyond through its own ethical and effective leadership.
King IVTM promotes good governance, transparency in leadership and decision making, and a focus on sustainability. Sustainable development is an ethical and economic imperative. It entails economic and social growth to meet present needs without compromising future generations' ability to fulfil their needs. Sustainable development is a fitting response to organisations being an integral part of society, their status as corporate citizens and meeting stakeholders' needs, interests and expectations. Exxaro expresses its commitment to sustainable development through its Sustainable Growth and Impact strategy.
The board therefore drives the Exxaro strategy and budget, sets performance and culture expectations as well as the governance framework for the group. The board considered progress, timing and scenario considerations related to the execution of the Sustainable Growth and Impact strategy. As part of the strategy development and review process, we conduct a risk and opportunity assessment, including emerging risks and material sustainability issues. We have furthermore developed a reimagined strategic performance management dashboard to enable visibility of strategy execution and facilitate strategic conversations at the right time within a tiered group governance structure.
Full details on how these principles have been applied in Exxaro are set out in the 2023 integrated and ESG reports.
ESG governance at its essence encapsulates the policies, practices and procedures adopted by the group to manage and enhance its ESG performance. Exxaro works to integrate and embed ESG into the organisation, beyond mere compliance, through a tiered governance structure and lens through which to view the Sustainable Growth and Impact strategy.
More detail on our ESG governance is set out in the 2023 integrated and ESG reports.
The results for the years ended 31 December 2023 and 2022 were adjusted for the key items as noted in the reconciliation of headline earnings (refer note 5.3).
The accounting policies applied during the year ended 31 December 2023 are consistent, in all material respects, with those applied in the group and company annual financial statements for the year ended 31 December 2022.
The diagram above represents the order of our capital allocation framework. In applying our capital allocation framework, we aim for a gearing ratio of below 1.5 times net debt (excluding ring-fenced project financing) to EBITDA. The capital allocation framework is in line with our commitment to sustainably return cash to shareholders through the cycle while retaining a strong financial position.
During 2023, we received cash of R16 billion (2022: R20.4 billion), comprising R10.7 billion from our operations (net of tax paid) (2022: R14.8 billion), dividend income received from our equity-accounted investments of R4.9 billion (2022: R5.9 billion). as well as net interest received of R0.4 billion (2022: R0.3 billion net interest paid) on our cash and cash equivalents.
In terms of our capital allocation framework, we utilised this cash, to mainly:
The share capital of the company is summarised as follows:
| Number of shares | ||
| At 31 December | 2023 | 2022 |
| Authorised ordinary shares of R0.01 each | 500 000 000 | 500 000 000 |
|---|---|---|
| Issued ordinary shares of R0.01 each | 349 305 092 | 349 305 092 |
| Treasury shares held by Kumba Resources Management Share Trust | 158 218 | 158 218 |
| Treasury shares held by Eyesizwe | 107 612 026 | 107 612 026 |
An analysis of shareholders and the respective percentage shareholdings appears in chapter 19: annexure 1.
Our investments in subsidiaries are fully disclosed in note 17.6.
The dividend policy is to consider an interim and final dividend for each financial year. At its discretion, the board may consider a special distribution where appropriate. Depending on the perceived need to retain funds for expansion or operating purposes, the board of directors may approve the declaration and payment of dividends.
Exxaro's dividend policy comprises the following two components:
Exxaro declared the following dividends relating to 2023:
Interim dividend number 41 of 1 143 cents per share was approved by the board on 15 August 2023 and declared in South African rand in respect of the six-month period ended 30 June 2023. The dividend payment date was Monday, 2 October 2023, to shareholders recorded on the register of the company at close of business on Friday, 29 September 2023.
Final dividend number 42 of 1 010 cents per share was approved on 12 March 2024 and declared in South African rand in respect of the year ended 31 December 2023. The final dividend payment date is Monday, 13 May 2024 to shareholders recorded on the register of the company at close of business on Friday, 10 May 2024 (record date). To comply with the requirements of Strate, the last date to trade cum dividend is Tuesday, 7 May 2024. The shares will commence trading ex-dividend on Wednesday, 8 May 2024.
The final dividend declared from income reserves, is subject to dividend withholding tax of 20% for all shareholders who are not exempt from or do not qualify for a reduced rate of dividend withholding tax. The net local dividend payable to shareholders, subject to dividend withholding tax at a rate of 20%, amounts to 808 cents per share.
Given the net cash position on 31 December 2023 of the R14 834 million (excluding energy's net debt), in addition to the final dividend declared, the board has resolved to pay a special dividend of 572 cents per share. The dividend was subject to SARB approval, which was obtained on 3 April 2024.
The special dividend declared from income reserves, is subject to dividend withholding tax of 20% for all shareholders who are not exempt from or do not qualify for a reduced rate of dividend withholding tax. The net local dividend payable to shareholders, subject to dividend withholding tax at a rate of 20%, amounts to 457.60 cents per share.
The number of ordinary shares in issue at the date of this declaration is 349 305 092.
Exxaro company's tax reference number is 9218/098/14/4.
The events after the reporting period are disclosed in note 18.3.
During 2023 the company welcomed to the board:
With thanks for their years of service to the company, the following directors retired at the AGM on 18 May 2023:
At the date of compilation of this report, the following individuals were directors of the company:
| Mvuleni Geoffrey Qhena | Independent non-executive and chairman of the board |
| Nombasa Tsengwa | CEO and executive |
| Riaan Koppeschaar | Finance director and executive |
| Geraldine Fraser-Moleketi | Lead independent non-executive |
| Karin Ireton | Independent non-executive |
| Ben Magara | Independent non-executive |
| Isaac Malevu | Non-executive |
| Billy Mawasha | Independent non-executive |
| Nondumiso Medupe | Independent non-executive |
| Likhapha Mbatha | Non-executive |
| Phumla Mnganga | Independent non-executive |
| Zwelibanzi Mntambo | Non-executive |
| Nosipho Molope | Independent non-executive |
| Mandlesilo Msimang | Non-executive |
| Chanda Nxumalo | Independent non-executive |
| Peet Snyders | Independent non-executive |
Details of the directors in office at the date of this report are set out in the 2023 integrated and ESG reports.
Details of directors' shareholdings are contained in note 14.5.3.
Guided by our Sustainable Growth and Impact strategy, Exxaro established a renewable energy business, branded Cennergi, underpinned by three pillars: distributed generation, utility generation, and services. To support strategy execution, Exxaro undertook an extensive process to appoint Leon Groenewald as the managing director for Cennergi, effective 1 April 2023.
To further support the execution of the Sustainable Growth and Impact strategy, Exxaro, using an organisational effectiveness process, made the following executive appointments:
Exxaro bid farewell to Alex de Angelis, executive head: strategy and business transformation, and Mzila Mthenjane, executive head: stakeholder affairs, who took up the position as CEO of the Minerals Council South Africa. We thank Alex and Mzila for their valuable contributions to Exxaro and we wish them well in their future endeavours.
KPMG Inc., with designated audit partner Safeera Loonat, was re-elected as independent external auditor at the AGM held on 18 May 2023 in accordance with section 90 of the Companies Act in respect of the 2023 financial year.
The audit committee report appears in 2.5 Audit committee report, as well as in the 2023 integrated and ESG reports.
| Group | ||
|
2023 Rm |
2022 Rm |
|
| Amount approved | 65 309 | 58 524 |
|---|---|---|
| Total interest-bearing borrowings | (8 923) | (9 093) |
| Unutilised borrowing capacity | 56 386 | 49 431 |
The borrowing powers were set at 125% of shareholders' funds (equity attributable to owners of the parent) for both the 2023 and 2022 financial years.
Pursuant to the authorisation granted at the AGM held on 18 May 2023, shareholders approved, in accordance with section 45 of the Companies Act, the granting of financial assistance to related and inter-related companies of Exxaro.
The directors resolved that the company would satisfy the solvency and liquidity test, as contemplated in section 45 of the Companies Act and detailed in section 4 of the Companies Act, post such assistance. The terms under which such assistance will be provided are fair and reasonable to the company.
Details of the employee incentive schemes are set out in the remuneration committee and remuneration reports in the 2023 integrated and ESG reports and the supplementary information.
Details of related-party transactions are set out in note 15.1.
The directors believe that the group and company have adequate financial resources to continue in operation for the foreseeable future. Accordingly, the group and company annual financial statements 2023 have been prepared on a going-concern basis.
The directors are not aware of any new material changes, or any material non-compliance with statutory or regulatory requirements that may adversely impact the group or company.
The company registration number is 2000/011076/06. The registered office is The conneXXion, 263B West Avenue, Die Hoewes, Centurion. Refer chapter 19: annexure 4 for further details.
Absa Bank Limited acted as lead equity sponsor and debt sponsor to the company for the financial year ended 31 December 2023.
Tamela Holdings Proprietary Limited acted as joint equity sponsor to the company for the financial year ended 31 December 2023.
JSE Investor Services Proprietary Limited serves as the South African registrar of the company.
The 23rd (twenty third) AGM of shareholders of Exxaro will be held via electronic communication and in person meeting participation (subject to any adjournment or postponement, health and safety protocols) at The conneXXion, 263B West Avenue, Die Hoewes, Centurion, South Africa, in the Auditorium at 10:00 on Thursday, 23 May 2024 (2024 AGM) to consider and, if deemed fit, pass with or without modification, the resolutions presented thereat.
IR