TIDMFXPO
RNS Number : 4776C
Ferrexpo PLC
19 January 2015
19 January 2015
Ferrexpo plc
("Ferrexpo", the "Group" or the "Company")
Unaudited Nine Month Results to 30 September 2014
Ferrexpo today announces key unaudited financial information as
of and for the nine months ended 30 September 2014. The Company is
releasing this information in connection with the announcement by
Ferrexpo Finance Plc of an exchange offer for its US$500,000,000
7.875 per cent. Guaranteed Notes due 2016 and the commencement of
the exchange offer period.
Michael Abrahams, Chairman of Ferrexpo commented:
"These good operating results highlight our resilient business
model. We continue to benefit from increased production of high
quality product which receives a price premium, and lower costs,
driven by production efficiencies as a result of the investments we
have made over the last four years combined with the fall in the
value of the Hryvnia."
Highlights for the unaudited nine months ended 30 September 2014
are presented below:
Financial
-- Turnover of US$1,079 million (9M 2013: US$1,109 million)
-- Net profit before taxation of US$199 million (9M 2013: US$211
million)
-- EBITDA of US$404 million (9M 2013: US$346 million)
-- Group consolidated shareholder equity as of 30 September 2014
of US$954 million (30 September 2013 : US$1,648 million)
-- Net financial indebtedness as of 30 September 2014 US$712
million (30 September 2013: US$677 million)
-- Cash and cash equivalents of US$608 million as of 30
September 2014 (30 September 2013: US$339 million)
One off Impacts
-- US$56 million non-cash increase in EBITDA from the
revaluation of US dollar receivables at the Group's Ukrainian
subsidiaries
-- US$82 million impairment of Ferrous Resources reflecting the
iron ore market environment
Sales and Marketing
-- Average Platts China CFR 62% Fe iron ore price was US$104 per
tonne for 9M 2014 (9M 2013: US$136 per tonne)
-- Sales volumes were 8.3 million tonnes of pellets (9M 2013:
7.6 million tonnes of pellets)
-- Ferrexpo's DAF/FOB realized price 15% lower on average in 9M
2014 compared to 9M 2013. Benchmark iron ore price 23% lower on
average in 9M 2014 compared to 9M 2013
Operations
-- Most regrettably there was one fatality during the period at
the Group's operations
-- 9M 2014 total pellet production 8.3 million tonnes (9M 2013:
8.0 million tonnes)
-- Production of 65% Fe pellets increased 10% to 4.1 million
tonnes (9M 2013: 3.7 million tonnes)
-- 9M 2014 average C1 cost per tonne US$47.1 (9M 2013: US$60.1
per tonne)
-- Lower costs driven by the depreciation of the Hryvnia,
increased volume, improved efficiency, lower cost FYM ore and
reduced commodity prices
Capital Investment
-- 9M 2014 capital investment US$191 million (9M 2013: US$214
million)
-- Growth projects substantially complete at 31 December 2014 to
increase output to 12 million tonnes per year and produce mostly
65% Fe pellets
-- FYM concentrator project on hold
VAT / Prepaid Corporate Profit Tax
-- Gross VAT receivable in Ukraine of US$66 million as of 30
September 2014 (US$302 million as of 30 September 2013; US$ 318
million as of 31 December 2013)
-- Fair value of VAT bonds held at 30 September 2014 of US$72
million (30 September 2013: nil)
-- VAT balance as of 30 September 2014 reduced by US$149 million
since 31 December 2013 due to foreign exchange losses and fair
value adjustments to VAT bonds, of which US$115 million was
recorded in reserves
-- VAT refunds in respect of the nine-month period to 30
September 2014 subject to prepayment of corporate profit tax
-- Prepaid corporate profit tax as of 30 September 2014 totaled
US$91 million (as of 30 September 2013: US$90 million; as of 31
December 2013: US$87 million)
4Q 2014 Update
-- Average benchmark iron ore price in 4Q 2014 US$74 per tonne
(average 9M 2014: US$104 per tonne)
-- The Group received no VAT refunds in November and December
2014, all remaining VAT bonds sold at fair value
-- 4Q 2014 production of 2.8 million tonnes of pellets (Q4 2013:
2.8 million tonnes of pellets)
-- 4Q 2014 production reduced by 144 thousand tonnes of pellets
as a result of power restrictions (4Q 2013: nil)
-- 4Q 2014 capital investment approximately c.US$40 million (Q4
2013: US$64 million)
-- Cash and cash equivalents as of 31 December 2014 c.US$627
million (of which c.US$162 million held in Ukraine)
Key financial information for the nine months ended 30 September
2014 is summarised in the table below
US$ million (unless otherwise 9 months 9 months Change Year ended
stated) ended 30.09.14 ended 30.09.13 31.12.13
------------------------------- ---------------- ---------------- ------- -----------
Total pellet production (kt) 8,258 8,048 3% 10,813
------------------------------- ---------------- ---------------- ------- -----------
Sales volumes (kt) 8,257 7,582 9% 10,689
------------------------------- ---------------- ---------------- ------- -----------
Revenue 1,079 1,109 (3%) 1,581
------------------------------- ---------------- ---------------- ------- -----------
EBITDA 404 346 17% 506
------------------------------- ---------------- ---------------- ------- -----------
Profit before tax 199 211 (6%) 305
------------------------------- ---------------- ---------------- ------- -----------
Diluted EPS (US cents per
share) 24.77 30.09 (18%) 44.69
------------------------------- ---------------- ---------------- ------- -----------
Working capital movements (54) (86) (37%) (103)
------------------------------- ---------------- ---------------- ------- -----------
Net cash flow from operating
activities 211 132 60% 233
------------------------------- ---------------- ---------------- ------- -----------
Capital investment 191 214 (11%) 278
------------------------------- ---------------- ---------------- ------- -----------
Cash and cash equivalents 608 339 79% 390
------------------------------- ---------------- ---------------- ------- -----------
Net debt (712) (677) 5% (639)
------------------------------- ---------------- ---------------- ------- -----------
Net debt to LTM (1) EBITDA 1.2x 1.5x (20%) 1.3x
------------------------------- ---------------- ---------------- ------- -----------
(1) Last twelve months
For further information contact:
Ferrexpo:
Ingrid McMahon +44 207 389 8304
Maitland:
Peter Ogden +44 207 379 5151
Liz Morley
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets
in Ukraine and transport and sales operations throughout the world.
It has been mining and processing high quality iron ore pellets for
the global steel industry for over 35 years. Ferrexpo's resource
base is one of the largest iron ore deposits in the world. The
Group is the 5(th) largest supplier of pellets to the global steel
industry and the largest producer and exporter of pellets from the
Former Soviet Union. In 2014, it produced 11 million tonnes of
pellets, a 2% increase compared to 2013 and a record for the
Company. Ferrexpo has a diversified customer base supplying steel
mills in Austria, China, Japan, Germany as well as other European
and Asian countries. Ferrexpo is listed on the main market of the
London Stock Exchange under the ticker FXPO. For further
information, please visit www.ferrexpo.com
Interim Consolidated Income Statement
9 months ended Year ended
US$'000 Notes 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Revenue 4 1,078,834 1,108,546 1,581,385
Cost of sales 3/5 (491,378) (555,977) (773,221)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Gross profit 587,456 552,569 808,164
------------------------------------------------------ ------ --------------- ------------------------ -----------
Selling and distribution expenses (239,200) (231,894) (335,718)
General and administrative expenses 6 (35,501) (38,083) (54,839)
Other income 4,896 3,547 6,662
Other expenses (36,694) (17,186) (23,457)
Operating foreign exchange gains 7 55,891 352 622
------------------------------------------------------ ------ --------------- ------------------------ -----------
Operating profit from continuing operations before
adjusted items 336,848 269,305 401,434
------------------------------------------------------ ------ --------------- ------------------------ -----------
Under recovery and write-down of VAT receivable 13 (6,419) - (36,421)
Write-offs and impairment losses 8 (83,733) (50) (854)
Share of profit from associates 3,295 2,903 3,551
Losses on disposal of property, plant and equipment (4,389) (3,988) (8,492)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Profit before tax and finance 245,602 268,170 359,218
------------------------------------------------------ ------ --------------- ------------------------ -----------
Finance income 9/13 18,360 1,698 2,372
Finance expense 9 (51,431) (65,421) (65,953)
Non-operating foreign exchange (losses)/gains 7 (13,603) 6,114 9,755
------------------------------------------------------ ------ --------------- ------------------------ -----------
Profit before tax 198,928 210,561 305,392
------------------------------------------------------ ------ --------------- ------------------------ -----------
Income tax expense 10 (48,737) (33,690) (41,608)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Profit for the period/year 150,191 176,871 263,784
------------------------------------------------------ ------ --------------- ------------------------ -----------
Attributable to:
Equity shareholders of Ferrexpo plc 145,322 176,380 261,984
Non-controlling interests 4,869 491 1,800
------------------------------------------------------ ------ --------------- ------------------------ -----------
150,191 176,871 263,784
------------------------------------------------------ ------ --------------- ------------------------ -----------
Earnings per share:
Basic (US cents) 11 24.82 30.14 44.76
Diluted (US cents) 11 24.77 30.09 44.69
Interim Consolidated Statement of Comprehensive Income
9 months ended Year ended
US$ 000 Notes 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Profit for the period/year 150,191 176,871 263,784
Items that may subsequently be reclassified to
profit or loss:
Exchange differences on translating foreign operations (910,718) (212) (437)
Income tax effect 58,085 - -
Net losses on available-for-sale financial assets (102) (126) (138)
Income tax effect 18 23 30
-------------------------------------------------------------- --------------- ------------------------ -----------
Net other comprehensive income to be reclassified to profit
or loss in subsequent periods (852,717) (315) (545)
-------------------------------------------------------------- --------------- ------------------------ -----------
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement (losses)/gains on defined benefit pension
liability (2,264) 259 498
Income tax effect 267 (24) (58)
-------------------------------------------------------------- --------------- ------------------------ -----------
Net other comprehensive income not being reclassified to
profit or loss in subsequent periods (1,997) 235 440
-------------------------------------------------------------- --------------- ------------------------ -----------
Other comprehensive income for the period/year, net of tax (854,714) (80) (105)
-------------------------------------------------------------- --------------- ------------------------ -----------
Total comprehensive income for the period/year, net of tax (704,523) 176,791 263,679
-------------------------------------------------------------- --------------- ------------------------ -----------
Total comprehensive income attributable to:
Equity shareholders of Ferrexpo plc (694,250) 176,301 261,888
Non-controlling interests (10,273) 490 1,791
-------------------------------------------------------------- --------------- ------------------------ -----------
(704,523) 176,791 263,679
------------------------------------------------------------- --------------- ------------------------ -----------
Interim Consolidated Statement of Financial Position
US$'000 Notes As at 30.09.14 As at 30.09.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Assets
Property, plant and equipment 12 1,071,826 1,484,440 1,533,819
Goodwill and other intangible assets 73,564 118,908 117,086
Investments in associates 8,582 19,898 20,546
Available-for-sale financial assets 20 139 82,785 82,778
Inventories 14 69,729 27,481 58,303
Other non-current assets 40,770 36,438 34,575
Income taxes recoverable and prepaid 10 91,320 54,242 54,242
Other taxes recoverable and prepaid 13 - 141,689 78,281
Deferred tax assets 30,953 37,087 37,612
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total non-current assets 1,386,883 2,002,968 2,017,242
----------------------------------------------------------- ------ --------------- --------------- ---------------
Inventories 14 144,043 200,396 180,863
Trade and other receivables 93,877 90,245 102,498
Prepayments and other current assets 21,709 40,931 25,073
Income taxes recoverable and prepaid 10 - 35,848 33,233
Other taxes recoverable and prepaid 13 67,196 126,198 182,863
Marketable securities 13/20 72,480 - -
Cash and cash equivalents 3/15 608,075 339,219 390,491
----------------------------------------------------------- ------ --------------- --------------- ---------------
1,007,380 832,837 915,021
----------------------------------------------------------- ------ --------------- --------------- ---------------
Assets classified as held for sale 92 479 106
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total current assets 1,007,472 833,316 915,127
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total assets 2,394,355 2,836,284 2,932,369
----------------------------------------------------------- ------ --------------- --------------- ---------------
Equity and liabilities
Share capital 16 121,628 121,628 121,628
Share premium 185,112 185,112 185,112
Other reserves 16 (1,184,534) (347,437) (347,326)
Retained earnings 1,819,223 1,667,391 1,753,200
----------------------------------------------------------- ------ --------------- --------------- ---------------
Equity attributable to equity shareholders of the parent 941,429 1,626,694 1,712,614
----------------------------------------------------------- ------ --------------- --------------- ---------------
Non-controlling interest 12,155 21,127 22,428
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total equity 953,584 1,647,821 1,735,042
----------------------------------------------------------- ------ --------------- --------------- ---------------
Interest-bearing loans and borrowings 3/17 1,114,419 962,545 928,196
Defined benefit pension liability 37,520 52,597 53,154
Provision for site restoration 1,904 2,571 2,871
Deferred tax liability 2,012 1,531 2,031
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total non-current liabilities 1,155,855 1,019,244 986,252
----------------------------------------------------------- ------ --------------- --------------- ---------------
Interest-bearing loans and borrowings 3/17 205,440 54,059 101,043
Trade and other payables 28,744 50,612 50,001
Accrued liabilities and deferred income 30,901 25,052 35,508
Income taxes payable 4,051 25,766 12,554
Other taxes payable 15,780 13,730 11,969
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total current liabilities 284,916 169,219 211,075
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total liabilities 1,440,771 1,188,463 1,197,327
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total equity and liabilities 2,394,355 2,836,284 2,932,369
----------------------------------------------------------- ------ --------------- --------------- ---------------
The financial statements were approved by the Board of Directors
on the 5 January 2015.
Kostyantin Zhevago Christopher Mawe
Chief Executive Officer Chief Financial Officer
Interim Consolidated Statement of Cash Flows
9 months ended Year ended
US$'000 Notes 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Profit before tax 198,928 210,561 305,392
Adjustments for:
Depreciation of property, plant and equipment
and amortisation of intangible assets 63,811 72,565 99,645
Interest expense 47,963 61,284 60,466
Under recovery and write-down of VAT receivable 13 6,419 - 36,421
Interest income 9 (18,360) (1,698) (2,372)
Share of profit from associates (3,295) (2,903) (3,551)
Movement in allowance for doubtful receivables 8,317 500 661
Losses on disposal of property, plant and
equipment 4,389 3,988 8,492
Write-offs and impairment losses 8 83,733 50 854
Site restoration provision 213 204 503
Employee benefits 5,091 6,483 8,654
Share based payments 367 933 1,266
Operating foreign exchange gains 2/7 (55,891) (352) (622)
Non-operating foreign exchange losses/(gains) 2/7 13,603 (6,114) (9,755)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Operating cash flow before working capital changes 355,288 345,501 506,054
------------------------------------------------------ ------ --------------- ------------------------ -----------
Changes in working capital:
(Increase)/decrease in trade and other
receivables (665) 27,598 27,485
Increase in inventories (65,594) (75,879) (88,482)
Decrease in trade and other accounts payable (15,865) (39,230) (29,489)
Decrease/(increase) in VAT recoverable and other
taxes recoverable and payable (1) 27,633 1,324 (12,516)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Cash generated from operating activities 300,797 259,314 403,052
------------------------------------------------------ ------ --------------- ------------------------ -----------
Interest paid (32,120) (32,543) (57,037)
Income tax paid (54,751) (91,572) (108,321)
Post-employment benefits paid (2,761) (3,503) (4,768)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Net cash flows from operating activities 211,165 131,696 232,926
------------------------------------------------------ ------ --------------- ------------------------ -----------
Cash flows from investing activities
Purchase of property, plant and equipment (189,472) (205,393) (270,534)
Proceeds from disposal of property, plant and
equipment 1,583 5,577 910
Purchase of intangible assets (1,974) (8,343) (7,268)
Purchase of available-for-sale investment - (81,235) (82,382)
Interest received 1,538 1,604 2,090
Dividends from associates 2,755 - -
------------------------------------------------------ ------ --------------- ------------------------ -----------
Net cash flows used in investing activities (185,570) (287,790) (357,184)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Cash flows from financing activities
Proceeds from borrowings and finance 392,515 - 26,279
Repayment of borrowings and finance (112,242) (16,683) (19,308)
Arrangement fees paid (3,578) (9,857) (10,643)
Dividends paid to equity shareholders of
Ferrexpo plc (2) (73,686) (74,510) (77,882)
Dividends paid to non-controlling shareholders - - (1)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Net cash flows used in financing activities 203,009 (101,050) (81,555)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Net increase/(decrease) in cash and cash
equivalents 228,604 (257,144) (205,813)
Cash and cash equivalents at the beginning of
the period/year 390,491 596,560 596,560
Effect of exchange rate changes on cash and cash
equivalents (11,020) (197) (256)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Cash and cash equivalents at the end of the
period/year 15 608,075 339,219 390,491
------------------------------------------------------ ------ --------------- ------------------------ -----------
(1) The movement in the current period includes the effect of a
VAT receivable balance amounting to US$24,594 thousand recovered
through VAT bonds. See also note 13
(2) Net of withholding taxes paid subsequent to the end of the
periods ended 30 September 2014 and 2013. See note 10 for further
details.
Interim Consolidated Statement of Changes in Equity
For the financial year
2013 and the nine months
ended 30 September 2014 Attributable to equity shareholders of the parent
---------------------------------------------------------------------------------------------------
Uniting Employee Net
of Treasury Benefit unreali-sed
interest share Trust gains Translation Total
Issued Share reserve reserve reserve reserve reserve Retained capital and Non-controlling Total
US$ 000 capital premium (note 16) (note 16) (note 16) (note 16) (note 16) earnings reserves interests equity
At 1 January
2013 121,628 185,112 31,780 (77,260) (7,808) 820 (295,588) 1,568,077 1,526,761 20,637 1,547,398
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
Profit for the
period - - - - - - - 261,984 261,984 1,800 263,784
Other
comprehensive
income - - - - - (108) (428) 440 (96) (9) (105)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
income for
the period - - - - - (108) (428) 262,424 261,888 1,791 263,679
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - - (77,301) (77,301) - (77,301)
Share-based
payments - - - - 1,266 - - - 1,266 - 1,266
At 31 December
2013
(audited) 121,628 185,112 31,780 (77,260) (6,542) 712 (296,016) 1,753,200 1,712,614 22,428 1,735,042
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
Profit for the
period - - - - - - - 145,322 145,322 4,869 150,191
Other
comprehensive
income - - - - - (84) (837,491) (1,997) (839,572) (15,142) (854,714)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
income for
the period - - - - - (84) (837,491) 143,325 (694,250) (10,273) (704,523)
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - - (77,302) (77,302) - (77,302)
Share-based
payments - - - - 367 - - - 367 - 367
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
At 30
September
2014
(unaudited) 121,628 185,112 31,780 (77,260) (6,175) 628 (1,133,507) 1,819,223 941,429 12,155 953,584
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
For the nine months ended 30
September 2013 Attributable to equity shareholders of the parent
----------------------------------------------------------------------------------------------------
Uniting Employee Net
of Treasury Benefit unreali-sed
interest share Trust gains Translation
Issued Share reserve reserve reserve reserve reserve Retained Total capital Non-controlling Total
US$ 000 capital premium (note 16) (note 16) (note 16) (note16) (note16) earnings and reserves interests equity
At 1 January 2013 121,628 185,112 31,780 (77,260) (7,808) 820 (295,588) 1,568,077 1,526,761 20,637 1,547,398
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Profit for the period - - - - - - - 176,380 176,380 491 176,871
Other comprehensive income - - - - - (103) (211) 235 (79) (1) (80)
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Total comprehensive income
for the period - - - - - (103) (211) 176,615 176,301 490 176,791
Equity dividends paid to
shareholders of Ferrexpo plc - - - - - - - (77,301) (77,301) - (77,301)
Share-based payments - - - - 933 - - - 933 - 933
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
At 30 September 2013
(unaudited) 121,628 185,112 31,780 (77,260) (6,875) 717 (295,799) 1,667,391 1,626,694 21,127 1,647,821
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
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 Kremenchug in Ukraine, an
interest in a port in Odessa and sales and marketing activities
around the world including offices in Switzerland, Japan, China,
Dubai and Ukraine. The Group also owns logistics assets in Austria
which operates a fleet of vessels operating on the Rhine and Danube
waterways and an ocean going vessel which provides top off services
and operates on international sea routes. 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 Kremenchug Magnetic
Anomaly and are currently being extracted at the
Gorishne-Plavninskoye and Lavrikovskoye ('GPL') and Yeristovskoye
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 50.3% (30 September 2013: 51.0%; 31 December 2013: 50.3%) of
Ferrexpo plc's issued share capital.
The Group comprises of Ferrexpo plc and its consolidated
subsidiaries as set out below:
Equity interest owned
-------------------------------
Name Country of incorporation Principal activity 30.09.14 30.09.13 31.12.13
% % %
OJSC Ferrexpo Poltava
Mining Ukraine Iron ore mining 97.3 97.3 97.3
Ferrexpo AG Switzerland Sale of iron ore pellets 100.0 100.0 100.0
Trade, transportation
DP Ferrotrans Ukraine services 97.3 97.3 97.3
United Energy Company LLC Ukraine Holding company 97.3 97.3 97.3
Ferrexpo Finance plc England Finance 100.0 100.0 100.0
Management services &
Ferrexpo Services Limited Ukraine procurement 100.0 100.0 100.0
Ferrexpo Hong Kong Limited China Marketing services 100.0 100.0 100.0
LLC Ferrexpo Yeristovo GOK Ukraine Iron ore mining 100.0 100.0 100.0
LLC Ferrexpo Belanovo GOK Ukraine Iron ore mining 100.0 100.0 100.0
Nova Logistics Limited Ukraine Service company (dormant) 51.0 51.0 51.0
Ferrexpo Middle East FZE U.A.E. Sale of iron ore pellets 100.0 100.0 100.0
Ferrexpo Singapore PTE Ltd Singapore Marketing services 100.0 100.0 100.0
First-DDSG Logistics
Holding GmbH Austria Holding company 100.0 100.0 100.0
EDDSG GmbH Austria Barging company 100.0 100.0 100.0
DDSG Tankschiffahrt GmbH Austria Barging company 100.0 100.0 100.0
DDSG Services GmbH(2) Austria Barging company 100.0 100.0 100.0
DDSG Mahart Kft. Hungary Barging company 100.0 100.0 100.0
Pancar Kft. Hungary Barging company 100.0 100.0 100.0
Ferrexpo Port Services
GmbH Austria Port services 100.0 100.0 100.0
Ferrexpo Shipping
International Ltd. Marshall Islands Holding company 100.0 100.0 100.0
Iron Destiny Ltd. Marshall Islands Holding company 100.0 100.0 100.0
Transcanal SRL Romania Port services 77.6 77.6 77.6
Helogistics Asset Leasing
Kft. Hungary Asset holding company 100.0 100.0 100.0
Universal Services Group
Ltd. Ukraine Asset holding company 100.0 100.0 100.0
LLC DDSG Ukraine
Holding(1) Ukraine Holding company 100.0 100.0 100.0
LLC DDSG Invest(1) Ukraine Asset holding company 100.0 100.0 100.0
LLC DDSG Ukraine Shipping
Management(1) Ukraine Barging company 100.0 100.0 100.0
LLC DDSG Ukraine
Shipping(1) Ukraine Asset holding company 100.0 100.0 100.0
Arlington Ltd.(3) Guernsey Holding company 100.0 - -
--------------------------- -------------------------- ---------------------------- --------- --------- ---------
(1) The entities were incorporated in February and March
2013.
(2) Formerly Helogistics Transport GmbH.
(3) The entity was acquired in February 2014.
The Group's interests in the entities listed above are held
indirectly by the Company.
At 30 September 2014, the Group also holds through OJSC Ferrexpo
Poltava Mining an interest of 48.6% (30 September 2013: 48.6%; 31
December 2013: 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.
Note 2: Summary of significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the
nine months period ended 30 September 2014 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 2013.
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 2013. 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 2013, 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.
During the period ended 30 September 2014, the Ukrainian Hryvnia
has devalued by approximately 62% compared to the US Dollar; from
7.993 as at 31 December 2013 to 12.949 as at the end of this
reporting period. As a result of this devaluation, the total equity
decreased by US$852,633 thousand as of 30 September 2014 due the
exchange differences on translating foreign operations which is
reflected in the translation reserve. Further details are provided
in note 7 and note 16.
The Group continues to generate positive free cash flow under
the lower iron ore price environment. The principal repayments
under the Group's debt facilities take place in 2Q 2016 and the
Group has sufficient liquidity to operate until this time. The fall
in the iron ore price and the lower cash generation of the business
is, however, likely to require certain debt facilities to be
renewed or rolled over with extended repayment terms in order to
ensure that the Group has sufficient working capital in 2016 (see
note 17 for further information).
The Directors are of the view that such refinancing and or
extension of debt repayment maturities will be available and as
such 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
During the period ended 30 September 2014, the Group received
VAT bonds issued by the Ministry of Finance of Ukraine to settle
certain accumulated VAT liabilities. These VAT bonds were
designated as financial assets at fair value through profit or loss
("FVTPL"). As disclosed in accounting policies in the Annual Report
and Accounts 2013, the Group did not have such financial assets in
previous periods.
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
2013 except for the adoption of new amendments and improvements to
IFRSs effective as of 1 January 2014, noted below:
Standards adopted affecting reported results, financial position
or disclosures
IFRS 12 Disclosure of involvement with other entities
The new standard covers the disclosures that were previously
required in consolidated financial statements under IAS 27
Consolidated and separate financial statements as well as those
included in IAS 31 Interests in joint ventures and IAS 28
Investments in associates. The new standard became mandatory in the
EU for financial years beginning on or after 1 January 2014. A
number of additional disclosures will be required in the next
Annual Report and Accounts under the new standard. There is no
impact on these interim condensed consolidated financial statements
to be considered.
Standards and interpretations adopted with no effect on reported
results, financial position or disclosures
IFRS 10 Consolidated financial statements
The new standard provides additional guidance to assist in the
determination of which entities are controlled and are required to
be consolidated. This standard replaces the portion of IAS 27
Consolidated and separate financial statements that addresses the
accounting for consolidated financial statements. The new standard
became mandatory in the EU for financial years beginning on or
after 1 January 2014. The new standard did not have an impact on
the financial position or performance of the Group.
IFRS 11 Joint arrangements
The new standard replaces IAS 31 Interests in joint ventures and
SIC 13 Jointly-controlled entities - non-monetary contributions by
ventures. The standard defines contractually agreed sharing of
control of an arrangement and the accounting for joint operations
and joint ventures. The new standard became mandatory in the EU for
annual periods beginning on or after 1 January 2014. The new
standard did not have an impact on the financial position or
performance of the Group.
IAS 32 Financial instruments: presentation - offsetting
financial assets and financial liabilities
The amendment clarifies existing application issues relating to
the offset of financial assets and financial liabilities
requirements. The amendment became effective for financial years
beginning on or after 1 January 2014 with retrospective
application. The amendment did not have an impact on the financial
position or performance of the Group.
IAS 36 Impairment of assets - recoverable amount disclosures
The amendment to the standard was issued in May 2013 and became
effective for financial years beginning on or after 1 January 2014.
The amendment removes the requirement to disclose recoverable
amounts when there has been no impairment or reversal of
impairment. Further to that, the disclosure requirements have been
aligned with those under US GAAP for impaired assets. The amendment
did not have an impact on the financial position or performance of
the Group.
IAS 39 Financial instruments: recognition and measurement -
novation of derivatives and continuation hedge accounting
The amendment to the standard was issued in June 2013 and
provides guidance in respect of the continuation of hedge
accounting if a hedging derivative was novated. The amendment
became effective for the financial years beginning on or after 1
January 2014 and did not have an impact on the financial position
or performance 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 monitored at a more detailed level, 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 presents EBITDA because it believes that EBITDA is a
useful measure for evaluating its ability to generate cash and its
operating performance. The Group's full definition of EBITDA is
disclosed in the Glossary on page 25.
9 months ended Year ended
US$ 000 Notes 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Profit before tax and finance 245,602 268,170 359,218
Under recovery and write-down of VAT receivable 13 6,419 - 36,421
Write-offs and impairment losses 8 83,733 50 854
Share based payments 367 933 1,266
Losses on disposal of PPE 4,389 3,988 8,492
Depreciation and amortisation 63,811 72,565 99,645
--------------------------------------------------- ------ --------------- ------------------------ -----------
EBITDA 404,321 345,706 505,896
--------------------------------------------------- ------ --------------- ------------------------ -----------
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 ended Year ended
US$'000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Cost of sales - pellet production 5 445,350 526,240 726,960
Depreciation and amortisation 5 (49,781) (57,243) (78,690)
Purchased concentrate and other items for resale 5 (17,566) (22,770) (34,805)
Inventory movements 5 12,308 44,858 25,476
Other (11,027) (20,447) (13,213)
---------------------------------------------------- --------------- ------------------------ -----------
C1 cost 379,284 470,638 625,728
---------------------------------------------------- --------------- ------------------------ -----------
Own ore produced (tonnes) 8,052,754 7,766,300 10,465,606
---------------------------------------------------- --------------- ------------------------ -----------
C1 cash cost per tonne US$ 47.1 60.6 59.8
---------------------------------------------------- --------------- ------------------------ -----------
Net financial indebtedness
Net financial indebtedness as defined by the Group comprises
cash and cash equivalents, term deposits, interest bearing loans
and borrowings.
US$ 000 Notes As at 30.09.14 As at 30.09.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Cash and cash equivalents 15 608,075 339,219 390,491
Interest bearing loans and borrowings - current 17 (205,440) (54,059) (101,043)
Interest bearing loans and borrowings - non-current 17 (1,114,419) (962,545) (928,196)
------------------------------------------------------- ------ --------------- --------------- ---------------
Net financial indebtedness (711,784) (677,385) (638,748)
------------------------------------------------------- ------ --------------- --------------- ---------------
Note 4: Revenue
Revenue for the nine months period ended 30 September 2014
consisted of the following:
9 months ended Year ended
US$ 000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Revenue from sales of ore pellets:
Export 1,004,921 1,050,089 1,494,899
------------------------------------------------------------ --------------- ------------------------ -----------
Total revenue from sale of iron ore pellets and
concentrate 1,004,921 1,050,089 1,494,899
------------------------------------------------------------ --------------- ------------------------ -----------
Revenue from logistics and bunker business 69,011 51,764 76,321
Revenue from other sales and services provided 4,902 6,693 10,165
Total revenue 1,078,834 1,108,546 1,581,385
------------------------------------------------------------ --------------- ------------------------ -----------
No sales were made in Ukraine during the periods presented.
Export sales of iron ore pellets and concentrate by geographical
destination were as follows:
9 months ended Year ended
US$'000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Traditional Market 476,333 473,367 663,950
Growth Market 371,926 381,694 565,901
Natural Market 156,662 195,028 265,048
Total export revenue 1,004,921 1,050,089 1,494,899
------------------------- --------------- ------------------------ -----------
Information about the composition of the markets is provided in
the Glossary.
Note 5: Cost of sales
Cost of sales for the nine months period ended 30 September 2014
consisted of the following:
9 months ended Year ended
US$ 000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Materials 65,077 83,683 107,530
Purchased concentrate and other items for resale 17,566 22,770 34,805
Electricity 95,373 119,194 158,849
Personnel costs 39,531 52,325 66,194
Spare parts and consumables 4,083 13,532 15,921
Depreciation and amortisation 49,781 57,243 78,690
Fuel 53,339 60,807 74,653
Gas 54,393 60,134 82,028
Repairs and maintenance 42,705 53,049 72,299
Royalties and levies 18,793 14,826 23,162
Cost of sales from logistics business 16,538 9,294 16,531
Bunker fuel 29,490 20,443 29,731
Inventory movements (12,308) (44,858) (25,476)
Other 17,017 33,535 38,304
----------------------------------------------------- --------------- ------------------------ -----------
Total cost of sales 491,378 555,977 773,221
----------------------------------------------------- --------------- ------------------------ -----------
9 months ended Year ended
US$ 000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Cost of sales - pellet production 445,350 526,240 726,960
Cost of sales - logistics and bunker business 46,028 29,737 46,261
-------------------------------------------------- --------------- ------------------------ -----------
Total cost of sales 491,378 555,977 773,221
-------------------------------------------------- --------------- ------------------------ -----------
Note 6: General and administrative expenses
General and administrative expenses for the nine months period
ended 30 September 2014 consisted of the following:
9 months ended Year ended
US$ 000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Personnel costs 21,301 23,462 31,972
Buildings and maintenance 1,761 2,105 2,571
Taxes other than income tax and other charges 215 143 184
Professional fees 4,804 3,181 6,715
Depreciation and amortisation 1,626 2,812 4,022
Communication 957 973 1,328
Vehicles maintenance and fuel 1,116 1,134 1,584
Repairs 369 690 982
Audit fees 1,148 1,157 1,606
Non-audit fees 75 68 900
Security 440 351 497
Other 1,689 2,007 2,478
-------------------------------------------------- --------------- ------------------------ -----------
Total general and administrative expenses 35,501 38,083 54,839
-------------------------------------------------- --------------- ------------------------ -----------
Note 7: Foreign exchange gains and losses
Foreign exchange gains and losses for the nine months period
ended 30 September 2014 consisted of the following:
9 months ended Year ended
US$ 000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Operating foreign exchange gains
Revaluation of trade receivables 57,282 1 1
Revaluation of trade payables (1,372) 30 30
Others (19) 321 591
-------------------------------------------------------- --------------- ------------------------ -----------
Total operating foreign exchange gains 55,891 352 622
-------------------------------------------------------- --------------- ------------------------ -----------
Non-operating foreign exchange gains
Revaluation of interest-bearing loans (53,383) 1,560 2,892
Revaluation of cash and cash equivalents 57,208 4,929 7,329
Others (17,428) (375) (466)
-------------------------------------------------------- --------------- ------------------------ -----------
Total non-operating foreign exchange (losses)/gains (13,603) 6,114 9,755
-------------------------------------------------------- --------------- ------------------------ -----------
Total foreign exchange gains 42,288 6,466 10,377
-------------------------------------------------------- --------------- ------------------------ -----------
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. During the period ended 30 September 2014, the Ukrainian
Hryvnia has devalued by approximately 62% compared to the US
Dollar; from 7.993 as at 31 December 2013 to 12.949 as at the end
of this reporting period. This has affected mainly the opening
balances of property plant and equipment (note 12), income taxes
recoverable and prepaid and other taxes recoverable and prepaid
(note 13).
Note 8: 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 months period
ended 30 September 2014 consisted of the following:
9 months ended Year ended
US$ 000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Impairment loss on available-for-sale financial assets 82,382 - -
Write-off of VAT receivables 1,351 - -
Write-off of property, plant and equipment - 50 326
Write-off of inventories - - 528
Total write-offs and impairment losses 83,733 50 854
----------------------------------------------------------- --------------- ------------------------ -----------
The impairment loss on available-for-sale financial assets is
related to the 15.5% equity investment in Ferrous Resources.
Further information is provided in note 20.
Note 9: Finance income and expense
Finance income and expense for the period ended 30 September
2014 consisted of the following:
9 months ended Year ended
US$000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Finance income
Interest income 1,501 1,539 2,062
Other finance income 16,859 159 310
Total finance income 18,360 1,698 2,372
------------------------------------------------------------ --------------- ------------------------ -----------
Finance expense
Interest expense on financial liabilities measured at
amortised cost (41,062) (41,052) (53,340)
Effect from capitalised borrowing costs 6,901 6,811 8,966
Interest on defined benefit plans (3,481) (4,137) (5,487)
Bank charges (11,891) (7,795) (10,976)
Other finance costs (1,898) (19,248) (5,116)
------------------------------------------------------------ --------------- ------------------------ -----------
Total finance expense (51,431) (65,421) (65,953)
------------------------------------------------------------ --------------- ------------------------ -----------
Net finance expense (33,071) (63,723) (63,581)
------------------------------------------------------------ --------------- ------------------------ -----------
Other finance income includes a US$16,497 thousand release of a
discount recorded in the prior years for VAT in dispute that was
expected to be recovered over a protracted period of time. Further
information is provided in note 13.
This discount was built up in prior periods and recorded as a
finance cost. The amount recorded for the nine months ended 30
September 2013 and the year ended 31 December 2013 were US$18,000
thousand and US$3,695 thousand respectively.
Note 10: Taxation
The Group pays corporate profit tax in a number of jurisdictions
and its tax rate is influenced by the mix of profits primarily
between Ukraine, Switzerland and Dubai, as well as the level of
non-deductible expenses for tax purposes in each of these
jurisdictions. For the period ended 30 September 2014, the income
tax expense was based on an expected tax rate of 24.5% for the
financial year 2014, which is significantly above the effective tax
rate for the financial year 2013 of 13.6%.
The increase of the tax rate during the period ended September
2014 was a result of a change in the mix of profits within the
Group and significantly higher non-deductible expenses in Ukraine
and Switzerland including the discount recorded on the VAT bonds
sold prior to their maturity and the impairment loss recorded on an
equity investment (see note 20 for further details).
During the financial years 2013 and 2014, current VAT receivable
balances in Ukraine were mainly recovered in exchange for
prepayments of corporate profit tax. As at 30 September 2014, the
Group prepaid corporate profit tax totalling US$91,320 thousand (30
September 2013: US$85,889 thousand; 31 December 2013: US$87,514
thousand) and it is management's view that this balance will be
either offset with future profits or recovered through an issuance
of bonds by the Ministry of Finance as happened during the
financial year 2014 for overdue VAT receivable balances (see note
13). As at the date of the preparation of these consolidated
interim financial statements, there is an uncertainty as to the
timing of the recovery of this balance. In light of this
uncertainty, it was considered most appropriate to classify the
entire balance as non-current in the consolidated statement of
financial position.
Note 11: 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 are 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 ended Year ended
30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Profit for the period / year attributable to equity
shareholders:
Basic earnings per share (US cents) 24.82 30.14 44.76
Diluted earnings per share (US cents) 24.77 30.09 44.69
------------------------------------------------------------ --------------- ------------------------ -----------
The calculation of the basic and diluted earnings per share is
based on the following data:
9 months ended Year ended
Thousands 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Weighted average number of shares
Basic number of ordinary shares outstanding 585,413 585,275 585,294
Effect of dilutive potential ordinary shares 1,258 947 926
-------------------------------------------------- --------------- ------------------------ -----------
Diluted number of ordinary shares outstanding 586,671 586,222 586,220
-------------------------------------------------- --------------- ------------------------ -----------
The basic number of ordinary shares is calculated by subtracting
the shares held in treasury from the total number of ordinary
shares in issue.
Dividends
9 months ended Year ended
US$000 30.09.14 9 months ended 30.09.13 31.12.13
(unaudited) (unaudited) (audited)
Dividend proposed
Final dividend for 2013: 3.3 US cents - - 19,317
Special dividend for 2013: 6.6 US cents - - 38,633
Total dividends proposed - - 57,950
-------------------------------------------- ---------------- ------------------------ -----------
Paid per ordinary share
Interim dividend for 2014: 3.3 US cents 19,011 - -
Final dividend for 2013: 3.3 US cents 19,279 - -
Special dividend for 2013: 6.6 US cents 38,614 - -
Interim dividend for 2013: 3.3 US cents - 19,692 19,692
Final dividend for 2012: 3.3 US cents - 19,441 19,441
Special dividend for 2012: 6.6 US cents - 38,749 38,749
-------------------------------------------- ------- ------- -------
Total dividends paid during the period 76,904 77,882 77,882
-------------------------------------------- ------- ------- -------
The interim dividends paid for 2014 and 2013 include withholding
taxes of US$3,218 thousand and US$3,372 thousand paid subsequent to
the periods ended 30 September 2014 and 30 September 2013
respectively.
Note 12: Property, plant and equipment
During the nine months period ended 30 September 2014, the Group
acquired property, plant and equipment with a cost of US$192,668
thousand (30 September 2013: US$230,191 thousand; 31 December 2013:
US$319,320 thousand) and disposed of property, plant and equipment
with original costs of US$22,771 thousand (30 September 2013:
US$17,358 thousand; 31 December 2013: US$32,782 thousand). The
total depreciation charge for the period was US$77,350 thousand (30
September 2013: US$83,550 thousand; 31 December 2013: US$116,677
thousand).
During the reporting period, the Ukrainian Hryvnia has devalued
compared to the US Dollar from 7.993 as of 31 December 2013 to
12.949 as of 30 September 2014 reducing property, plant and
equipment by US$569,998 thousand. This effect is reflected in the
translation reserve included in shareholder's equity. See also note
16.
Property, plant and equipment include capitalised borrowing
costs on qualifying assets of US$13,811 thousand (30 September
2013: US$8,319 thousand; 31 December 2013: US$10,474 thousand).
Note 13: Other taxes recoverable and prepaid
As at 30 September 2014 taxes recoverable and prepaid
comprised:
US$000 As at 30.09.14 As at 30.09.13 As at 31.12.13
(unaudited) (unaudited) (audited)
VAT receivable 67,082 125,574 182,628
Other taxes prepaid 114 624 235
------------------------------------------------------------ --------------- --------------- ---------------
Total other taxes recoverable and prepaid - current 67,196 126,198 182,863
------------------------------------------------------------ --------------- --------------- ---------------
VAT receivable - 141,689 78,281
------------------------------------------------------------ --------------- --------------- ---------------
Total other taxes recoverable and prepaid - non-current - 141,689 78,281
------------------------------------------------------------ --------------- --------------- ---------------
Total other taxes recoverable and prepaid 67,196 267,887 261,144
------------------------------------------------------------ --------------- --------------- ---------------
As at 30 September 2014, US$66,412 thousand of the VAT
receivable before discount relates to the Group's Ukrainian
business operations (30 September 2013: US$302,493 thousand; 31
December 2013: US$318,213 thousand).
The Ukrainian Hryvnia devalued compared to the US Dollar from
7.993 as at 31 December 2013 to 12.949 as at 30 September 2014
reducing the gross balance of VAT outstanding expressed in US
Dollar by US$121,793 thousand and the associated provision of
US$36,421 thousand by US$11,798 thousand. These net differences are
reflected in the translation reserve. See also note 15.
During the second half of the financial year 2014, bonds were
received by the Group with a face value of UAH1,607,101 thousand
(US$135,573 thousand at the exchange rate at the date of issuance)
in settlement for VAT due of the same amount. The bonds were issued
by the Ministry of Finance to settle certain accumulated VAT
liabilities and are tradable and mature over a period of five years
in 10 equal instalments. The bonds carry a 9.5% annual coupon
payable semi-annually. As at 30 September 2014, the Group had sold
VAT bonds with a face value of UAH391,485 thousand at an average
discount of 18.7% resulting in net proceeds of UAH318,256 thousand
(US$24,594 thousand at the exchange rate at the date of sale).
Subsequent to the end of the reporting period ended 30 September
2014, the remaining VAT bonds outstanding at the balance sheet date
were sold resulting in additional proceeds of UAH934,544 thousand
(US$72,473 thousand at the exchange rate at the date of sale). The
average discount of all VAT bonds sold during the second half of
the financial year 2014 was 21.8% resulting in net proceeds
totalling UAH1,256,800 thousand (US$97,067 thousand at the exchange
rate at the date of sale).
As at the end of the comparative period ended 31 December 2013,
part of the VAT balance was in the court system and management
estimated that these balances would be recovered over a protracted
period of time. As a result a discount of US$23,696 thousand was
recorded and charged to finance expense during the financial years
2012 and 2013. From this balance, US$16,497 was released to finance
income in 2014 (note 9) with the remainder reflected in the
translation reserve. As at 30 September 2014, management expect
amounts in the court system to be recovered inside one year through
a further issuance of bonds which will trade at a similar discount
to face value and a provision of US$1,710 thousand has been
recorded in the income statement to reflect this.
Note 14: Inventories
Inventories are held at the lower of cost or net realisable
value. As at 30 September 2014 ore stockpiles amounting to
US$69,729 thousand (30 September 2013: US$27,481; 31 December 2013:
US$58,303 thousand) were classified as non-current as this ore is
not planned to be processed within one year.
Note 15: Cash and cash equivalents
As at 30 September 2014 the Group held cash and cash equivalents
of US$608,075 thousand (30 September 2013: US$339,219 thousand; 31
December 2013: US$390,491 thousand).
The Group's exposure to liquidity, counterparty and interest
rate risk as well as a sensitivity analysis for financial assets
and liabilities are disclosed in note 37 of the Annual Report and
Accounts 2013. See also note 18 of these interim condensed
consolidated financial statements for further information in
respect of transactional banking arrangements with a related
party.
Note 16: Share capital and reserves
The share capital of Ferrexpo plc at 30 September 2014 was
613,967,956 (30 September 2013: 613,967,956; 31 December 2013:
613,967,956) Ordinary Shares at par value of GBP0.10 paid for cash,
resulting in share capital of US$121,628 thousand which is
unchanged since the Group's Initial Public Offering in June 2007.
This balance includes 25,343,814 shares (30 September 2013:
25,343,814 shares; 31 December 2013: 25,343,814 shares) which are
held in treasury, resulting from a share buyback that was
undertaken in September 2008, and 3,162,399 shares held in the
employee benefit trust reserve (30 September 2013: 3,275,435
shares; 31 December 2013: 3,275,435 shares).
The translation reserve includes the effect from the exchange
differences arising on translation of foreign non-US Dollar
functional currency operations (mainly in Ukrainian Hryvnia).
During the period ended 30 September 2014, the Ukrainian Hryvnia
devalued from 7.993 as at the beginning of the year to 12.949 as at
30 September 2014 and the exchange differences arising on
translation of the Group's foreign operations are initially
recognised in the other comprehensive income. See also the Interim
Consolidated Statement of Comprehensive Income on page 2 of these
financial statements for further details. As at 30 September 2014
other reserves attributable to equity shareholders of Ferrexpo plc
comprised.
For the financial
year 2013 and the
nine months ended
30 September 2014
Uniting of Employee Net
interest Treasury Benefit Trust unreali-sed Translation Total other
US$ 000 reserve share reserve reserve gains reserve reserve reserves
At 1 January 2013 31,780 (77,260) (7,808) 820 (295,588) (348,056)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Foreign currency
translation
differences - - - - (428) (428)
Loss on
available-for-sale
financial assets - - - (138) - (138)
Tax effect - - - 30 - 30
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Total comprehensive
income for the
period - - - (108) (428) (536)
Share based
payments - - 1,266 - - 1,266
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
At 31 December 2013
(audited) 31,780 (77,260) (6,542) 712 (296,016) (347,326)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Foreign currency
translation
differences - - - - (895,576) (895,576)
Loss on
available-for-sale
financial assets - - - (102) - (102)
Tax effect - - - 18 58,085 58,103
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Total comprehensive
income for the
period - - - (84) (837,491) (837,575)
Share based
payments - - 367 - - 367
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
At 30 September
2014 (unaudited) 31,780 (77,260) (6,175) 628 (1,133,507) (1,184,534)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
For the nine months
ended 30 September
2013
Uniting of Employee Net
interest Treasury Benefit Trust unreali-sed Translation Total other
US$ 000 reserve share reserve reserve gains reserve reserve reserves
At 1 January 2013 31,780 (77,260) (7,808) 820 (295,588) (348,056)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Foreign currency
translation
differences - - - - (211) (211)
Gain on
available-for-sale
financial assets - - - (126) - (126)
Tax effect - - - 23 - 23
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Total comprehensive
income for the
period - - - (103) (211) (314)
Share based
payments - - 933 - - 933
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
At 30 September
2013 (unaudited) 31,780 (77,260) (6,875) 717 (295,799) (347,437)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Note 17: Interest bearing loans and borrowings
This note provides information about the contractual terms of
the Group's interest bearing loans and borrowings which are
measured at amortised cost and denominated in US Dollars.
US$ 000 As at 30.09.14 As at 30.09.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Current
Syndicated bank loans - secured 157,500 17,500 70,000
Bank loans - secured 22,664 13,360 16,775
Obligations under finance leases 4,619 3,931 4,523
Interest accrued 20,657 19,268 9,745
----------------------------------------------------------- --------------- --------------- ---------------
Total current interest bearing loans and borrowings 3 205,440 54,059 101,043
----------------------------------------------------------- --------------- --------------- ---------------
Non-current
Eurobond issued 495,726 493,162 493,810
Syndicated bank loans - secured 525,000 402,500 350,000
Other bank loans - secured 79,407 50,075 66,129
Obligations under finance leases 14,286 16,808 18,257
----------------------------------------------------------- --------------- --------------- ---------------
Total non-current interest bearing loans and borrowings 3 1,114,419 962,545 928,196
----------------------------------------------------------- --------------- --------------- ---------------
Total interest bearing loans and borrowings 1,319,859 1,016,604 1,029,239
----------------------------------------------------------- --------------- --------------- ---------------
As at 30 September 2014 the Group has a syndicated US$420
million pre-export finance facility, of which US$332.5 million is
available and drawn, and a new fully drawn syndicated US$350
million pre-export finance facility. Both are revolving facilities
with commitment amortisation over the final 24 months to the final
maturity dates of 31 July 2016 and 8 August 2018 respectively.
Subject to additional bank commitments, the new US$350 million
facility can be further increased up to an amount of US$500 million
within one year of the effective date, which was 8 August 2014.
As at 30 September 2014 the major bank debt facilities were
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.
In addition to the Group's major bank debt facilities listed
above, an unsecured US$500 million Eurobond was issued on 7 April
2011 and is due for repayment on 7 April 2016. The bond has a
7.875% coupon and interest is payable on a semi-annual basis.
Further information on the Group's exposure to interest rate,
foreign currency and liquidity risk is provided in note 37 of the
Annual Report and Accounts 2013.
Note 18: Related party disclosure
During the periods presented the Group entered into arm's length
transactions with entities under the common control of the majority
owner of the Group, Kostyantin Zhevago and with associated
companies and with other related parties. Management considers that
the Group has appropriate procedures in place to identify and
properly disclose transactions with the related parties.
Entities under common control are those under the control of
Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in
which the Group holds an interest of 48.6%. This is the only
associated company of the Group. Other related parties are
principally those entities controlled by Anatoly Trefilov who is a
member of the supervisory board of OJSC Ferrexpo Poltava Mining.
Related party transactions entered into by the Group during the
periods presented are summarised in the following tables:
Revenue, expenses, finance income and finance expenses
9 months ended 30.09.14 (unaudited) 9 months ended 30.09.13 Year ended 31.12.13 (audited)
(unaudited)
------------------------------------- -------------------------------- ------------------------------
Entities Asso-ciated Other Entities Asso- Other Entities Asso- Other
under compa- nies related under ciated related under ciated related
common parties common compa- parties common compa- parties
US$ 000 control control nies control nies
Other sales (a) 530 - 305 481 - 329 647 - 491
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
party
transactions
within revenue 530 - 305 481 - 329 647 - 491
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Materials (b) 9,538 - 19 9,915 - - 13,897 - 43
Purchased
concentrate and
other items for
resale (c) 0 - - 6,208 - - 7,053 - -
Spare parts and
consumables (d) 1,872 - 1 2,213 - - 2,838 - 2
Gas (e) 30,684 - - 23,712 - - 33,581 - -
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
parties
transactions
within cost of
sales 42,094 - 20 42,048 - - 57,369 - 45
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Selling and
distribution
expenses (f) 8,383 18,499 3,881 8,157 16,766 5,715 11,183 22,582 8,335
General and
administration
expenses (g) 1,039 - - 1,551 - 13 1,747 - 12
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
parties
transactions
within expenses 51,516 18,499 3,901 51,756 16,766 5,728 70,299 22,582 8,392
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Finance income (h) 1,312 - - 1,194 - - 1,673 - -
Finance expenses
(h) (43) - - (174) - - (184) - -
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Net finance
income/(expenses) 1,269 - - 1,020 - - 1,489 - -
------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Entities under common control
The Group entered into various related party transactions with
entities under common control. A description of the most material
transactions which are in aggregate over US$200 thousand (on an
expected annualised basis) in the current or comparative periods is
given below. All transactions were carried out on an arm's length
basis in the normal course of business.
(a) Sales of power, steam and water and other materials for
US$119 thousand (30 September 2013: US$104 thousand; 31 December
2013: US$149 thousand) and income from premises leased to Kislorod
PCC of US$200 thousand (30 September 2013: US$176 thousand; 31
December 2013: US$238 thousand).
(b) Purchases of compressed air, oxygen and metal scrap from
Kislorod PCC for US$4,080 thousand (30 September 2013: US$4,415
thousand; 31 December 2013: US$5,988 thousand); and
(b) Purchases of cast iron balls from AutoKraZ Holding Co. for
US$4,453 thousand (30 September 2013: US$4,874 thousand; 31
December 2013: US$6,865 thousand).
(b) Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas
for US$816 thousand (30 September 2013: US$398 thousand; 31
December 2013: US$711 thousand).
(c) No purchases of concentrate and other items for resale from
Vostok Ruda Ltd in the period ended 30 September 2014 (30 September
2013: US$6,208 thousand; 31 December 2013: US$7,053 thousand).
(d) Purchases of spare parts from CJSC Kiev Shipbuilding and
Ship Repair Plant ('KSRSSZ') in the amount of US$576 thousand (30
September 2013: US$671 thousand; 31 December 2013: US$864
thousand);
(d) Purchases of spare parts from Valsa GTV of US$671 thousand
(30 September 2013: US$1,018 thousand; 31 December 2013: US$1,226
thousand);
(d) Purchases of ferromanganese from Raw and Refined Commodities
AG for US$353thousand (30 September 2013: US$239 thousand; 31
December 2013: US$354 thousand).
(e) Procurement of gas for US$30,684 thousand (30 September
2013: US$23,712thousand; 31 December 2013: US$33,581 thousand) from
OJSC Ukrzakordongeologia.
(f) Purchases of advertisement, marketing and general public
relations services from FC Vorskla of US$8,332 thousand (30
September 2013: US$8,101 thousand; 31 December 2013: US$11,000
thousand).
(g) Insurance premiums of US$478 thousand (30 September 2013:
US$541 thousand; 31 December 2013:US$728 thousand) paid to ASK
Omega for workmen's insurance and general cover;
(g) Fees of US$349thousand (30 September 2013: US$339 thousand;
31 December 2013: US$ 433 thousand) paid to Bank Finance &
Credit (Bank F&C) for bank services.
(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 on page 19.
Associated companies
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). A description of the most material
transactions which are in aggregate over US$200 thousand (on an
expected annualised basis) in the current or comparative periods is
given below:
(f) Purchases of logistics services in the amount of US$18,499
thousand (30 September 2013: US$16,766 thousand; 31 December 2013:
US$22,582 thousand) relating to port operations, including port
charges, handling costs, agent commissions and storage costs.
Other related parties
The Group entered into various transactions with other related
parties. A description of the most material transactions which are
in aggregate over US$200 thousand (on an expected annualised basis)
in the current or comparative periods is given below:
(a) Sales of material and services to Slavutich Ruda Ltd. for
US$295 thousand (30 September 2013: US$329 thousand; 31 December
2013: US$491 thousand).
(f) Purchases of logistics management services from Slavutich
Ruda Ltd. relating to customs clearance services and the
coordination of rail transit. Total billings amounted to US$3,881
thousand (30 September 2013: US$5,715 thousand; 31 December 2013:
US$8,335 thousand). Slavutich Ruda Ltd. earned commission income of
US$419 thousand on these services (30 September 2013: US$731
thousand; 31 December 2013: US$979 thousand).
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature
which were undertaken between Group companies and entities under
common control, associated companies and other related parties
during the periods presented.
9 months ended 30.09.14 (unaudited) 9 months ended 30.09.13 Year ended 31.12.13 (audited)
(unaudited)
------------------------------------- -------------------------------- ------------------------------
US$ 000 Entities Asso-ciated Other Entities Asso- Other Entities Asso- Other
under compa-nies related under ciated related under ciated related
common parties common compa- parties common compa- parties
control control nies control nies
Purchases 458 - - - - - - - -
with
independent
fair and
reasonable
confirmation
Purchases
with
shareholder
approval - - - 13,527 - - 18,141 - -
Purchases in
the ordinary
course of
business 2,263 - 4 3,624 - - 3,741 - -
-------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total
purchases of
property,
plant and
equipment
(i) 2,721 - 4 17,151 - - 21,882 - -
-------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Entities under common control
Current year
i During the first nine months of the financial year 2014, the
Group entered in various transactions of a capital nature with
related parties totalling to US$2,267 thousand. These transactions
were in the ordinary course of business. Individual transactions of
a capital nature which exceeded US$200 thousand are listed
below.
-- During the period ended 30 September 2014, the Group procured
goods and services totaling US$1,659 thousand from OJSC Berdichev
Machine-Building Plant Progress for various ongoing projects.
In August 2014, the Group acquired in two separate transactions
a railway line and an associated power lines from LLC Vorskla Steel
totaling US$458 thousand. As the transaction was not considered to
be in the ordinary course of business, an independent fair and
reasonable confirmation was obtained and the transaction was
announced in accordance with the UK Listing Rules.
In February 2014, the Group ordered through its subsidiary LLC
Ferrexpo Yeristovo GOK 300 rail cars from PJSC Stakhanov Railcar
Company with a total value of US$15.9 million, of which 233 rail
cars were under the authority of the shareholder approval obtained
on 24 May 2012. A further 67 rail cars were ordered in the ordinary
course of business. A prepayment of US$8.0 million (at current
exchange rate) was made in relation to these rail cars. The rail
cars were due for delivery in the second half of the financial year
2014. However, as a consequence of the ongoing conflict in the
Eastern part of Ukraine, PJSC Stakhanov Railcar Company halted its
production in the Lugansk region and declared force-majeure on 24
October 2014, which was confirmed by the Ukrainian Chamber of
Commerce and Industry. At the point of time of preparation of these
interim financial statements, there is uncertainty surrounding the
delivery of the rail cars or recovery of the prepayment. As a
consequence, the Group recorded an allowance for the full amount as
at 30 September 2014.
Prior periods:
During the financial year 2013, the Group entered into various
transactions of a capital nature with related parties totalling
US$3,741 thousand. These transactions were in the ordinary course
of business and on an arm's length basis. Individual transactions
which exceeded US$200 thousand are listed below:
-- In January 2013, the Group procured three railway platforms
in the amount of US$218 thousand from PJSC Stakhanov Railcar
Company.
-- In April 2013, the Group entered into a contract with OJSC
Berdichev Machine-Building Plant Progress and OJSC Uzhgorodsky
Turbogas for the production and supply of deslimers for a new
flotation section in the amount of US$585 thousand.
-- In June and September 2013, the Group procured metal works
from OJSC Berdichev Machine-Building Plant Progress in the amount
of US$1,297 thousand and US$1,054 thousand in connection with the
construction of a new crushing section.
The Group received shareholder approval on 24 May 2012 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. In
February 2013, the Group exercised the right under this option to
order 267 rail cars. These rail cars, amounting to US$18,141
thousand, were delivered and taken into operation during the
financial year 2013 and increased the total fleet of rail cars from
1,933 units to 2,200 units as at 31 December 2013.
Balances with related parties
The outstanding balances, as a result of transactions with
related parties, for the periods presented are shown in the table
below:
9 months ended 30.09.14 (unaudited) 9 months ended 30.09.13 Year ended 31.12.13 (audited)
(unaudited)
------------------------------------- -------------------------------- ------------------------------
Entities Asso-ciated Other Entities Asso- Other Entities Asso- Other
under compa-nies related under ciated related under ciated related
common parties common compa- parties common compa- parties
US$ 000 control control nies control nies
Available-for-sale
financial assets
(j) 139 - - 402 - - 396 - -
Other non-current
assets (k) 5,809 - - 7,407 - - 7,438 - -
Prepayments for
property, plant
and equipment (l) 793 - - 1,527 - - 1,548 - -
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total non-current
assets 6,741 - - 9,336 - - 9,382 - -
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Trade and other
receivables (m) 785 - 27 965 - 97 1,150 - 31
Prepayments and
other current
assets (n) 1,206 1,225 380 4,633 2,293 603 136 1,172 186
Cash and cash
equivalents (o) 162,364 - - 127,259 - 143,005 - -
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total current
assets 164,355 1,225 407 132,857 2,293 700 144,291 1,172 217
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Trade and other
payables (p) 1,125 - 39 1,762 - 299 3,099 - 275
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Current liabilities 1,125 - 39 1,762 - 299 3,099 - 275
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
A description of the most material balances which are over
US$200 thousand in the current or comparative periods is given
below:
Entities under common control
j The balance of the available-for-sale financial assets
comprised shareholdings in PJSC Stakhanov Railcar Company (1.1%)
and Vostok Ruda Ltd. (1.1%). 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 available-for-sale financial assets remained unchanged
during the periods disclosed above. The balance of US$139 thousand
as at 30 September 2014 related to the investment in PJSC Stakhanov
Railcar Company (30 September 2013: US$403 thousand; 31 December
2013: US$396 thousand). The investment in Vostok Ruda Ltd. was
fully impaired in a previous period.
k As at 30 September 2014, other non-current assets related to a
deposit of US$5,809 thousand with bank F&C (30 September 2013:
US$7,407 thousand; 31 December 2013: US$7,438 thousand) as a
security in respect of loans made to employees under the Group's
social loyalty programme. Further information is provided under
transactional banking arrangements below.
l A prepayments of US$7,983 thousand (at current exchange rate)
was made in relation to rail cars purchased from PJSC Stakhanov
Railcar Company (30 September 2013: nil; 31 December 2013: nil)
during the period ended 30 September 2014 in relation to 300 rail
cars ordered. Due to uncertainty surrounding the delivery of the
rail cars or recovery of the prepayment, the Group recorded an
allowance for the full amount as at 30 September 2014 (see section
Purchases of property, plant, equipment and investments above for
further details). The prepayments made as at 30 September 2013 are
in relation to 267 rail cars ordered in 2013 and received in full
until August 2013. Prepayments of US$669 thousand were made to OJSC
Berdichev Machine-Building Plant Progress (30 September 2013:
US$1,271 thousand; 31 December 2013: US$1,397 thousand).
m As at 30 September 2014, trade and other receivables included
outstanding amounts of US$282 thousand due from Vorskla Steel Ltd.
(30 September 2013: US$359 thousand; 31 December 2013: US$387
thousand) in relation to other sales and US$338 thousand (30
September 2013: US$451thousand; 31 December 2013: US$540 thousand)
from Kislorod PCC for the sale of power, steam and water.
n Prepayments and other current assets include US$993 thousand
prepayment made to OJSC Ukrzakordongeologia for gas (30 September
2013: US$736 thousand; 31 December 2013: nil). The balance as at
end of the period ended 30 September 2013 included an amount of US$
3,691 for prepayments for concentrate made to Vostok Ruda.
o As at 30 September 2014, cash and cash equivalents with Bank
F&C were US$162,259 thousand (30 September 2013: US$127,259
thousand; 31 December 2013: US$143,005 thousand). Further
information is provided under Transactional banking arrangements
below.
p Trade and other payables amounting to US$530 thousand for
compressed air and oxygen purchased from Kislorod PCC (30 September
2013: US$592 thousand; 31 December 2013: US$639 thousand). US$71
thousand (30 September 2013: US$276 thousand; 31 December 2013:
US$215 thousand) are due to AutoKraZ Holding Co. and US$107
thousand (30 September 2013: US$106 thousand; 31 December 2013:
US$258 thousand) OJSC Berdichev Machine-Building Plant Progress for
the procurement of spare parts. The balance as at end of the period
ended 30 September 2013 included an amount of US$409 thousand
payable to PJSC Stakhanov Railcar Company related to rail car
deliveries. The balance as at end of the period ended 31 December
2013 included an amount US$1,690 thousand for procurement of gas
from OJSC Ukrzakordongeologia.
Associated companies
n Prepayments and other current assets relate to prepayments of
US$1,225 thousand (30 September 2013: US$2,293 thousand; 31
December 2013: US$1,172 thousand) made TIS Ruda LLC for
transhipment services.
Other related parties
n Prepayments and other current assets relate to prepayments of
US$380 thousand for distribution services made to Slavutich Ruda
Ltd. (30 September 2013: US$603 thousand; 31 December 2013: US$186
thousand).
p Trade and other payables amounting to US$39 thousand as at 30
September 2014 are in respect of distribution services provided by
Slavutich Ruda Ltd. (30 September 2013: US$299 thousand; 31
December 2013: US$275 thousand).
Transactional banking arrangements
The Group has transactional banking arrangements with Bank
Finance & Credit ('Bank F&C') in Ukraine which is under
common control of the majority shareholder of Ferrexpo plc. Finance
income and expenses are disclosed in the table on page 16.
The Group had an uncommitted multicurrency revolving loan
facility agreement with Bank F&C which expired on 16 April
2013. The maximum limit of this facility amounted to UAH80 million
and the terms and conditions of the facility were subject of an
independent fair and reasonable confirmation at its inception and
renewal dates. The loan facility remained undrawn for the entire
period of time since its inception.
On 25 May 2013, the Group entered into a new uncommitted
multicurrency revolving loan facility agreement and a documentary
credit facility agreement with Bank F&C which will expire on 29
May 2016. The aggregate maximum limit of these facilities amounts
to UAH80 million (30 September 2014: US$6,178 thousand; 31 December
2013: US$10,009 thousand) and, as required under Ukrainian
legislation, fixed assets are pledged. The total value of pledges
under the terms of the loan facility agreements is US$4,987
thousand as of the date of the signing of the agreements. The terms
and conditions of both facilities were the subject of an
independent fair and reasonable confirmation.
US$ 000 As at 30.09.14 As at 30.09.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Loan facilities 6,178 10,009 10,009
Amount drawn - - -
Letter of credit facility outstanding - 476 153
Bank guarantee facility outstanding - - -
------------------------------------------ --------------- --------------- ---------------
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$5,809 thousand at Bank F&C as security (30 September 2013:
US$7,407 thousand; 31 December 2013: US$7,438 thousand). The
interest rate margin earned by Bank F&C covers the costs of
administrating the mortgages and loans. Detailed information on the
social loyalty programme is provided in the Corporate Social
Responsibility Review section of the Annual Report and Accounts
2013.
Cash and cash equivalent balances held with Bank F&C are in
the normal course of business and are held on call or from time to
time on overnight deposit. Interest is paid on balances held. The
interest rates received by the Group were in line with relevant
comparable market rates throughout the periods presented.
Note 19: Commitments and contingencies
Commitments
US$ 000 As at 30.09.14 As at 30.09.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Operating lease commitments 52,672 82,917 65,555
Capital commitments on purchase of PPE 125,418 119,795 102,958
------------------------------------------- --------------- --------------- ---------------
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 has been disclosed in its various public
documents since IPO in 2007. The main chronology of the dispute is
below:
On 10 April 2010, The Higher Commercial Court of Ukraine upheld
judgments of the lower courts on invalidating the share sale and
purchase agreement ('SPA') pursuant to which a 40.19% stake in OJSC
Ferrexpo Poltava Mining ('FPM') was sold on 20 November 2002 to
nominee companies that were previously ultimately controlled by
Kostyantin Zhevago.
On 6 October 2011, the sellers under the SPA filed a claim to
restore their title to shares in FPM as of 2002 by seeking to
invalidate a number of decisions of FPM general shareholders
meeting. On 26 March 2013, Kyiv City Commercial Court granted a
freezing order against FPM shares whilst the case was
considered.
On 20 October 2014, Kyiv City Commercial Court rendered a
judgment in the case and dismissed the claims in full. The court
concluded amongst other things that restitution of the status quo
ante of the shareholding position as sought by claimants is not
possible under Ukrainian law. The court also cancelled the
injunction granted on 26 March 2013 to suspend trading of FPM
shares.
As part of the court process, the claimants filed an appeal
against the Judgment on 31 October 2014 which was returned by the
appeal court on formal grounds. On 26 November 2014, the claimants
re-submitted the appeal. As at the date of the publication of these
interim financial statements for the period ended 30 September
2014, the appeal had not been considered and no decision on the
merits of the appeal had been made.
On 2 December 2014, the Supreme Court of Ukraine set aside the
judgement of the Higher Commercial Court of Ukraine delivered in
April 2010 (see above) and remitted the case for new cassation
review by the Higher Commercial Court of Ukraine. As at the date of
the publication of these interim financial statements for the
period ended 30 September 2014, no decision on the merits of the
cassation review by the Higher Commercial Court of Ukraine had been
made.
After having taken legal advice, the management of the Group
continues to believe that risks related to these court proceedings
are remote. In the light of the risks surrounding the operation and
independence of Ukrainian courts, including those associated with
the Ukrainian legal system in general however the claimants may
ultimately prevail in this dispute and the Group's ownership of the
relevant interest in FPM may be successfully challenged.
Tax and other regulatory compliance
Ukrainian legislation and regulations regarding taxation and
customs 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. This includes also a new transfer pricing
law which significantly increased the power of the tax authorities.
The Group does not believe that these risks are any more
significant than those of similar enterprises in Ukraine.
Recoverable VAT amounting to US$12,130 thousand (30 September
2013: US$99,060 thousand; 31 December 2013: US$101,977 thousand)
outstanding at 30 September 2014 is in the process of being
considered by the Ukrainian court system in several different
cases. As the VAT is fully recoverable under the relevant Ukrainian
legislation, the Group expects to receive positive court decisions
for these ongoing court proceedings and expect these amounts to be
recovered in a further issuance of bonds. Consequently, the VAT is
recorded at its full amount in the financial statements, net of an
estimated discount for VAT balances expected to be recovered
through VAT bonds. See also disclosure made in note 13. No
provision has been made for any related penalties and fines, which
would in the case of a final negative ruling become payable.
Note 20: Financial instruments
Fair values
Set out below are the carrying amounts and fair values of the
Group's financial instruments that are carried in the interim
consolidated statement of financial position:
Carrying amount Fair Value
------------------------------------------------- -------------------------------------------------
As at 30.09.14 As at 30.09.13 As at 31.12.13 As at 30.09.14 As at 30.09.13 As at 31.12.13
US$ 000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Financial assets
Cash and cash
equivalents 608,075 339,219 390,491 608,075 339,219 390,491
Marketable
securities 72,480 - - 72,480 - -
Trade and other
receivables 93,877 90,245 102,498 93,877 90,245 102,498
Available-for-sale
financial assets 139 82,785 82,778 139 82,785 82,778
Other financial
assets 12,596 6,843 15,054 12,596 6,843 15,054
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
assets 787,167 519,092 590,821 787,167 519,092 590,821
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Financial
liabilities
Trade and other
payables 28,744 50,612 50,001 28,744 50,612 50,001
Accrued liabilities 29,570 22,648 32,015 29,570 22,648 32,015
Interest bearing
loans and
borrowings 1,319,859 1,016,604 1,029,239 1,287,227 996,422 1,035,933
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
liabilities 1,378,173 1,089,864 1,111,255 1,345,541 1,069,682 1,117,949
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Marketable securities
The marketable securities (VAT bonds) are generally fair valued
based on the market price quotation at the reporting date. As at 30
September 2014, the remaining balance of VAT bonds was fair valued
through profit or loss. See also note 13 for further
information.
Other financial assets
The fair values of cash and cash equivalents, trade and other
receivables and payables are approximately equal to their carrying
amounts due to their short maturity.
Interest bearing loans and borrowings
The fair values of interest-bearing loans and borrowings are
based on the discounted cash flows using market interest rates
except for the fair value of the Eurobond issued, which is based on
the market price quotation at the reporting date.
Available-for-sale financial assets
As at 30 September 2014, the Group held a 15.5% equity
investment in Ferrous Resources acquired during the financial year
2013 in various transactions with total transaction costs of
US$82,382 thousand, which was also the carrying amount as at the
end of the comparative periods ended 30 September 2013 and 31
December 2013. In the quarter to 30 September 2014, the iron ore
prices in the global market declined significantly and no recovery
is expected in the near future based on available market outlooks.
As a consequence of this significant adverse change in the iron ore
market and industry, the investment in Ferrous Resources was fully
impaired as at 30 September 2014 due to surrounding uncertainties
in respect of the current operational activity and the future
development of the mining operation.
The available-for-sale equity investment in PJSC Stakhanov
Railcar Company in the amount of US$139 thousand (30 September
2013: US$403 thousand; 31 December 2013: US$396 thousand) is fair
value based on the quoted market price for its shares on the
Ukrainian Stock exchange ('PFTS').
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable.
Level 1: fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2: fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
US$ 000 As at 30.09.14 (unaudited)
Level 1 Level 2 Level 3 Total
Financial assets
Marketable securities 72,480 - - 72,480
Available-for-sale financial assets 139 - - 139
---------------------------------------- --------- --------- --------- -------
Total financial assets 72,619 - - 72,619
---------------------------------------- --------- --------- --------- -------
US$ 000 As at 30.09.13 (unaudited)
Level 1 Level 2 Level 3 Total
Financial assets
Marketable securities - - - -
Available-for-sale financial assets 403 - 82,382 82,785
---------------------------------------- --------- --------- --------- -------
Total financial assets 403 - 82,382 82,785
---------------------------------------- --------- --------- --------- -------
US$ 000 As at 31.12.13 (audited)
Level 1 Level 2 Level 3 Total
Financial assets
Marketable securities - - - -
Available-for-sale financial assets 396 - 82,382 82,778
---------------------------------------- --------- -------- -------- -------
Total financial assets 396 - 82,382 82,778
---------------------------------------- --------- -------- -------- -------
There were no transfers between the different levels during the
reporting period.
As of 30 September 2014 the fair value of the available-for-sale
financial assets in Level 1 decreased by US$257 thousand of which
US$102 thousand is included in other comprehensive income (30
September 2013: loss of US$150 thousand; 31 December 2013: loss of
US$138 thousand) and US$155 thousand as foreign exchange difference
in the income statement.
Reconciliation of recurring fair value measurements categorised
within Level 3 of the fair value hierarchy is shown in the table
below:
US$ 000 As at 30.09.14 As at 30.09.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Opening balance 82,382 - -
Total gains or losses: - - -
- in profit or loss (82,382) - -
- in other comprehensive income - - -
Purchases - 82,382 82,382
Transfer out of Level 3 - - -
----------------------------------- ---------------- --------------- ---------------
Closing balance - 82,382 82,382
------------------------------------ --------------- --------------- ---------------
Note 21: Events after the reporting period
No material adjusting or non-adjusting events have occurred
subsequent to the period end except for the sale of the total
balance of VAT bonds in various transactions that were received for
the settlement of VAT due by 4 November 2014. Further information
is provided in note 13.
.
Glossary
Act The Companies Act 2006
AGM The Annual General Meeting of the Company
Articles Articles of Association of the Company
Audit Committee The Audit Committee of the Company's Board
Belanovo or Belanovskoye An iron ore deposit located immediately to the north
of Yeristovo
Benchmark Price Platts 62% Fe iron ore fines price CFR China
Beneficiation Process A number of processes whereby the mineral is extracted
from the crude ore
BIP Business Improvement Programme, a programme of projects
to increase production output and efficiency at FPM
Board The Board of Directors of the Company
Bt Billion tonnes
Capesize Capesize vessels are typically above 150,000 tonnes
deadweight. Ships in this class include oil tankers,
supertankers and bulk carriers transporting coal,
ore, and other commodity raw materials. Standard
capesize vessels are able to transit through the
Suez Canal
Capital Employed The aggregate of equity attributable to shareholders,
non-controlling interests and borrowings
CFR Delivery including cost and freight
C1 Costs Represent the cash costs of production of iron pellets
from own ore, divided by production volume, from
own ore, and excludes non-cash costs such as depreciation,
pension costs and inventory movements, costs of purchased
ore, concentrate and production cost of gravel
CIF Delivery including cost, insurance and freight
CIS The Commonwealth of Independent States
Code The UK Corporate Governance Code published in 2012
Company Ferrexpo plc, a public company incorporated in England
and Wales with limited liability
CPI Consumer Price Index
CSR Corporate Safety and Social Responsibility
CSR Committee The Corporate Safety and Social Responsibility Committee
of the Board of the Company
DAP Delivery at place
DFS Detailed feasibility study
Directors The Directors of the Company
Dragline Excavators Heavy machinery used to excavate material. A dragline
consists of a large bucket which is suspended from
a boom
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
EBT Employee Benefit Trust
EPS Earnings per share
Executive Committee The Executive Committee of management appointed by
the Company's Board
Executive Directors The Executive Directors of the Company
FBM Ferrexpo Belanovo Mining, also known as BGOK, a company
incorporated under the laws of Ukraine
Fe Iron
Ferrexpo The Company and its subsidiaries
Ferrexpo AG Group Ferrexpo AG and its subsidiaries including FPM
Fevamotinico S.a.r.l. A company incorporated with limited liability in
Luxembourg
FOB Delivered free on board, which means that the seller's
obligation to deliver has been fulfilled when the
goods have passed over the ship's rail at the named
port of shipment, and all future obligations in terms
of costs and risks of loss or damage transfer to
the buyer from that point onwards
FPM Ferrexpo Poltava Mining, also known as Ferrexpo Poltava
GOK Corporation or PGOK, a company incorporated under
the laws of Ukraine
FRMC Financial Risk Management Committee, a sub-committee
of the Executive Committee
FTSE 250 Financial Times Stock Exchange top 250 companies
FYM Ferrexpo Yeristovo Mining, also known as YGOK, a
company incorporated under the laws of Ukraine
Group The Company and its subsidiaries
Growth Markets These are predominantly in Asia and have the potential
to deliver new and significant sales volumes to the
Group
HSE Health, safety and environment
IAS International Accounting Standards
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards, as adopted
by the EU
IPO Initial public offering
Iron ore concentrate Product of the benefication process with enriched
iron content
Iron ore sinter fines Fine iron ore screened to -6.3mm
Iron ore pellets Balled and fired agglomerate of iron ore concentrate,
whose physical properties are well suited for transportation
to and reduction within a blast furnace
JORC Australasian Joint Ore Reserves Committee - the internationally
accepted code for ore classification
K22 GPL ore has been classified as either K22 or K23
quality, of which K22 ore is of higher quality (richer)
KPI Key Performance Indicator
Kt Thousand tonnes
LIBOR The London Inter Bank Offered Rate
LLC Limited Liability Company
LTIFR Lost-Time Injury Frequency Rate
LTIP Long-Term Incentive Plan
m3 Cubic metre
Majority Shareholder Fevamotinico S.a.r.l., The Minco Trust and Kostyantin
Zhevago (together)
Mm Millimetre
Mt Million tonnes
Mtpa Million tonnes per annum
Natural Markets These include Turkey, the Middle East and Western
Europe and are those markets where Ferrexpo has a
competitive advantage over more distant producers,
but where market share remains relatively low
Nominations Committee The Nominations Committee of the Company's Board
Non-executive Directors Non-executive Directors of the Company
NOPAT Net operating profit after tax
OHSAS 18001 International safety standard 'Occupational Health
& Safety Management System Specification'
Ordinary Shares Ordinary Shares of 10 pence each in the Company
Ore A mineral or mineral aggregate containing precious
or useful minerals in such quantities, grade and
chemical combination as to make extraction economic
Panamax Modern panamax ships typically carry a weight of
between 65,000 to 90,000 tonnes of cargo and can
transit both Panama and Suez canals
PPI Ukrainian producer price index
Probable Reserves Those measured and/or indicated mineral resources
which are not yet 'proved', but of which detailed
technical and economic studies have demonstrated
that extraction can be justified at the time of determination
and under specific economic conditions
Proved Reserves Measured mineral resources of which detailed technical
and economic studies have demonstrated that extraction
can be justified at the time of determination and
under specific economic conditions
Rail car Railway wagon used for the transport of iron ore
concentrate or pellets
Relationship Agreement The relationship agreement entered into among Fevamotinico
S.a.r.l., Kostyantin Zhevago, The Minco Trust and
the Company
Remuneration Committee The Remuneration Committee of the Company's Board
Reserves Those parts of mineral resources for which sufficient
information is available to enable detailed or conceptual
mine planning and for which such planning has been
undertaken. Reserves are classified as either proved
or probable
Sinter A porous aggregate charged directly to the blast
furnace which is normally produced by firing fine
iron ore and/or iron ore concentrate, other binding
materials, and coke breeze as the heat source
Spot price The current price of a product for immediate delivery
Sterling/GBP Pound Sterling, the currency of the United Kingdom
STIP Short-Term Incentive Plan
Tailings The waste material produced from ore after economically
recoverable metals or minerals have been extracted.
Changes in metal prices and improvements in technology
can sometimes make the tailings economic to process
at a later date
Tolling The process by which a customer supplies concentrate
to a smelter and the smelter invoices the customer
the smelting charge, and possibly a refining charge,
and then returns the metal to the customer
Ton A US short ton, equal to 0.9072 metric tonnes
Tonne or t Metric tonne
Traditional Markets These lie within Central and Eastern Europe and include
steel plants that were designed to use Ferrexpo pellets.
Ferrexpo has been supplying some of these customers
for more than 20 years. Ferrexpo has well-established
logistics routes and infrastructure to these markets
by both river barge and rail. These markets include
Austria, Czech Republic, Hungary, Serbia and Slovakia
Treasury Shares A company's own issued shares that it has purchased
but not cancelled
TSF Tailings storage facility
TSR Total shareholder return. The total return earned
on a share over a period of time, measured as the
dividend per share plus capital gain, divided by
initial share price
UAH Ukrainian Hryvnia, the currency of Ukraine
Ukr SEPRO The quality certification system in Ukraine, regulated
by law to ensure conformity with safety and environmental
standards
US$/t US Dollars per tonne
VAT Value Added Tax
Value-in-use The implied value of a material to an end user relative
to other options, e.g. evaluating, in financial terms,
the productivity in the steel making process of a
particular quality of iron ore pellets versus the
productivity of alternative qualities of iron ore
pellets.
WAFV Weighted average fair value
WMS Wet magnetic separation
Yeristovo or Yeristovskoye The deposit being developed by FYM
This information is provided by RNS
The company news service from the London Stock Exchange
END
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