Independent funds provide retirement and other benefits for all permanent employees, retired employees and their dependants.
At the end of the financial year, the main defined contribution retirement funds were:
Bargaining unit employees pay a contribution of 8% with the employer's contribution of 15% to the above funds being expensed as incurred.
Other members generally pay a contribution of 7% with the employer's contribution of 10% to the above funds being expensed as incurred.
All funds are registered in South Africa and are governed by the South African Pension Funds Act of 1956.
Employer contributions to each fund were as follows:
| Group | Company | ||||
| 2024 Rm |
2023 Rm |
2024 Rm |
2023 Rm |
||
| Exxaro Provident Fund | 219 | 204 | 42 | 38 | |
|---|---|---|---|---|---|
| Mine Workers Provident Fund | 65 | 63 | |||
| Sentinel Retirement Fund | 86 | 81 | 4 | 4 | |
| Total employer contributions paid | 370 | 348 | 46 | 42 | |
Contributions are made to defined contribution medical aid schemes for the benefit of permanent employees and their dependents who choose to belong to one of a number of employer accredited schemes. The contributions expensed in profit or loss amount to R217 million (2023: R198 million).
The following short-term incentive (STI) schemes are in place:
Participants to the GIS include all executive to middle management level employees (FU to DM Paterson) in the group functions and coal business as well as employees in group functions (DL Paterson and below).
The scheme rewards the achievement of annual goals, which in turn are aligned to the medium and longer-term business strategy. All participants will receive payments that reflect annual achievements when performance targets and funding requirements are met. Annual goals are apportioned in the ratio of 80% to business performance (based on financial, operational and strategic, as well as safety and climate change KPIs) and 20% to individual performance.
Participants are paid annually.
LOS schemes are applicable to the operating business units only. The participants in these schemes include permanent employees, in roles graded at and below DL Paterson, based at the operations.
The measurement and payment cycles align with monthly and quarterly reporting periods. Participants are incentivised to deliver consistent, safe and quality production volumes.
Participants include the employees of the energy business. The scheme rewards the achievement of strategic objectives of the business by measuring certain strategic and financial targets. All participants will receive payments that reflect annual achievements when performance targets and funding requirements are met.
Participants are paid annually.
The following long-term incentive scheme is in place:
The scheme aims to incentivise the executive to middle management level employees of the energy business to drive particular financial measures linked to value creation, encourage long-term focus on sustainable growth and to attract the right talent.
The scheme vests in tranches of a third, annually in years three, four and five. The vesting of each tranche is subject to meeting conditions of employment and a performance milestone relevant for each portion thereof.
Equity compensation benefits are provided to selected employees through the following share-based payment schemes:
An LTIP is a conditional award of Exxaro shares offered to qualifying senior employees. The shares vest after three years subject to certain performance conditions being met. The extent to which the performance conditions are met governs the number of shares that vest. The LTIP is an equity-settled share-based payment scheme.
Participants in the 2024 and 2023 LTIP grant obtained the right (provided performance conditions are met) to receive a number of Exxaro shares. The vesting of the award is based on:
Performance between these targets will result in proportional vesting which will be calculated using a linear sliding scale between the minimum and maximum performance conditions. Grants have a vesting period of three years at which the performance conditions are calculated.
The aim of the DBP is to encourage executive directors and senior management to sacrifice a part of their bonuses for the purpose of acquiring shares in the company in exchange for an upliftment in the number of shares received. Participants may sacrifice a percentage of their (post-tax) bonus in exchange for Exxaro shares at the ruling market price. The pledged shares are then held in trust for a three-year period, thus until the vesting date of the matching award. At vesting date, the company will make an additional award of shares by matching the shareholding on a one-for-one basis (matching award). Participants will consequently become unconditionally entitled to both the original pledged shares as well as the matching award of shares.
A participant may elect to dispose of and withdraw the pledged shares from the scheme at any stage. However, if the pledged shares are withdrawn before the expiry of the pledge period, the participant forfeits the matching award. The DBP is an equity-settled share-based payment scheme.
Middle- and senior management of qualifying energy companies participate in the BMP through an award of rights to Exxaro shares calculated at a predetermined percentage of the energy business annual incentive scheme amount. 50% of the award vests after 12 months and the remaining 50% after 24 months, conditional on continued employment with the group for the vesting periods. Participants are not entitled to rights in respect of the shares until vesting takes place. Following the vesting of a matching incentive, the settlement of the shares to the participant are subject to the fulfilment of a free cash flow condition for the Cennergi group of companies.
The primary purpose of the BMP is to reward key personnel in achieving the strategic objectives of the energy business, ensure transparent remuneration practices and encourage a long-term focus, align business and individual performance with stakeholder objectives and to drive management retention through the reward of superior performance.
The BMP is an equity-settled share-based scheme. Details of the schemes:
Details of the schemes:
| LTIP | DBP | |||||
| Number of instruments | 2024 '000 |
2023 '000 |
2024 '000 |
2023 '000 |
||
| Outstanding at beginning of the year | 5 720 | 7 354 | 111 | 133 | ||
|---|---|---|---|---|---|---|
| Issued during the year | 2 686 | 2 367 | 44 | 53 | ||
| Exercised during the year | (1 829) | (3 334) | (39) | (59) | ||
| Lapsed/cancelled during the year | (317) | (667) | (3) | (16) | ||
| Outstanding at end of the year | 6 260 | 5 720 | 113 | 111 | ||
| Terms of outstanding instruments at end of the year | Expiry date | |||||
| 20241 | 1 878 | 1 | 41 | |||
| 2025 | 1 577 | 1 646 | 23 | 23 | ||
| 2026 | 2 091 | 2 196 | 46 | 47 | ||
| 2027 | 2 592 | 43 | ||||
| 6 260 | 5 720 | 113 | 111 | |||
| Total value of shares outstanding (Rm)2 | 989 | 1 170 | 18 | 23 | ||
| 1 | Employees were restricted from trading. |
| 2 | Based on a share price of R157.95 (2023: R204.48). |
| BMP | ||
| Number of instruments | 2024 '000 |
|
| Issued during the year | 4 | |
|---|---|---|
| Outstanding at end of the year | 4 | |
| Terms of outstanding instruments at end of the year | Expiry date | |
| 2025 | 2 | |
| 2026 | 2 | |
| 4 | ||
| Total value of shares outstanding (Rm)1 | 1 |
| 1 | Based on a share price of R157.95. |
In determining the fair value of services received as consideration for equity instruments, measurement is referenced to the fair value of the equity instrument granted.
During the current year, one new DBP, four new LTIP's and one BMP have been granted.
The conditional matching awards granted in terms of the DBP are the economic equivalent of granting an Exxaro share at no consideration, but without dividend rights for the period from the grant date to vesting date. Therefore, the value of the DBP is equal to the grant date share price less the present value of the future dividends expected to be granted over the term of the scheme. The DBP fair value is multiplied by the pledged shares in trust.
The value of the LTIP is the economic equivalent of granting an Exxaro share at no consideration, but without dividend rights for the period from the grant date to vesting date. Therefore, the value of the LTIP is equal to the grant date share price, less the present value of the future dividends expected to be granted over the term of the scheme. In determining the fair value, a Monte Carlo simulation model has been used to take into account the market vesting condition (TSR target). The non-market vesting conditions (ROCE and ESG targets) are taken into account when determining the number of options expected to vest.
The volatility input into the LTIP valuation model is determined by using a historical approach, which uses the historical price data of the underlying shares. The historical period used to determine the volatility is equal in length to the period from the valuation date up to and including the maturity date.
The conditional matching awards granted in terms of the BMP are the economic equivalent of granting an Exxaro share at no consideration, but without dividend rights for the period from the grant date to vesting date. Therefore, the value of the BMP is equal to the grant date share price less the present value of the future dividends expected to be granted over the term of the scheme. The BMP is multiplied with the number of shares after taking into account the probable achievement of the non-market condition and the completion of a service period.
The key assumptions are summarised as follows:
| 2024 | 2023 | |
| Average fair value for grants during the year (Rand per grant) | ||
| LTIP | 105.45 | 112.11 |
| DBP | 168.98 | 130.14 |
| BMP | 139.43 | |
| Inputs to the valuation models for | ||
| LTIP | ||
| – Share price at valuation date (Rand per share) | 160.00 to 181.01 | 186.55 |
| – Weighted average option life (years) | 3 | 3 |
| – Dividend yield over the life of the option (continuous compounding) (%) | 9.25 to 11.38 | 8.46 to 13.92 |
| – Risk-free interest rate (%) | 7.23 to 8.52 | 7.76 |
| – Exxaro equity equally weighted volatility (%) | 34.24 to 35.02 | 39.67 |
| – TSR peer companies equally weighted volatility (%) | 40.83 to 41.25 | 42.49 |
| DBP | ||
| – Share price at valuation date (Rand per share) | 168.98 | 186.55 |
| – Weighted average option life (years) | 3 | 3 |
| – Dividend yield over the life of the option (continuous compounding) (%) | 11.39 | 8.46 to 13.92 |
| – Risk-free interest rate (%) | 8.11 | 7.76 |
| BMP | ||
| – Share price at valuation date (Rand per share) | 168.98 | |
| – Option life (years): | ||
| Tranche one | 1 | |
| Tranche two | 2 | |
| – Dividend yield over the life of the option (continuous compounding) (%) | ||
| Tranche one | 14.68 | |
| Tranche two | 11.83 | |
| – Risk-free interest rate (%) | ||
| Tranche one | 8.18 | |
| Tranche two | 8.06 |
IR