Exxaro | Sharing the SIOC windfall to ease concerns
Exxaro's (EXX) H1 '18 results were in line with our expectations. In our view, a revision in the Group's dividend policy overshadowed the results. The new policy resulted in the interim dividend significantly exceeding our expectations. Given EXX's extensive capex profile, we stress tested the Group's balance sheet under the new dividend policy in a low coal price environment. We support the new policy as we believe it provides greater clarity and certainty of increased cash returns for shareholders. Elsewhere, EXX continues with the digitisation of its supply chain to gain greater visibility over its operations. Furthermore, various initiatives under the Group's ‘Operational Excellence' programme have proven beneficial and should help contain cash costs.Exxaro Resources is a mining company, with interests in the coal, titanium dioxide, ferrous and energy markets. Co. has four reportable operating segments, which include: Coal, which produces thermal and metallurgical coal as well as other small scale products; Ferrous, which include the Mayoko iron ore project; Titanium dioxide, in which Co. holds a 43.98% equity interest in Tronox Limited and a 26% equity interest in each of the South African based operations as well as a 26% member's interest in Tronox Sands Limited Liability Partnership in the U.K.; and Other, which include the 50% equity interest in Cennergi Proprietary Limited, among others.
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