TIDMFXPO
RNS Number : 6415W
Ferrexpo PLC
30 January 2013
Not for distribution, directly or indirectly, in or into the
United States (except to qualified institutional buyers, as defined
in Rule 144A under the U.S. Securities Act of 1933, as amended),
Australia, Canada, Japan or any other jurisdiction where to do so
would be unlawful.
30 January 2013
Ferrexpo plc
("Ferrexpo", the "Group" or the "Company")
Unaudited Nine Month Results to 30 September 2012
Ferrexpo plc, a major iron ore pellet producer and member of the
FTSE 250, today announces that it has mandated Morgan Stanley and
Credit Suisse to arrange a series of fixed income investor meetings
commencing on Thursday, 31 January 2013 in anticipation of a
potential USD-denominated senior unsecured Reg S / 144A Eurobond
issue (the "Notes Offering"). Placement of the Notes Offering will
be dependent on market conditions.
As part of the fixed income investor meetings, Ferrexpo will be
presenting financial information from its unaudited interim
financial statements for the nine month period to 30 September
2012, as described below. As such, this release is to inform the
market of these financial results. Ferrexpo will report its full
year results for the period ended 31 December 2012 on 13 March
2013.
The proceeds of the expected Notes Offering, if issued, will be
used for general corporate purposes, to reduce reliance on secured
lending and to add further liquidity. This is consistent with the
Group's strategy to maintain prudent financial ratios enabling it
to develop its substantial iron ore reserves through the economic
cycle. For the nine months to September 2012, the Group had a net
debt to LTM EBITDA ratio of below 1 times.
Highlights for the nine months ended 30 September 2012 are
presented below:
Financial
-- Turnover of US$1,082.6 million (9M 2011: US$1,313.8 million)
-- Net profit before taxation of US$228.8 million (9M 2011: US$533.6 million)
-- EBITDA of US$328.8 million (9M 2011: US$612.3 million)
-- Group consolidated shareholder equity of US$1,545.8 million (9M 2011: US$1,265.8 million)
-- Group Net financial indebtedness of US$337.8 million (9M 2011:US$16.4 million)
-- Cash and cash equivalents of US$673.9 million (9M 2011: US$543.2 million)
Sales and Marketing
-- Average benchmark China CFR 62% Fe fines price was US$131 per
tonne (9M 2011: US$177 per tonne)
-- Sales volumes were 7.0 million tonnes of pellets (9M 2011:
7.2 million tonnes of pellets)
-- Lower prices were partially mitigated through reduced freight
rates to seaborne markets
-- Growth markets accounted for 42% of sales up from 36% of
sales for the prior year period
Operations
-- 6.9 million tonnes of pellet production, from own ore(9M
2011: 6.7 million tonnes)
-- C1 cash cost of US$59.9 per tonne (9M 2011: US$49.4 per
tonne)
-- C1 cash cost impacted by stable exchange rate between
Ukrainian hryvnia and US dollar and local inflation including
electricity tariff and gas price increases
Growth Projects
-- Growth projects progressed as planned on budget and
schedule
-- First ore achieved at FYM in July 2012, commercial production
expected in 2013
-- FYM mining license renewed for 20 years to 2032
-- 37% increase in capital investment for the period to US$324
million (9M 2011: US$236 million)
VAT
-- Net VAT outstanding as of 30 September 2012 was US$269.6
million (9M 2011: US$149.7 million)
-- A US$15.9 million discount has been recorded to reflect the
time value of money for VAT and the expectation that a portion of
VAT will be recovered after more than one year
Key financial information is summarised in the table below
US$'000 unless otherwise stated
9 months 9 months Change Year ended
ended ended 31.12.11
30.09.12 30.09.11
(unaudited) (unaudited) (unaudited)
Pellets produced from own ore (thousand
tonnes) 6,934 6,728 3% 9,063
Total pellet production (thousand
tonnes) 7,156 7,257 (1%) 9,811
Sales volumes (thousand tonnes) 6,954 7,175 (3%) 9,875
Revenue 1,082.6 1,313.8 (18%) 1,788.0
EBITDA(1) 328.8 612.3 (46%) 800.9
Profit before tax and finance 288.7 581.0 (50%) 758.6
Diluted EPS (US cents per share) 32.4 75.4 (57%) 96.7
Net cash flow from operating activities 107.3 428.9 (75%) 502.7
Capital investment 323.8 236.0 37% 380.4
VAT outstanding 269.6 149.7 80% 172.4
Net debt / (Net funds position) 337.8 16.4 (80.2)
Cash and cash equivalents 673.9 543.2 24% 890.2
Net debt to LTM EBITDA 0.7 0.0 0.1
(1) EBITDA - the Group calculates EBITDA as profit from
continuing operations before tax and finance plus depreciation and
amortisation and non-recurring exceptional items included in other
income and other expenses, and the net of gains and losses from
disposal of investments, property, plant and equipment.
For further information, please
contact:
Ferrexpo:
Ingrid McMahon +44 207 389 8304
Pelham Bell Pottinger
Charles Vivian +44 207 861 3126
Lorna Spears +44 207 861 3883
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets
in Ukraine. It is principally involved in the production and export
of high quality iron ore pellets, which are used in the manufacture
of steel. Ferrexpo's resource base is one of the largest iron ore
deposits in the world. Its current producing asset, FPM, produced
approximately 10 million tonnes of iron ore pellets in 2012 making
it the largest exporter of pellets in the CIS. The Company has a
diversified customer base supplying steel mills in Austria,
Slovakia, Czech Republic, Germany and other European states, as
well as in China, India, Japan, Taiwan and South Korea. Ferrexpo is
listed on the main market of the London Stock Exchange under the
ticker FXPO. For further information, please visit
www.ferrexpo.com
The information contained herein is not for publication or
distribution, directly or indirectly, in or into the United States
of America. The materials do not constitute an offer of securities
for sale in the United States of America, nor may the securities be
offered or sold in the United States of America absent registration
or an exemption from registration as provided in the U.S.
Securities Act of 1933, as amended (the "U.S. Securities Act), and
the rules and regulations thereunder. There is no intention to
register any portion of the offering in the United States of
America or to conduct a public offering of securities in the United
States of America and the securities will only be offered for sale
in the United States of America to "qualified institutional buyers"
(QIBs) as defined in and in reliance upon Rule 144A under the U.S.
Securities Act and will only be offered for sale outside the United
States of America to persons other than U.S. persons under
Regulation S under the U.S. Securities Act.
The information contained herein shall not constitute an offer
to sell or the solicitation of an offer to buy, nor shall there be
any sale of the securities referred to herein in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior
to registration, exemption from registration or qualification under
the securities laws of any such jurisdiction. The offering and the
distribution of this communication and other information referred
to herein may be restricted by law and persons into whose
possession this communication or such other information comes
should inform themselves about and observe any such restriction.
Any failure to comply with these restrictions may constitute a
violation of the securities laws of any such jurisdiction.
This communication is not being made, and this communication has
not been approved, by an authorised person for the purposes of
section 21 of the Financial Services and Markets Act 2000, as
amended (the "FSMA"). Accordingly, this communication is not being
distributed to, and must not be passed on to; the general public in
the United Kingdom or to persons in the United Kingdom save in
circumstances where section 21(1) of the FSMA does not apply. This
announcement is made to and is directed only at persons in the
United Kingdom having professional experience in matters relating
to investments who fall within the definition of "investment
professionals" in Article 19(5) or are high net worth companies,
unincorporated associations etc falling within Article 49(2), in
each case of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, and to those persons to whom it can
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or otherwise acquire such securities will be engaged in only with,
such relevant persons. No other person should rely or act upon it.
This communication is not intended for distribution to and must not
be passed on to any retail client.
Interim Consolidated Income Statements
9 months 9 months Year
ended ended ended
30.09.12 30.09.11 31.12.11
------------------------------------------------- ------
US$'000 Notes (unaudited) (unaudited) (audited)
------------------------------------------------- ------ ------------ ------------ ----------
Revenue 4 1,082,608 1,313,827 1,788,012
Cost of sales 3/5 (502,905) (473,902) (649,544)
------------------------------------------------- ------
Gross profit 579,703 839,925 1,138,468
------------------------------------------------- ------ ------------ ------------ ----------
Selling and distribution expenses 6 (233,371) (218,061) (317,951)
General and administrative expenses 7 (41,821) (38,663) (51,969)
Other income 7,019 5,323 6,943
Other expenses (22,117) (8,825) (17,091)
Operating foreign exchange losses 8 (447) (605) (1,360)
------------------------------------------------- ------
Operating profit from continuing operations
before adjusted items 288,966 579,094 757,040
------------------------------------------------- ------ ------------ ------------ ----------
Write-offs and impairment losses 9 (518) (198) (478)
Share of profit from associates 1,604 2,405 2,012
Losses on disposal of property, plant and
equipment (1,389) (284) (46)
-------------------------------------------------
Profit before tax and finance 288,663 581,017 758,528
------------------------------------------------- ------ ------------ ------------ ----------
Finance income 1,807 1,862 2,511
Finance expense (66,279) (49,818) (68,205)
Non-operating foreign exchange gains/(losses) 8 4,588 527 (1,934)
------------------------------------------------- ------
Profit before tax 228,779 533,588 690,900
------------------------------------------------- ------ ------------ ------------ ----------
Income tax expense (37,581) (88,138) (115,964)
------------------------------------------------- ------ ------------ ------------ ----------
Profit for the period/year 191,198 445,450 574,936
Attributable to:
Equity shareholders of Ferrexpo plc 189,958 440,834 567,822
Non-controlling interests 1,240 4,616 7,114
------------------------------------------------- ------ ------------ ------------ ----------
191,198 445,450 574,936
------------------------------------------------- ------ ------------ ------------ ----------
Earnings per share:
Basic (US cents) 10 32.48 75.48 97,09
Diluted (US cents) 10 32.44 75.40 96.67
Interim Consolidated Statement of Comprehensive Income
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
----------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
---------------------------------------- ---------------- ---------------- ----------
Profit for the period/year 191,198 445,450 574,936
---------------------------------------- ---------------- ---------------- ----------
Exchange differences on translating
foreign
operations (477) (1,105) (3,024)
Income tax effect - - -
Exchange differences arising on
hedging
of foreign operations (201) (243) (894)
Income tax effect 32 40 153
Net gains/(losses) on
available-for-sale
investments (113) (1,853) (1,868)
Income tax effect 25 464 437
---------------- ---------------- ----------
Other comprehensive income for the
period/year,
net of tax (734) (2,697) (5,196)
---------------------------------------- ---------------- ---------------- ----------
Total comprehensive income for the
period/year,
net of tax 190,464 442,753 569,740
---------------------------------------- ---------------- ---------------- ----------
Total comprehensive income
attributable
to:
Equity shareholders of Ferrexpo plc 189,232 438,198 562,883
Non-controlling interests 1,232 4,555 6,857
---------------------------------------- ---------------- ---------------- ----------
190,464 442,753 569,740
---------------------------------------- ---------------- ---------------- ----------
Interim Consolidated Statement of Financial Position
As at 30.09.12 As at As at
30.09.11 31.12.11
(audited)
---------------------------------------------- ------ -----------
US$'000 Notes (unaudited) (unaudited)
---------------------------------------------- ------ --------------- ------------ -----------
Assets
Property, plant and equipment 11 1,246,624 844,061 924,690
Goodwill and other intangible assets 108,131 103,224 103,240
Investments in associates 19,416 21,329 19,186
Available-for-sale financial assets 18 765 1,722 1,290
Other non-current assets 53,551 42,400 93,358
Other taxes recoverable and prepaid 12 91,008 - -
Deferred tax assets 27,130 16,512 23,426
Total non-current assets 1,546,625 1,029,248 1,165,190
---------------------------------------------- ------ --------------- ------------ -----------
Inventories 143,478 108,840 117,046
Trade and other receivables 86,614 93,772 128,905
Prepayments and other current assets 24,037 44,695 22,720
Income taxes recoverable and prepaid 17,527 345 384
Other taxes recoverable and prepaid 12 178,853 150,633 172,951
Cash and cash equivalents 13 673,913 543,188 890,154
---------------------------------------------- ------ --------------- ------------ -----------
1,124,422 941,473 1,332,160
---------------------------------------------- ------ --------------- ------------ -----------
Assets classified as held for sale 1,784 2,938 1,845
---------------------------------------------- ------ --------------- ------------ -----------
Total current assets 1,126,206 944,411 1,334,005
Total assets 2,672,831 1,973,659 2,499,195
---------------------------------------------- ------ --------------- ------------ -----------
Equity and liabilities
Share capital 14 121,628 121,628 121,628
Share premium 185,112 185,112 185,112
Other reserves (348,089) (346,451) (348,603)
Retained earnings 1,565,818 1,287,524 1,414,512
------
Equity attributable to equity shareholders
of the parent 1,524,469 1,247,813 1,372,649
---------------------------------------------- ------ --------------- ------------ -----------
Non-controlling interest 21,367 18,034 20,480
------
Total equity 1,545,836 1,265,847 1,393,129
---------------------------------------------- ------ --------------- ------------ -----------
Interest-bearing loans and borrowings 3/15 977,985 529,343 951,430
Defined benefit pension liability 19,331 23,921 13,329
Provision for site restoration 3,194 2,833 3,015
Deferred tax liability 2,152 1,823 2,232
------
Total non-current liabilities 1,002,662 557,920 970,006
---------------------------------------------- ------ --------------- ------------ -----------
Interest-bearing loans and borrowings 3/15 33,724 30,244 18,948
Trade and other payables 40,524 38,788 42,648
Accrued liabilities and deferred
income 25,274 25,832 29,713
Income taxes payable 12,789 36,398 36,674
Other taxes payable 12,022 18,630 8,077
------
Total current liabilities 124,333 149,892 136,060
---------------------------------------------- ------ --------------- ------------ -----------
Total liabilities 1,126,995 707,812 1,106,066
---------------------------------------------- ------ --------------- ------------ -----------
Total equity and liabilities 2,672,831 1,973,659 2,499,195
---------------------------------------------- ------ --------------- ------------ -----------
The financial statements were approved by the Board of Directors
on 24 January 2013.
Kostyantin Zhevago Christopher Mawe
Chief Executive Officer Chief Financial Officer
Interim Consolidated Statement of Cash Flows
9 months 9 months Year
ended 30.09.12 ended ended
30.09.11 31.12.11
---------------------------------------------------- ------
US$'000 Notes (unaudited) (unaudited) (audited)
---------------------------------------------------- ------ ---------------- ------------ ----------
Profit before tax 228,779 533,588 690,900
---------------------------------------------------- ------ ---------------- ------------ ----------
Adjustments for:
Depreciation of property, plant and
equipment and amortisation of intangible
assets 36,954 30,100 41,003
Interest expense 61,515 46,917 62,321
Interest income (2,035) (3,379) (2,511)
Share of income of associates (1,604) (2,405) (2,012)
Movement in allowance for doubtful
receivables (313) (3,333) (2,406)
Loss on disposal of property, plant
and equipment 1,389 284 46
Write-offs and impairment losses 9 518 198 478
Site restoration provision 176 89 269
Employee benefits 9,276 10,405 1,069
Share based payments 1,240 605 891
Operating foreign exchange losses 8 447 605 1,360
Non-operating foreign exchange (gains)/losses 8 (4,588) (527) 1,934
---------------------------------------------------- ------ ---------------- ------------ ----------
Operating cash flow before working
capital changes 331,754 613,147 793,342
---------------------------------------------------- ------ ---------------- ------------ ----------
Changes in working capital:
Decrease/(Increase) in trade and
other receivables 32,935 (4,606) (17,391)
Increase in inventories (26,368) (4,013) (12,220)
Decrease in trade and other accounts payable (1,466) (10,861) (9,788)
Increase in VAT recoverable and other
taxes recoverable and payable (108,864) (47,087) (72,051)
---------------------------------------------------- ------
Cash generated from operating activities 227,991 546,580 681,892
---------------------------------------------------- ------ ---------------- ------------ ----------
Interest paid (33,854) (16,559) (43,266)
Income tax paid (83,483) (98,263) (132,176)
Post-employment benefits paid (3,372) (2,809) (3,741)
---------------------------------------------------- ------ ---------------- ------------ ----------
Net cash flows from operating activities 107,282 428,949 502,709
---------------------------------------------------- ------ ---------------- ------------ ----------
Cash flows from investing activities
Purchase of property, plant and equipment (318,218) (234,340) (378,302)
Proceeds from disposal of property, 562 - -
plant and equipment
Purchase of intangible assets (5,611) (1,675) (2,092)
Interest received 2,097 1,407 2,067
Dividends from associates 3,123 - 2,207
Proceeds from loans to associates - 1,000 1,000
Cash payment for acquisition made
in 2010 - (38,045) (38,045)
Acquisition of subsidiaries, net
of cash acquired - - (390)
---------------------------------------------------- ------ ---------------- ------------ ----------
Net cash flows used in investing
activities (318,047) (271,653) (413,555)
---------------------------------------------------- ------ ---------------- ------------ ----------
Cash flows from financing activities
Proceeds from borrowings and finance 41,912 514,800 952,269
Repayment of borrowings and finance (10,569) (393,142) (410,027)
Arrangement fees paid (350) (18,800) (21,021)
Dividends paid to equity shareholders
of Ferrexpo plc (35,555) (35,697) (38,663)
Dividends paid to non-controlling
shareholders (634) (264) (880)
Net cash flows from/(used) in financing
activities (5,196) 66,897 481,678
---------------------------------------------------- ------ ---------------- ------------ ----------
Net (decrease)/increase in cash and
cash equivalents (215,961) 224,193 570,832
Cash and cash equivalents at the beginning
of the period/year 890,154 319,470 319,471
Currency translation differences (280) (475) (149)
---------------------------------------------------- ------ ---------------- ------------ ----------
Cash and cash equivalents at the
end of the period/year 13 673,913 543,188 890,154
---------------------------------------------------- ------ ---------------- ------------ ----------
Interim Consolidated Statement of Changes in Equity
For the
financial year
2011
and the nine
months ended
30 September
2012 Attributable to equity shareholders of the parent
---------------------------------------------------------------------------------------------------------
Uniting Employee Net
of Treasury Benefit unrealised Total
Issued Share interest share Trust gains Translation Retained capital Non-controlling Total
US$ 000 capital premium reserve reserve reserve reserve reserve earnings and reserves interests equity
-------- -------- --------- --------- --------- ------------ ---------- ------------- ---------------- ----------
At 1 January
2011 121,628 185,112 31,780 (77,260) (10,172) 2,515 (291,283) 885,353 847,673 13,801 861,474
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
Profit for the
period - - - - - - - 567,822 567,822 7,114 574,936
Other
comprehensive
income - - - - - (1,431) (3,508) - (4,939) (257) (5,196)
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
income
for the period - - - - - (1,431) (3,508) 567,822 562,883 6,857 569,740
Equity dividends
paid to
shareholders
of Ferrexpo plc - - - - - - - (38,663) (38,663) (322) (38,985)
Share based
payments - - - - 756 - - 756 756
Adjustments
relating to the
increase in
non-controlling
interests - - - - - - - 144 144
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
At 31 December
2011 (audited) 121,628 185,112 31,780 (77,260) (9,416) 1,084 (294,791) 1,414,512 1,372,649 20,480 1,393,129
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
Profit for the
period - - - - - - - 189,958 189,958 1,240 191,198
Other
comprehensive
income - - - - - (89) (637) - (726) (8) (734)
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
income
for the period - - - - - (89) (637) 189,958 189,232 1,232 190,464
Equity dividends
paid to
shareholders
of Ferrexpo plc - - - - - - - (38,652) (38,652) (345) (38,997)
Share based
payments - - - - 1,240 - - - 1,240 - 1,240
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
At 30 September
2012
(unaudited) 121,628 185,112 31,780 (77,260) (8,176) 995 (295,428) 1,565,818 1,524,469 21,367 1,545,836
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
For the nine
months ended
30 September
2011 Attributable to equity shareholders of the parent
Uniting Employee Net
of Treasury Benefit unrealised Total
Issued Share interest share Trust gains Translation Retained capital Non-controlling Total
US$ 000 capital premium reserve reserve reserve reserve reserve earnings and reserves interests equity
----------------- -------- -------- --------- --------- --------- ------------ ---------- ------------- ---------------- ----------
At 1 January
2011 121,628 185,112 31,780 (77,260) (10,172) 2,515 (291,283) 885,353 847,673 13,801 861,474
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
Profit for the
period - - - - - - - 440,834 440,834 4,616 445,450
Other
comprehensive
income - - - - - (1,390) (1,246) - (2,636) (61) (2,697)
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
income
for the period - - - - - (1,390) (1,246) 440,834 438,198 4,555 442,753
Equity dividends
paid to
shareholders
of Ferrexpo plc - - - - - - - (38,663) (38,663) (322) (38,985)
Share based
payments - - - - 605 - - - 605 - 605
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
At 30 September
2011
(unaudited) 121,628 185,112 31,780 (77,260) (9,567) 1,125 (292,529) 1,287,524 1,247,813 18,034 1,265,847
----------------- -------- -------- --------- --------- --------- ----------- ------------ ---------- ------------- ---------------- ----------
Notes to the Interim Condensed Consolidated Financial
Statements
Note 1: Corporate information
Organisation and operation
Ferrexpo plc (the 'Company') is incorporated in the United
Kingdom with registered office at 2-4 King Street, London, SW1Y
6QL, UK. Ferrexpo plc and its subsidiaries (the 'Group') operate
two mines and a processing plant near Kremenchuk in Ukraine, an
interest in a port in Odessa and sales and marketing activities in
Switzerland, Dubai and Kiev. The Group also owns a logistics group
located in Austria which operates a fleet of vessels operating on
the Rhine and Danube waterways. The Group's operations are
vertically integrated from iron ore mining through to iron ore
concentrate and pellet production and subsequent logistics. The
Group's mineral properties lie within the Kremenchuk Magnetic
Anomaly and are currently being exploited at the
Gorishne-Plavninsky and Lavrikovsky ('GPL') and Yeristovo
deposits.
The majority shareholder of the Group is Fevamotinico S.a.r.l.
('Fevamotinico'), a company ultimately owned by The Minco Trust, of
which Kostyantin Zhevago, the Group's Chief Executive Officer, is a
beneficiary. At the time this report was published, Fevamotinico
held 51.0% (30 September 2011: 51.0%; 31 December 2011: 51.0%) of
Ferrexpo plc's issued share capital. The Group's operations are
largely conducted through Ferrexpo plc's principal subsidiary, OJSC
Ferrexpo Poltava Mining and logistics for Western Europe are
managed through the Helogistics subsidiaries.
The Group comprises of Ferrexpo plc and its consolidated
subsidiaries as set out below:
Equity interest owned
Name Country Principal activity 30.09.12 30.09.11 31.12.11
of incorporation
% % %
--------------------------- ------------------- ----------------------- --------- --------- ---------
OJSC Ferrexpo Poltava
Mining(1) Ukraine Iron ore mining 97.3 97.3 97.3
Sale of iron ore
Ferrexpo AG(2) Switzerland pellets 100.0 100.0 100.0
Trade, transportation
DP Ferrotrans(3) Ukraine services 97.3 97.3 97.3
United Energy Company
LLC(3) Ukraine Holding company 97.3 97.3 97.3
Ferrexpo Finance plc(1) England Finance 100.0 100.0 100.0
Ferrexpo Services Management services
Limited(1) Ukraine & procurement 100.0 100.0 100.0
Ferrexpo Hong Kong
Limited(1) China Marketing services 100.0 100.0 100.0
LLC Ferrexpo Yeristovo
GOK(4) Ukraine Iron ore mining 100.0 98.6 100.0
LLC Ferrexpo Belanovo
GOK(4) Ukraine Iron ore mining 100.0 98.6 100.0
Service company
Nova Logistics Limited(3) Ukraine (dormant) 51.0 51.0 51.0
Ferrexpo Middle East Sale of iron ore
FZE(6) U.A.E. pellets 100.0 100.0 100.0
Ferrexpo Singapore
PTE Ltd(6) Singapore Marketing services 100.0 100.0 100.0
Helogistics Holding
GmbH(5) Austria Holding company 100.0 100.0 100.0
EDDSG GmbH(5) Austria Barging company 100.0 100.0 100.0
DDSG Tankschiffahrt
GmbH(5) Austria Barging company 100.0 100.0 100.0
Helogistics Transport
GmbH(5) Austria Barging company 100.0 100.0 100.0
DDSG MahartKft. (formerly
MahartDuna Cargo Kft.)
(5) Hungary Barging company 100.0 100.0 100.0
Pancar Kft.(5) Hungary Barging company 100.0 100.0 100.0
Ferrexpo Port Services
GmbH(7) Austria Port services 100.0 100.0 100.0
Ferrexpo Shipping
International Ltd. Marshall
(8) Islands Holding company 100.0 100.0 100.0
Marshall
Iron Destiny Ltd.(8) Islands Holding company 100.0 100.0 100.0
Transcanal SRL(9) Romania Port services 77.6 - 77.6
Helogistics Asset Asset holding
Leasing Kft. (7) Hungary company 100.00 - -
Universal Service Asset holding
Group Ltd.(10) Ukraine company 100.0 - -
--------------------------- ------------------- ----------------------- --------- --------- ---------
(1) The Group's interest in these entities is held through
Ferrexpo AG.
(2) Ferrexpo AG was the holding company of the Group until, as a
result of the pre-IPO restructuring, Ferrexpo plc became the
holding company on 24 May 2007.
(3) The Group's interest in these entities is held through OJSC
Ferrexpo Poltava Mining.
(4) The Group's interest in this entity is held through both
Ferrexpo AG and Ferrexpo Service Limited.
(5) The Group's interest in these entities is held through
Ferrexpo AG.
(6) Both subsidiaries were incorporated in March 2011. The
Group's interest in Ferrexpo Middle East FZE is held by Ferrexpo AG
whereas Ferrexpo Singapore PTE Ltd is a subsidiary of Ferrexpo
Middle East FZE.
(7) The subsidiaries were incorporated in April and December
2011 and the Group's interest is held through Helogistics Holding
GmbH.
(8) The subsidiaries were incorporated on 14 July 2011.
(9) The company was acquired in October 2011 and its interest is
held through Helogistics Holding GmbH.
(10) The company was incorporated in December 2012 and the
Group's interest is held through Ferrexpo Services Limited.
Note 2: Summary of significant accounting policies
At 30 September 2012, the Group also holds through OJSC Ferrexpo
Poltava Mining an interest of 48.6% (30 September 2011: 48.6%; 31
December 2011: 48.6%) in TIS Ruda, a Ukrainian port located on the
Black Sea. As this is an associate, it is accounted for using the
equity method of accounting.
Basis of preparation
The interim condensed consolidated financial statements for the
nine month period ended 30 September 2012 have been prepared in
accordance with International Accounting Standard ('IAS') 34
Interim Financial Reporting. The interim condensed consolidated
financial statements do not include all of the information and
disclosures required in the annual financial statements, and should
be read in conjunction with the Group's annual financial statements
as at 31 December 2011.The interim condensed consolidated financial
statements do not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. The financial information
for the full year is based on the statutory accounts for the
financial year ended 31 December 2011. A copy of the statutory
accounts for that year, which were prepared in accordance with
International Financial Reporting Standards ('IFRS') issued by the
International Accounting Standard Board ('IASB'), as adopted by the
European Union as they apply to financial statements of the Group
for the year ended 31 December 2011, has been delivered to the
Register of Companies. The auditors' report under section 495 of
the Companies Act 2006 in relation to those accounts was
unqualified and did not contain a statement under 498(2) or 498(3)
of the Companies Act 2006.
Financing and going concern
At the period end, the Group's main debt facilities comprised a
US$500 million Eurobond which is due for repayment on 7 April 2016
and a US$420 million revolving pre-export finance facility
including a commitment amortisation over a 24 month period from
September 2014 to August 2016. The Group is of the view that it can
generate sufficient cash flows to fully repay the borrowings as
they fall due in compliance with the terms and conditions of the
loan facility and Eurobond terms and conditions.
The Group faces several risks to its business and strategy,
which are included in the Principal Risks section of published
Interim Report 2012 and these financial statements should be read
in conjunction with this report.
The Directors are of the view that the Group is a going concern
and the interim consolidated financial statements have been drawn
up on this basis.
Changes in accounting policies
The accounting policies and methods of computation adopted in
the preparation of the interim condensed consolidated financial
statements are the same as those followed in the preparation of the
Group's annual financial statements for the year ended 31 December
2011 except for the adoption of new amendments to IFRSs effective
as of 1 January 2012, noted below:
IAS 12 Income taxes - recovery of underlying assets
The amendment to the standard was issued in December 2010 and
became effective for financial years beginning on or after 1
January 2012.The amendment provides an exception to the general
principle of measuring deferred taxes for investment properties
measured at fair value and introduces a rebuttable presumption that
the carrying amount of such assets will be recovered entirely
through sale. The adoption of this amended standard did not have an
impact on the financial position or performance of the Group.
IFRS 1 First-time adoption of IFRS - severe hyperinflation and
removal of fixed dates for first time adopters
The amendments were issued in December 2010 and became effective
for annual periods beginning on or after 1 July 2011. The
amendments to IFRS 1 provide guidance for entities emerging from
severe hyperinflation and replace the date of prospective
application of the de-recognition of financial assets and
liabilities of '1 January 2004' with 'the date of transition to
IFRS'. Both amendments did not have an impact on the financial
position or performance of the Group.
IFRS 7 Financial instruments: disclosures - transfer of
financial assets
The amendment to IFRS became effective for financial years
beginning on or after 1 July 2011. The amendment requires the
disclosure of information that enables the users of the financial
statements to understand the relationship between transferred
financial assets that are not de-recognised in their entirety and
the associated liabilities as well as, in the case of fully
de-recognised financial assets in which the entity retains
continuing involvement, information to evaluate the nature of, and
associated risks with continuing involvement in the derecognized
financial assets. The application of this amendment did not have
impact on the financial statements of the Group.
Seasonality
The Group's operations are not affected by seasonality.
Note 3: Segment information
The Group is managed as a single entity which produces, develops
and markets its principal product, iron ore pellets, for sale to
the metallurgical industry. While the revenue generated by the
Group is analysed, there are no separate measures of profit
reported to the Group's Chief Operating Decision-Maker ('CODM'). In
accordance with IFRS 8 Operating Segments, the Group presents its
results in a single segment which are disclosed in the income
statement for the Group. The management monitors the operating
result of the Group based on a number of measures including EBITDA,
C1 costs and the net financial indebtedness.
EBITDA
The Group calculates EBITDA as profit from continuing operations
before tax and finance plus depreciation and amortisation and
non-recurring exceptional items included in other income and other
expenses, share based payment expenses and the net of gains and
losses from disposal of investments and property, plant and
equipment. The Group presents EBITDA because it believes that
EBITDA is a useful measure for evaluating its ability to generate
cash and its operating performance.
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
------------------------------------ ------
US$ 000 Notes (unaudited) (unaudited) (audited)
------------------------------------ ------ ---------------- ---------------- ----------
Profit before tax and finance 288,663 581,598 758,528
Write-offs and impairment losses 9 518 198 478
Share based payments 1,240 735 891
Losses on disposal of PPE 1,389 285 46
Depreciation and amortisation 36,954 30,100 41,003
------------------------------------ ------ ---------------- ---------------- ----------
EBITDA 328,764 612,917 800,946
------------------------------------ ------ ---------------- ---------------- ----------
C1 costs
C1 costs represent the cash costs of production of iron ore
pellets from own ore divided by production volume of own ore, and
excludes non-cash costs such as depreciation, pension costs and
inventory movements, costs of purchased ore and concentrate and
production cost of gravel.
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
--------------------------------------
US$'000 (unaudited) (unaudited) (audited)
-------------------------------------- ---------------- ---------------- ----------
Cost of sales - pellet production 462,651 437,430 600,790
Depreciation and amortisation (25,988) (20,911) (28,639)
Purchased concentrate and other
items for resale (23,638) (66,573) (102,908)
Processing costs for purchased ore
and concentrate (2,559) (4,952) (7,873)
Production cost of gravel (476) (340) (572)
Inventory movements 19,456 5,053 481
Pension service costs (4,224) (3,942) 5,334
Other (10,089) (13,551) (7,099)
-------------------------------------- ---------------- ---------------- ----------
C1 cost 415,133 332,214 459,514
-------------------------------------- ---------------- ---------------- ----------
Own ore produced (tonnes) 6,933,900 6,727,700 9,063,398
-------------------------------------- ---------------- ---------------- ----------
C1 cash cost per tonne US$ 59.9 49.4 50.7
-------------------------------------- ---------------- ---------------- ----------
Net financial indebtedness
Net financial indebtedness as defined by the Group comprises
cash and cash equivalents, term deposits, interest bearing loans
and borrowings.
As at 30.09.12 As at 30.09.11 As at 31.12.11
----------------------------------------- ------
US$ 000 Notes (unaudited) (unaudited) (audited)
----------------------------------------- ------ --------------- --------------- ---------------
Cash and cash equivalents 13 673,913 543,188 890,154
Interest bearing loans and borrowings
- current 15 (33,724) (30,244) (18,948)
Interest bearing loans and borrowings
- non-current 15 (977,985) (529,343) (951,430)
----------------------------------------- ------ --------------- --------------- ---------------
Net financial indebtedness (337,796) (16,399) (80,224)
----------------------------------------- ------ --------------- --------------- ---------------
Note 4: Revenue
Revenue consisted of the following:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
--------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
-------------------------------------- ---------------- ---------------- ----------
Revenue from sales of ore pellets:
Export 1,010,585 1,241,409 1,699,154
Ukraine 319 273 742
-------------------------------------- ---------------- ---------------- ----------
1,010,904 1,241,682 1,699,896
-------------------------------------- ---------------- ---------------- ----------
Revenue from logistics and bunker
business 62,664 58,066 73,276
Revenue from services provided 2,160 5,113 4,092
Revenue from other sales 6,880 8,967 10,748
-------------------------------------- ---------------- ---------------- ----------
Total revenue 1,082,608 1,313,828 1,788,012
-------------------------------------- ---------------- ---------------- ----------
Export sales of iron ore pellets and concentrate by geographical
destination were as follows:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
------------------------
US$'000 (unaudited) (unaudited) (audited)
------------------------ ---------------- ---------------- ----------
China 388,940 385,007 569,924
Austria 275,779 352,348 453,586
Slovakia 109,824 86,274 121,041
Czech Republic 96,115 92,467 119,793
Turkey 49,213 55,995 83,722
Japan 33,041 52,375 88,875
Germany 21,496 29,157 28,898
Serbia 19,723 134,054 158,687
India 14,390 37,653 47,119
Hungary 2,064 16,079 27,509
------------------------ ---------------- ---------------- ----------
Total export revenue 1,010,585 1,241,409 1,699,154
------------------------ ---------------- ---------------- ----------
During the period ended 30 September 2012 sales made to three
customers accounted for approximately 47.7% of the revenues from
export sales of ore pellets(30 September 2011: 57.8%; 31 December
2011: 50.2%).
Sales made to two customers individually amounted to more than
10% of total sales. These are disclosed below:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
--------------
US$'000 (unaudited) (unaudited) (audited)
-------------- ---------------- ---------------- ----------
Customer A 275,779 352,348 453,586
Customer B 109,824 142,269 279,728
Note 5: Cost of sales
Cost of sales consisted of the following:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
-----------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
----------------------------------------- ---------------- ---------------- ----------
Materials 67,022 60,053 75,246
Purchased concentrate and other
items for resale 23,638 66,753 102,908
Electricity 105,924 88,468 121,364
Personnel costs 52,958 45,067 51,677
Spare parts and consumables 19,327 14,284 20,968
Depreciation and amortisation 25,988 20,911 28,639
Fuel 40,411 33,687 47,343
Gas 57,181 42,987 63,485
Repairs and maintenance 56,843 45,676 63,801
Royalties and levies 9,355 7,584 10,437
Cost of sales from logistics business 17,601 16,981 23,363
Bunker fuel 22,653 19,490 25,391
Inventory movements (19,456) (5,053) (481)
Other 23,460 17,014 15,403
----------------------------------------- ---------------- ---------------- ----------
Total cost of sales 502,905 473,902 649,544
----------------------------------------- ---------------- ---------------- ----------
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
----------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
---------------------------------------- ---------------- ---------------- ----------
Cost of sales - pellet production 462,651 437,431 600,790
Cost of sales - logistics and bunker
business 40,254 36,471 48,754
---------------------------------------- ---------------- ---------------- ----------
Total cost of sales 502,905 473,902 649,544
---------------------------------------- ---------------- ---------------- ----------
Note 6: Selling and distribution expenses
Selling and distribution expenses consisted of the
following:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
-------------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
------------------------------------------- ---------------- ---------------- ----------
International freight for pellets 84,343 76,168 119,572
Railway transportation 71,346 64,879 89,185
Port charges 25,779 26,744 37,724
Other pellet transportation costs 8,069 7,977 13,453
Costs of logistics business 21,016 26,126 36,671
Gravel delivery costs 422 1,546 1,783
Advertising 7,217 5,127 6,911
Depreciation 6,709 6,112 8,231
Other 8,470 3,382 4,421
------------------------------------------- ---------------- ---------------- ----------
Total selling and distribution expenses 233,371 218,061 317,951
------------------------------------------- ---------------- ---------------- ----------
Note 7: General and administrative expenses
General and administrative expenses consisted of the
following:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
------------------------------------ ---------------- ---------------- ----------
Personnel costs 22,469 22,263 26,912
Buildings and maintenance 1,818 1,567 2,182
Taxes other than income tax and
other charges 1,093 1,695 1,480
Professional fees 3,547 3,776 7,799
Depreciation and amortisation 3,424 2,958 3,968
Communication 842 830 1,149
Vehicles maintenance and fuel 1,435 1,114 1,553
Repairs 1,071 845 1,365
Audit fees 1,164 1,050 1,445
Non-audit fees 254 280 510
Security 1,686 1,357 1,859
Other 3,018 928 1,747
------------------------------------ ---------------- ---------------- ----------
Total general and administrative
expenses 41,821 38,663 51,969
------------------------------------ ---------------- ---------------- ----------
Note 8: Foreign exchange gains and losses
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
---------------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
--------------------------------------------- ---------------- ---------------- ----------
Operating foreign exchange (losses)/gains (447) (605) (1,360)
Non-operating foreign exchange gains 4,588 527 (1,934)
--------------------------------------------- ---------------- ---------------- ----------
Total foreign exchange losses 4,141 (78) (3,294)
--------------------------------------------- ---------------- ---------------- ----------
Operating foreign exchange gains and losses are those items that
are directly related to the production and sale of pellets (e.g.
trade receivables, trade payables on operating expenditure).
Non-operating gains and losses are those associated with the
Group's financing and treasury activities and with local income tax
payables.
Note 9: Write-offs and impairment losses
Impairment losses relate to adjustments made against the
carrying value of assets where this is higher than the recoverable
amount.
Write-offs and impairment losses for the nine month period ended
30 September 2012 consisted of the following:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
------------------------------------ ---------------- ---------------- ----------
Write-off of inventories - - 105
Write-off of property, plant and
equipment 90 - 175
Impairment of available-for-sale
financial assets 428 198 198
------------------------------------ ---------------- ---------------- ----------
Total write-offs and impairment
losses 518 198 478
------------------------------------ ---------------- ---------------- ----------
The impairment of the available-for-sale financial assets is
related to the investment in VostokRuda LLC.
Note 10: Earnings per share and dividends paid and proposed
Basic EPS is calculated by dividing the net profit for the
period attributable to ordinary equity shareholders of Ferrexpo plc
by the weighted average number of ordinary shares.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue on the
assumption of conversion of all potentially dilutive ordinary
shares. All share awards are potentially dilutive and have been
considered in the calculation of diluted earnings per share.
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
--------------------------------------------
(unaudited) (unaudited) (audited)
-------------------------------------------- ---------------- ---------------- ----------
Profit for the period / year attributable
to equity shareholders:
Basic earnings per share (US cents) 32.48 75.48 97,09
Diluted earnings per share (US cents) 32.44 75.40 96.67
Underlying earnings for the period
/ year:
Basic earnings per share (US cents) 32.13 75.44 97,47
Diluted earnings per share (US cents) 32.09 75.36 97,35
-------------------------------------------- ---------------- ---------------- ----------
The calculation of the basic and diluted earnings per share is
based on the following data:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
-----------------------------------------
Thousands (unaudited) (unaudited) (audited)
----------------------------------------- ---------------- ---------------- ----------
Weighted average number of shares
Basic number of ordinary shares
outstanding 585,041 584,788 584,811
Effect of dilutive potential ordinary
shares 913 617 730
----------------------------------------- ---------------- ---------------- ----------
Diluted number of ordinary shares
outstanding 585,954 585,405 585,541
----------------------------------------- ---------------- ---------------- ----------
The basic number of ordinary shares is calculated by subtracting
the shares held in treasury from the total number of ordinary
shares in issue.
'Underlying earnings' is an alternative earnings measure, which
the directors believe provides a clearer picture of the underlying
financial performance of the Group's operations. Underlying
earnings exclude adjusted items and is calculated after
non-controlling interest have been deducted from these items. The
calculation of underlying earnings per share is based on the
following earnings data:
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
------------------------------------------------- ------
US$ 000 Notes (unaudited) (unaudited) (audited)
------------------------------------------------- ------ ---------------- ---------------- ----------
Profit attributable to equity holders 189,958 440,834 567,822
Write-offs and impairment losses 9 518 198 478
Losses on disposal of PPE 1,389 284 46
Non-operating foreign exchange (gains)/losses 8 (4,588) (527) 1,934
Tax on adjusted items 652 (214) (282)
------------------------------------------------- ------ ---------------- ---------------- ----------
Underlying earnings 187,929 440,575 569,998
------------------------------------------------- ------ ---------------- ---------------- ----------
Adjusted items are those items of financial performance that the
Group believes should be separately disclosed on the face of the
income statement to assist in the understanding of the underlying
financial performance achieved by the Group. Adjusted items that
relate to the operating performance of the Group include impairment
charges and reversals and other exceptional items. Non-operating
adjusted items include gains and losses on disposal of investments
and businesses and non-operating foreign exchange gains and
losses.
Dividends
9 months 9 months Year
ended 30.09.12 ended 30.09.11 ended
31.12.11
-------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
------------------------------------- ---------------- ---------------- ----------
Proposed per ordinary share
Final dividend for 2011: 3.3 US
cents - - 19,301
------------------------------------- ---------------- ---------------- ----------
Total dividends proposed - - 19,301
------------------------------------- ---------------- ---------------- ----------
Paid per ordinary share
Interim dividend for 2012: 3.3 US 19,312 - -
cents
Final dividend for 2011: 3.3 US 19,340 - -
cents
Interim dividend for 2011: 3.3 US
cents - 19,301 19,301
Final dividend for 2010: 3.3 US
cents - 19,362 19,362
------------------------------------- ---------------- ---------------- ----------
Total dividends paid during the
period 38,652 38,663 38,663
------------------------------------- ---------------- ---------------- ----------
Note 11: Property, plant and equipment
During the nine months period ended 30 September 2012, the Group
acquired property, plant and equipment with a cost of
US$374,422thousand (30 September 2011: US$242,515 thousand; 31
December 2011: US$334,666 thousand) and disposed of property, plant
and equipment with original costs of US$8,814 thousand (30
September 2011: US$3,428 thousand; 31 December 2011: US$5,796
thousand).
Note 12: Other taxes recoverable and prepaid
As at 30.09.12 As at 30.09.11 As at 31.12.11
-------------------------------------
US$ 000 (unaudited) (unaudited) (audited)
------------------------------------- --------------- --------------- ---------------
VAT receivable 178,582 149,724 172,434
Other taxes prepaid 271 909 517
------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and
prepaid - current 178,853 150,633 172,951
------------------------------------- --------------- --------------- ---------------
VAT receivable 91,008 - -
------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and 91,008 - -
prepaid - non-current
------------------------------------- --------------- --------------- ---------------
VAT receivable is as a result of VAT paid on domestic Ukrainian
purchases of goods, capital equipment and services and on the
import of goods, capital equipment and services into Ukraine to the
extent that this cannot be offset on VAT paid on domestic sales.
Ferrexpo currently has limited domestic sales and exports the
majority of its products. As a result, VAT has to be recovered from
the Government tax authority and Ferrexpo is reliant on the normal
functioning of this system.
During the nine months period ended 30 September 2012, FPM
received VAT refunds in respect of 2011 and 2012 amounting to
US$39,585 thousand and paid Ukrainian VAT amounting to US$166,019
thousand, including US$61,050 thousand in respect of capital
expenditure. As a result the gross recoverable balance increased by
US$109,940 thousand to US$281,429 thousand (UAH2,249 million).
Management expects this amount to be fully recovered in local
currency. However, the exact timing of recovery and method of
settlement is subject to uncertainties, along with the prevailing
exchange rate to the US Dollar at the time of repayment. In the
past, VAT has been recovered in cash and by the issuance of
domestic local currency bonds. An alternative method of settlement
could be to offset amounts recoverable against current and future
corporate profit tax. A financial loss could result, for example
from the issuance of bonds which trade at a discount at the time of
issue; continued late repayment as a result of Government fiscal
constraints diminishing the present value of the receivable, or the
conversion to US Dollar of local currency received at a different
exchange rate to that recorded at the time of payment.
Management has considered these uncertainties including
potential continued International Monetary Fund support for the
Ukrainian national budget, domestic economic and budgetary
constraints, and current discussions with fiscal authorities in
making an estimate of the timing of recovery of the VAT due.
Management concluded that a large portion of the VAT is likely to
be repaid considerably beyond the settlement terms which will
result in additional funding costs for the Group. As a result, an
estimated discount of US$15,900 thousand has been recorded to
reflect this uncertainty and its effect is included in finance
expense. The discount was calculated on the basis that VAT refunds
will continue to be limited to an amount which is double monthly
corporation tax payments, which has been our recent experience.
Based on current management estimates, US$174,537 thousand of VAT
is expected to be recovered within one year of the period end, with
the remainder, amounting to US$91,008 thousand, net of the
associated discount to reflect the time value of money, recoverable
after more than one year of the period end.
Further information on the Ukrainian VAT situation is provided
in the risk section on page 23 of the Interim Report for the period
ended 30 June 2012.
Note 13: Cash and cash equivalents
As at 30 September 2012 the Group held cash and cash equivalents
of US$673,913 thousand (30 September 2011: US$543,188 thousand; 31
December 2011: US$890,154 thousand).
Note 14: Share capital and reserves
The share capital of Ferrexpo plc at 30 September 2012 was
613,967,956 (30 September 2011: 613,967,956; 31 December 2011:
613,967,956) ordinary shares at par value of GBP0.10 paid for cash,
resulting in share capital of US$121,628 thousand which is
unchanged since the Group's Initial Public Offering in June
2007.
This balance includes 25,343,814 shares (30 September 2011:
25,343,814 shares; 31 December 2011: 25,343,814 shares) which are
held in treasury, resulting from a share buyback that was
undertaken in September 2008, and 3,504,523 shares held in the
employee benefit trust reserve (30 September 2011: 3,744,658
shares; 31 December 2011: 3,744,658 shares).
As at 30 September 2012 other reserves attributable to equity
shareholders of Ferrexpo plc comprised:
Uniting Employee Total
of interest Treasury Benefit Net unrealised Translation other
US$ 000 reserve share reserve Trust reserve gains reserve reserve reserves
--------------- --------------- ---------------- -------------- ----------
At 1 January
2011 31,780 (77,260) (10,172) 2,515 (291,283) (344,420)
-------------------- --------------- --------------- ---------------- ---------------- -------------- ----------
Foreign currency
translation
differences - - - - (3,661) (3,661)
Loss on
available-for-sale
investments - - - (1,868) - (1,868)
Tax effect - - - 437 153 590
-------------------- --------------- --------------- ---------------- ---------------- -------------- ----------
Total comprehensive
income for the
period - - - - (1,431) (3,508) (4,939)
Share based
payments - - 756 - - 756
--------------------
At 31 December
2011 (audited) 31,780 (77,260) (9,416) 1,084 (294,791) (348,603)
-------------------- --------------- --------------- ---------------- ---------------- -------------- ----------
Foreign currency
translation
differences - - - - (669) (669)
Loss on
available-for-sale
investments - - - (113) - (113)
Tax effect - - - 24 32 56
-------------------- --------------- --------------- ---------------- ---------------- -------------- ----------
Total comprehensive
income for the
period - - - (89) (637) (726)
Share based
payments - - 1,240 - - 1,240
-------------------- --------------- --------------- ---------------- ---------------- -------------- ----------
At 30 September
2012 (unaudited) 31,780 (77,260) (8,176) 995 (295,428) (348,089)
-------------------- --------------- --------------- ---------------- ---------------- -------------- ----------
For the nine months period ended 30 September 2011:
Net
Uniting Employee unrealised Total
of interest Treasury Benefit gains Translation other
US$ 000 reserve share reserve Trust reserve reserve reserve reserves
--------------- ----------------- ----------------- -------------- ----------
At 1 January
2011 31,780 (77,260) (10,172) 2,515 (291,283) (344,420)
-------------------- --------------- ----------------- ----------------- ------------- -------------- ----------
Foreign currency
translation
differences - - - - (1,286) (1,286)
Loss on
available-for-sale
investments - - - (1,853) - (1,853)
Tax effect - - - 463 40 503
-------------------- --------------- ----------------- ----------------- ------------- -------------- ----------
Total comprehensive
income for the
period - - - (1,390) (1,246) (2,636)
Share based
payments - - 605 - - 605
-------------------- ----------
At 30 September
2011 (unaudited) 31,780 (77,260) (9,567) 1,125 (292,529) (346,451)
-------------------- --------------- ----------------- ----------------- ------------- -------------- ----------
Uniting of interest reserve
The uniting of interest reserve represents the difference
between the initial investment by Ferrexpo AG in OJSC Ferrexpo
Poltava Mining to gain control of the subsidiary in 2005 and the
net assets acquired, which under the pooling of interests method of
accounting are consolidated at their historic cost, less
non-controlling interests.
Treasury share reserve
During September 2008, Ferrexpo plc completed a buyback of
25,343,814 shares for a total cost of US$77,260 thousand. These
shares are currently held as treasury shares by the Group. The
Companies Act 2006 forbids the exercise of any rights (including
voting rights) and the payment of dividends in respect of treasury
shares.
Employee benefit trust reserve
This reserve represents the treasury shares held by Ferrexpo AG
setting up an employee benefit trust reserve. The reserve is used
to satisfy future grants of shares for senior management incentive
schemes.
Net unrealised gains reserve
This reserve records fair value changes on available-for-sale
investments.
Translation reserve
The translation reserve represents exchange differences arising
on the translation of non-US Dollar (e.g. Ukrainian Hryvnia)
functional currency operations within the Group into US
Dollars.
Share premium
Share premium represents the premium paid by subscribers for the
share capital issues, net of costs directly attributable to the
share issue. Subsequent increases in the stake have been accounted
for using the parent extension concept method of accounting as
described in the accounting policy section of the Annual Report and
Accounts 2011 (note 2).
Note 15: Interest bearing loans and borrowings
As at 30 September 2012 the Group has in place a syndicated
US$420 million revolving pre-export finance facility and a US$500
million Eurobond.
The revolving pre-export finance facility was drawn in full on 7
October 2011. This finance facility is available for 60 months
including a commitment amortisation over the final 24 months. The
maturity is 31 August 2016.
As at 30 September 2012 the major bank debt facility was
guaranteed and secured as follows:
-- Ferrexpo AG and Ferrexpo Middle East FZE assigned the rights
to revenue from certain sales contracts;
-- OJSC Ferrexpo Poltava Mining assigned all of its rights of
certain export contracts for the pellets sales to Ferrexpo AG and
Ferrexpo Middle East FZE; and
-- the Group pledged bank accounts of Ferrexpo AG and Ferrexpo
Middle East FZE into which all proceeds from the sale of certain
iron ore pellet contracts are received.
The unsecured US$500 million Eurobond was issued on 7 April 2011
and is due for repayment on 7 April 2016. The bond has a
7.875%coupon and interest is payable on a semi-annual basis.
As at 30 September 2012, the Group has other committed credit
lines amounting to US$72,000 thousand (30 September 2011: US$68,800
thousand;31 December 2011: US$50,000 thousand). These are undrawn
at 30 September 2012.
Note 16: Related party disclosure
During the periods presented the Group entered into arm's length
transactions with entities under the common control of the majority
owner of the Group, Kostyantin Zhevago and with associated
companies and with other related parties. Management considers that
the Group has appropriate procedures in place to identify and
properly disclose transactions with the related parties.
Entities under common control are those under the control of
Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in
which the Group holds an interest of 48.6%. This is the only
associated company of the Group. Other related parties are
principally those entities controlled by Anatoly Trefilov and
Olexander Moroz. Anatoly Trefilov is a member of the supervisory
board of OJSC Ferrexpo Poltava Mining from which Olexander Moroz
resigned as of 14 May 2010. All transactions taking place up to 31
May 2011, being within one year of his resignation from the
supervisory board, are considered to be transactions with a related
party and thus included in the disclosures made for the comparative
period. Related party transactions entered into by the Group during
the periods presented are summarised in the following tables:
Revenue, expenses, finance income and finance expenses
9 months ended 30.09.12 9 months ended 30.09.11 Year ended 31.12.11
(unaudited) (unaudited) (audited)
---------------------------------- ---------------------------------- ----------------------------------
Entities Asso-ciated Other Entities Asso-ciated Other Entities Asso-ciated Other
under compa-nies related under compa-nies related under compa-nies related
common parties common parties common parties
US$ 000 control control control
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Other sales
(a) 1,046 - 85 5,019 807 61 6,718 - 1,783
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Total related
party
transactions
with revenue 1,046 - 85 5,019 807 61 6,718 - 1,783
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Materials (b) 4,496 - - 2,919 - - 4,638 - 8,475
Purchased
concentrate
and other items
for resale
(c) 17,450 - - 17,453 - - 24,891 - -
Spare parts
and consumables
(d) 5,628 - 22 3,567 - - 4,726 - 256
Fuel (e) 1,373 - - 7,356 - - 7,980 - -
Gas (e) 2,355 - - 15,455 - - 15,455 - -
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Total related
parties
transactions
within cost
of sales 31,302 - 22 46,749 - - 57,690 - 8,731
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Selling and
distribution
expenses (f) 7,029 16,463 7,160 - 11,487 11,240 - 16,674 13,470
General and
administration
expenses (g) 2,420 - 49 5,778 - - 7,767 - 15
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Total related
parties
transactions
within expenses 40,752 16,463 7,230 52,527 11,487 11,240 65,457 16,674 22,216
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Finance income
(h) 695 - - 761 9 - 899 9 -
Finance expenses
(h) (183) - - (284) - - (411) - -
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Net finance
income/(expenses) 511 - - 477 9 - 488 9 -
------------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
The Group entered into various related party transactions with
entities under common control. A description of the material
transactions, all of which were carried out on an arm's length
basis in the normal course of business for the members of the Group
(see note 1), are listed below:
(a) Sales of power, steam and water and other materials to
Kislorod PCC for US$386thousand (30 September 2011:
US$1,540thousand; 31 December 2011: US$2,128 thousand). Revenue of
US$492thousand was received from Vorskla Steel Ltd. for the sale of
sand and other materials (30 September 2011: US$113thousand; 31
December 2011: US$548 thousand). Other sales as of 31 December 2011
comprised tolling fees of US$2,622 thousand paid by VostokRuda Ltd.
to OJSC Ferrexpo Poltava Mining for the production of pellets. No
pellets were produced under the tolling scheme in the first nine
months of the financial year 2012 (30 September2011:
US$2,466thousand).
(b) Purchases of compressed air and oxygen from Kislorod PCC for
US$3,675 thousand (30 September2011: US$2,919 thousand; 31 December
2011: US$4,033 thousand).
(c) Purchases of concentrate and other items for resale from
VostokRuda Ltd. amounting to US$17,450 thousand (30 September2011:
US$5,290 thousand; 31 December 2011: US$12,728 thousand).
(c) No purchases of merchant concentrate from VostokRuda Ltd. as
of 30 September2012 were made (30 September2011: US$7,458 thousand;
31 December 2011: US$7,458 thousand). VostockRuda Ltd earned no
fees for the period to 30 September2012. Fees on the purchase and
resale for concentrate amounting to US$6 thousand were received as
of 30 September2011 (31 December 2011: US$10thousand). This covered
costs incurred in procuring and delivering third party merchant
concentrate supplied.
(c) Handling commissions to SIA Wellmark Latvia amounting to
US$25 thousand as of 30 September2011 for the purchase of goods. No
handling commissions were paid for the period to 30 September
2012(31 December 2011: US$35 thousand).
(d) Purchases of spare parts from AutoKraZ Holding Co. in the
amount of US$3,823 thousand (30 September2011: 496; 31 December
2011: US$1,456 thousand);
(d) Purchases of spare parts from OJSC Berdichev
Machine-Building Plant Progress of US$314thousand (30
September2011: US$695thousand; 31 December 2011: US$1,017
thousand);
(d) Purchases of spare parts from Valsa GTV of US$530thousand
(30 September2011: US$474thousand; 31 December 2011: US$541
thousand); and
(d) Purchase of spare parts from Komsomolsk Cogeneration Company
LLC in the amount of US$600 thousand (30 September 2011: US$178
thousand; 31 December 2011: US$736 thousand).
(e) Procurement of fuel for US$1,374 thousand (30 September
2011: US$7,356 thousand; 31 December 2011: US$7,980 thousand) and
gas for US$2,355 thousand (30 September 2011: US$15,455 thousand;
31 December 2011: US$15,455 thousand) during the first nine month
of the financial year 2012 from OJSC Ukrzakordongeologia.
(g) Purchases from FC Vorskla for advertisement, marketing and
general public relations services for the period to 30 September
2012 of US$6,974 thousand (30 September2011: US$4,861 thousand;
31December 2011: US$6,536 thousand).
(h) Transactional banking services are provided to certain
subsidiaries of the Group by Bank Finance & Credit (Bank
F&C) Finance income and expenses relate to these transactional
banking services. Further information is provided under
transactional banking arrangements below.
The Group entered into related party transactions with its
Associated Company TIS Ruda LLC, which were carried out on an arm's
length basis in the normal course of business for the members of
the Group (see note 1). These are described below:
(f) Purchases of logistics services in the amount of US$17,407
thousand (30 September2011: US$11,487thousand; 31 December 2011:
US$16,674 thousand) relating to port operations, including port
charges, handling costs, agent commissions and storage costs.
The group entered into various transactions with other related
parties. Descriptions of the material transactions are below:
(a) Sales of scrap metal to Ferolit amounting to US$1,201
thousand and other sales of US$509 thousand as of 31 December 2011
and 30 September2011. Ferolit is no longer a related party to the
Group due to the resignation of Olexander Moroz as supervisory
board member of OJSC Ferrexpo Poltava Mining in May 2010.
(b) Purchases of cast iron grinding bodies from Ferolit for
US$8,475 thousand as of 31 December 2011 and 30 September2011. As
noted above, Ferolit is no longer a related party to the Group.
(f) Purchases of logistics management services from
SlavutichRuda Ltd relating to customs clearance services and the
coordination of rail transit. Total billings amounted to US$7,160
thousand (30 September 2011: US$11,225 thousand; 31 December 2011:
US$13,470 thousand). SlavutichRuda Ltd. earned commission income of
US$663thousand on these services (30 September2011: US$608thousand;
31 December 2011: US$809 thousand).
(g) Purchases of legal services from Kuoni Attorneys at Law Ltd.
amounting to US$49thousand as of 30 September2012 (30
September2011: US$4 thousand; 31 December 2011: US$12 thousand).
All services were provided on an arm's length basis.
Sale and purchases of property, plant, equipment and
investments
The table below details the transactions of a capital nature
which were undertaken between group companies and entities under
common control, associated companies and other related parties
during the periods presented.
9 months ended 30.09.12 9 months ended 30.09.11 Year ended 31.12.11
(unaudited) (unaudited) (audited)
---------------------------------- ---------------------------------- ----------------------------------
Entities Asso-ciated Other Entities Asso-ciated Other Entities Asso-ciated Other
under compa-nies related under compa-nies related under compa-nies related
common parties common parties common parties
US$ 000 control control control
-------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Purchases
with
independent
confirmation 2,659 - - 13,478 - - 14,655 - -
Purchases
with
shareholder
approval 55,026 - - 8,059 - - 13,167 - -
Other
purchases 391 - - - - - - - -
-------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Total
purchases
of property,
plant and
equipment
(i) 58,076 - - 21,537 - - 27,822 - -
-------------- --------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
(i) During the first nine months of the financial year 2012, the
Group entered into the following transactions with related parties
that were not of a revenue nature, but were in the normal course of
business. As such, these transactions were, in so far as they
exceeded the relevant aggregated threshold tests on a rolling
annual basis, subject to independent confirmation that the terms
are fair and reasonable in accordance with the requirements of the
UK Listing Rules.
-- In September 2012, metal works amounting to US$1,019 thousand
were procured from OJSC Berdichev Machine-Building Plant Progress
in connection with the floatation plant
-- In July 2012, design concept and documentation services in
the amount of US$194 thousand were procured from OJSC DIOS in
relation to the replacement of mixers and the construction of a
dust aspiration system at a pellet plant. The Group also procured
deslimer equipment from CJSC Kiev Shipbuilding and Ship Repair
Plant ('KSRSSZ') and OJSC Berdichev Machine-Building Plant Progress
for the beneficiation plant in the amount of US$668 thousand.
-- In March 2012, project management services in the amount of
US$140 thousand were procured from Vorskla Steel Ltd. in connection
with the construction of service facilities and technical design
documentation amounting to US$618 thousand from OJSC DIOS related
to the update of the beneficiation plant.
-- In February 2012, the Group procured design documentation
from OJSC DIOS in the amount of US$21 thousand in relation to the
construction of roads and loading facilities.
In addition to the transaction above, the Group obtained on 24
May 2012 shareholder approval for an option to purchase up to 500
rail cars from PJSC Stakhanov Railcar Company between the date of
the approval and 31 December 2014. As of 30 September2012, no rail
cars have been ordered under this authority.
During period ended 30 September 2011, the Group entered into
the following transactions with related parties that required
independent confirmation in accordance with the requirements of the
UK Listing Rules.
-- In September 2011, the Group purchased 12 dumper rail cars
from PJSC Stakhanov Railcar Company in the amount of US$1,756
thousand.
-- In August 2011, design services in relation to the conversion
of a vessel were provided by Zaliv Ship Design LLC in the amount of
US$483 thousand.
-- In June 2011, project management services in the amount of
US$140 thousand were procured from Vorskla Steel Ltd. in connection
with the construction of service facilities.
-- In May 2011, the Group entered into an agreement for the
purchase of equipment for the crushing and beneficiation plants
from CJSC Kiev Shipbuilding and Ship Repair Plant ('KSRSSZ') in the
amount of US$493 thousand. Orders were also placed for three
press-filters for US$8,991 thousand from OJSC Berdichev
Machine-Building Plant Progress.
-- In April 2011, the Group entered into an agreement for
engineering services to be provided by OJSC DIOS in the amount of
US$1,650 thousand for the upgrade of the crushing and concentrating
equipment.
The purchase of 400 rail cars, with an option to purchase an
additional 600 rail cars, was approved by the general meeting of
the shareholders on 15 March 2011. 712 rail cars were ordered under
the authority of this shareholder approval during the financial
year 2011 and 288 rail cars in 2012 bringing the total ordered to
1,000 units. As of 30 September2012, all rail cars have been
delivered under these orders bringing the total fleet of own rail
cars to 1,933 units; not including 200 dumper rail cars previously
used in the mine and related area and recently brought into
service. Purchased rail cars under this authority amounting to
US$55,026 thousand were put into operation during the period ended
30 September2012 (30 September 2011: US$8,059 thousand; 31 December
2011: US$13,167 thousand).
During the last quarter of the financial year 2011, the Group
entered into the following transactions with related parties that
required independent confirmation in accordance with the
requirements of the UK Listing Rules.
-- In December 2011, the Group purchased two dust filters from
OJSC Berdichev Machine-Building Plant Progress for the pellet
production plant amounting to US$438 thousand.
-- In November 2011, the Group entered into another agreement
with OJSC DIOS for the procurement of engineering design services
in the amount of US$739 thousand.
Balances with related parties
The outstanding balances, as a result of transactions with
related parties, for the periods presented are shown in the table
below:
9 months ended 30.09.12 9 months ended 30.09.11 Year ended 31.12.11
(unaudited) (unaudited) (audited)
-------------------------------- -------------------------------- --------------------------------
Entities Associated Other Entities Associated Other Entities Associated Other
under companies related under companies related under companies related
common parties common parties common parties
US$ 000 control control control
-------------------- --------- ----------- -------- --------- ----------- -------- --------- ----------- --------
Investments
available-for-sale
(j) 688 - - 1,707 - - 1,286 - -
Prepayments
for property,
plant and
equipment
(k) 1,294 - - 1,535 - - 29,080 - -
-------------------- --------- ----------- -------- --------- ----------- -------- --------- ----------- --------
Total non-current
assets 1,982 - - 3,242 - - 30,366 - -
-------------------- --------- ----------- -------- --------- ----------- -------- --------- ----------- --------
Trade and other
receivables
(l) 738 - 2 4,144 - 1 1,262 1,981 6
Prepayments
and other current
assets (m) 2,880 - 340 397 - 672 414 - 279
Cash and cash
equivalents
(n) 95,601 - - 72,762 - - 94,933 - -
-------------------- --------- ----------- -------- --------- ----------- -------- --------- ----------- --------
Total current
assets 99,220 - 343 77,303 - 673 96,609 1,981 285
-------------------- --------- ----------- -------- --------- ----------- -------- --------- ----------- --------
Trade and other
payables (0) 763 739 160 1,065 - 117 2,151 549 515
-------------------- --------- ----------- -------- --------- ----------- -------- --------- ----------- --------
Current liabilities 763 739 160 1,065 - 117 2,151 549 515
-------------------- --------- ----------- -------- --------- ----------- -------- --------- ----------- --------
Entities under common control
(j) The balance of the investments available-for sale comprised
shareholdings in PJSC Stakhanov Railcar Company(1.10%) and
VostokRuda Ltd. (1.10%). The ultimate beneficial owner of these
companies is Kostyantin Zhevago. PJSC Stakhanov Railcar Company is
further listed on the Ukrainian stock exchange. The changes of the
values in the table above are related to fair value adjustments
recorded during the respective reporting periods. The shareholdings
for all investments remained unchanged during the periods disclosed
above. The investment in VostokRuda Ltd. was subject to an
impairment of US$428thousand (30 September2011: US$198 thousand
recorded during the period ended 30 September2011.
(k) Prepayments of US$390thousand were made to DIOS (30
September 2011: US$264thousand; 31 December 2011: US$302 thousand)
for engineering design services. Further prepayments of US$373
thousand (30 September 2011: US$92 thousand; 31 December 2012: nil)
were made to CJSC Kiev Shipbuilding and Ship Repair Plant
('KSRSSZ') and US$489 thousand (30 September 2011: nil; 31 December
2012: nil) to OJSC Berdichev Machine-Building Plant Progress in
connection with the procurement of equipment. The balance as of 31
December 2011 includes prepayments of US$28,705 thousand made in
relation to key components for rail cars purchased from PJSC
Stakhanov Railcar Company(30 September 2011: US$1,052 thousand).
These prepayments were offset as of 30 September 2012 with
deliveries obtained.
(l) As of 30 September2012, trade and other receivables included
outstanding amounts of US$251 thousand due from Vorskla Steel Ltd.
(30 September2011: US$52thousand; December 2011: US$828 thousand)
in relation to other sales and US$413thousand (30 September2011:
US$297thousand; 31 December 2011: US$349 thousand) from Kislorod
PCC for the sale of power, steam and water. The open balance as of
30September 2011 includes a receivable balance of US$3,486 thousand
in relation to the pellets produced under a tolling scheme for
VostokRuda Ltd. No such receivable balances were due as of 31
December 2011and 2010.
(m) Prepayments and other current assets relate mainly to
prepayments of US$2,031thousand (30 September 2011: nil; 31
December 2011: nil)made to VostokRuda Ltd. for concentrate and
US$603 thousand (30 September 2011: nil; 31 December 2012: nil) to
CJSC Ukrenergozbutfor gas. Advance payments are in the normal
course of business as requested by any third party supplier in
Ukraine.
(n) As of 30 September2012, cash and cash equivalents with Bank
F&C were US$95,601 thousand (30 September2011: US$63,901
thousand; 31 December 2011: US$94,933 thousand). Further
information is provided under Transactional banking arrangements
below.
(o) Trade and other payables amounting to US$521thousand for
compressed air and oxygen purchased from Kislorod PCC (30
September2011: US$461thousand; 31 December 2011: US$535thousand)The
balance as of 31 December 2011 included US$1,276thousand due to
VostokRuda Ltd. for purchased concentrate (30 September 2012: nil;
30 September2011: nil).
Associated companies
(l) As of 31 December 2011, other receivables of
US$1,749thousand relate a dividend declared by TIS Ruda LLC (30
September 2012: nil; 30 September 2011: nil).
Other related parties
(m) Prepayments and other current assets relate to advance
payments of US$340thousand to SlavutichRuda Ltd. for distribution
services (30 September2011: US$672thousand; 31 December 2011:
US$279 thousand). Advance payments are in the normal course of
business and are common for the provision of supplies in
Ukraine.
(o) Trade and other payables amounting to US$160thousand as of
30 September2012 are in respect of distribution services provided
by SlavutichRuda Ltd. (30 September2011: US$117thousand;31 December
2011: US$515 thousand).
Transactional banking arrangements
The Group has transactional banking arrangements with Bank
Finance & Credit ('Bank F&C') for its main day-to-day
banking needs in Ukraine in the normal course of business. Bank
F&C is under common control of the majority shareholder of
Ferrexpo plc. In respect of these arrangements, finance income and
finance costs as well as cash and cash equivalents at Bank F&C
are disclosed in the tables above. The Group has an undrawn
multicurrency revolving loan facility agreement with Bank F&C
which will expire on 16 April 2013. The maximum limit of this
undrawn facility is UAH80,000 thousand (US$10,009 thousand at the
exchange rate as of 30 September 2012) at an interest rate for
Ukrainian Hryvnia advances of 18% per annum. The total value of
pledges for this loan facility is US$9,126 thousand.
Bank F&C provides mortgages and loans to employees of the
Group for the acquisition, construction and renovation of
apartments in Ukraine. This is part of a social loyalty programme
started by the Group in December 2011 allowing certain employees of
the Group to borrow at preferential interest rates. OJSC Ferrexpo
Poltava Mining and LLC Ferrexpo Yeristovo GOK act as guarantors for
the bank's loans to the employees of the Group and have deposited
US$2,046 thousand at Bank F&C as security (30 September 2011:
nil; 31 December 2011: US$1,500 thousand). The interest rate margin
earned by Bank F&C covers the costs of administrating the
mortgages and loans. Detailed information on the social loyalty
programme is provided in the Corporate Social Responsibility Review
section of the Annual Report and Accounts 2011.
Note 17: Commitments and contingencies
Commitments
As at As at 30.09.11 As at 31.12.11
30.09.12
-----------------------------------
US$ 000 (unaudited) (unaudited) (audited)
----------------------------------- ------------ --------------- ---------------
Operating lease commitments 78,488 52,184 61,361
Capital commitments on purchase
of PPE 157,135 152,171 137,029
Legal
In the ordinary course of business, the Group is subject to
legal actions and complaints. Management believes that the ultimate
liability, if any, arising from such actions or complaints will not
have a material adverse effect on the financial condition or the
results of future operations of the Group.
The Group is currently involved in a share dispute which
commenced in 2005 and which was disclosed and as relevant updated
in the Group's 2007 Annual Report and Accounts and subsequent IPO
and Eurobond prospectuses, interim as well as annual reports as
appropriate since then.
A former shareholder in FPM brought proceedings in the Ukrainian
courts against certain nominee companies that were previously
ultimately controlled by Kostyantin Zhevago, among other parties,
seeking to invalidate the shares sale and purchase agreement
pursuant to which a 40% stake in FPM (which was subsequently
diluted to less than 14% following further share issues by FPM) was
sold to those nominee companies. On 11 January 2010, a judgment
rejecting the claims of the former shareholder that had previously
been made by the Commercial Court of Poltava Region was upheld on
appeal by the Kyiv Inter Region Appellate Commercial Court.
Following the appeal proceedings, the former shareholder filed a
cassation complaint with the High Commercial Court of Ukraine
requesting that it reverse the judgments of the lower courts. The
High Commercial Court of Ukraine granted the cassation complaint of
the former shareholder on 21 April 2010 and invalidated the
respective shares sale and purchase agreement without ruling on any
consequences of such invalidity.
On 6 October 2011, the claimants filed a new claim in Ukraine
alleging that as a result of invalidity of the shares sale and
purchase agreement with respect to a 40% stake in FPM their rights
were infringed by the decisions on the capital increases taken at
the general shareholders meeting of FPM which took place on 20
November 2002 and all further decisions of the general shareholders
meetings of FPM relating to subsequent changes to FPM's charter
capital. Accordingly, the claimants asked the court to invalidate
the decisions taken at the general shareholders meeting of FPM
which took place on 20 November 2002, restore their status as
shareholders of FPM as of 20 November 2002 having a 40% stake in
FPM, cancel all share issues of FPM that took place after 20
November 2002 and register shares in their names.
On 22 November 2011, Ferrexpo AG filed a claim against the
claimants at the High Court of Justice in London seeking a
confirmation of ownership in FPM shares. The claim was launched in
order to take an active step outside Ukraine to resolve this
long-running dispute. By a judgment dated 3 April 2012, the
proceedings in the UK were stayed while the case continued in
Ukraine.
On 20 August 2012, the Commercial Court of Poltava Region, which
was considering the case as a court in the first instance, upon
motion of the claimants ruled that the case be transferred to the
Kyiv City Commercial Court, which has exclusive jurisdiction over
the case, given that one of the defendants in the case, the
National Commission on Securities and Stock Market of Ukraine, has
the status of a central executive authority. FPM challenged the
transfer of the case to the Kyiv City Commercial Court; however,
both the Kharkiv Appellate Commercial Court and the High Commercial
Court of Ukraine upheld the ruling of the Commercial Court of
Poltava Region dated 20 August 2012.
The case is currently pending before the Kyiv City Commercial
Court and at the latest hearing on 14 January 2013 the decision was
made to assign the case to a panel of three judges instead of a
sole judge due to its complexity.
After having taken Ukrainian legal advice, we believe the claim
has little legal merit primarily since neither the final decision
by the High Commercial Court of Ukraine nor any subsequent claims
entitle claimants to direct enforcement rights to the shares of
FPM. In addition, the restitution of the status quo ante of the
shareholding position as sought by claimants does not have a basis
under Ukrainian law for various legal, technical and practical
reasons. It follows that no provision was recorded for this dispute
as of 30 September 2012. At the same time, in light of the risks
surrounding the operation and independence of Ukrainian courts,
including the risks associated with the Ukrainian legal system in
general, the claimants may ultimately prevail in this dispute and
our ownership of the relevant interest in FPM may be successfully
challenged in the future, which could have a material adverse
effect on our business, results of operations, financial condition
and prospects.
Tax and other regulatory compliance
Ukrainian legislation and regulations regarding taxation and
custom regulations continue to evolve. Legislation and regulations
are not always clearly written and are subject to varying
interpretations and inconsistent enforcement by local, regional and
national authorities, and other governmental bodies. Instances of
inconsistent interpretations are not unusual.
The uncertainty of application and the evolution of Ukrainian
tax laws, including those affecting cross border transactions,
create a risk of additional tax payments having to be made by the
Group, which could have a material effect on the Group's financial
position and results of operations. The Group does not believe that
these risks are any more significant than those of similar
enterprises in Ukraine.
Note 18: Other financial assets
Other financial assets are available-for-sale investments, which
are measured subsequent to initial recognition at fair value,
categorised into Levels 1 to 3 based on the degree to which the
fair value is observable.
There were no changes in fair value hierarchy during the period
ended 30 September 2012 and in the equivalent comparative
period.
During the period ended 30 September 2012, a decrease of the
fair value of the available-for-sale investments of US$113 thousand
was recorded in other comprehensive income (30 September 2011:
US$1,437 thousand; 31 December 2011: US$1,868 thousand). In the
same period, an impairment of US$428 thousand was recorded in the
income statement (30 September 2011: US$198 thousand; 31 December
2011: US$198 thousand).
Note 19: Business combination
Business combination in previous years
On 31 December 2010, the Group acquired Helogistics Holding GmbH
and its subsidiaries ('Helogistics') in order to develop the
Group's distribution and logistics capabilities. The initial
accounting for the acquisition of Helogistics as of 31 December
2010 (acquisition date) was only provisionally determined.
During the financial year 2011, the necessary valuations and
assessments have been received so that the accounting for this
acquisition has been finalised resulting in adjustments of the
provisionally determined fair values of certain assets acquired and
liabilities assumed. These adjustments did not have an effect on
the gain on bargain purchase of US$2,623 thousand initially
recognised as of 31 December 2010. Further details are provided in
the Annual Report and Accounts 2011. These adjustments have been
reflected in the statement of financial position of the comparative
period ended on 30 September 2011 and the income statement effect
of these is immaterial.
Note 20: Events after the reporting period
No material adjusting or non-adjusting events have occurred
subsequent to the period end.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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