TIDMFXPO
RNS Number : 0591G
Ferrexpo PLC
03 August 2016
FERREXPO plc
("Ferrexpo", the "Group" or the "Company")
2016 Interim Results
Ferrexpo plc, a top three supplier of iron ore pellets to the
global steel industry, today announces interim results for the six
months ended 30 June 2016.
Michael Abrahams, Non-Executive Chairman, said:
"We are pleased to report a good set of financial results given
the challenging circumstances in the iron ore industry. We have
improved the quality of our pellet output, increased sales volumes
to record levels and significantly reduced our cost base. Cash
generated from operating activities was US$142 million for the
period (up 61% compared to the first half of 2015) which allowed
the Group to repay US$120 million of debt amortisation in the first
half of 2016.
The Group continues to control costs and to benefit from selling
a premium product to the world's top steel mills. Pellet demand
remains strong and Ferrexpo believes it is well placed to continue
to generate positive net operating cash flows throughout the
commodities cycle."
1H 2016 Financial Summary:
US$ million (unless otherwise 6 months 6 months Change Year
stated) ended ended ended
30.06.16 30.06.15 31.12.15
--------------------------------- ---------- ---------- ------- ----------
Pellet production from
own ore (kt) 5,700 5,504 4% 11,258
--------------------------------- ---------- ---------- ------- ----------
Sales volumes (kt) 6,017 5,680 6% 11,330
--------------------------------- ---------- ---------- ------- ----------
Revenue 458 512 -11% 961
--------------------------------- ---------- ---------- ------- ----------
Operating profit 133 142 -6% 251
--------------------------------- ---------- ---------- ------- ----------
Operating profit excl operating
forex gains 131 128 2% 225
--------------------------------- ---------- ---------- ------- ----------
EBITDA 160 176 -9% 313
--------------------------------- ---------- ---------- ------- ----------
Profit before tax before
special items 92 103 -11% 164
--------------------------------- ---------- ---------- ------- ----------
Profit before tax after
special items 92 143 -36% 25
--------------------------------- ---------- ---------- ------- ----------
Diluted EPS before special
items (US cents per share) 13.14 12.80 3% 23.86
--------------------------------- ---------- ---------- ------- ----------
Diluted EPS after special
items (US cents per share) 13.14 19.57 -33% 5.63
--------------------------------- ---------- ---------- ------- ----------
Working capital decrease
/ (increase) 16 -28 157% -77
--------------------------------- ---------- ---------- ------- ----------
Net cash flow from operating
activities 142 88 61% 128
--------------------------------- ---------- ---------- ------- ----------
Net debt -753 -653 15% -868
--------------------------------- ---------- ---------- ------- ----------
Net debt to EBITDA (last
12 months) 2.5x 1.9x 32% 2.8
--------------------------------- ---------- ---------- ------- ----------
-- Production volumes from own ore grew 4% to 5.7 million tonnes
while output of the Group's 65% Fe pellets increased to a record
5.4 million tonnes.
-- Record sales volumes for a half year period increasing 6% to 6.0 million tonnes.
-- Pellet premiums recovered from lows seen at the start of the
year to finish the period strongly.
-- The cash cost of production reduced 23%, or by US$7.7 per
tonne, to US$25.7 per tonne of pellets (1H 2015: US$33.4 per tonne)
as a result of local currency devaluation, lower oil prices and
increased operating efficiencies.
-- Operating profit, excluding foreign exchange gains, increased
2% to US$131 million in 1H 2016 compared to US$128 million in 1H
2015.
-- Net cash flows from operating activities increased by US$54
million to US$142 million compared to US$88 million in 1H 2015
while, compared to FY 2015, net cash flows from operating
activities increased by US$14 million (FY 2015: net cash flows from
operating activities US$128 million).
-- Net debt as of 30 June 2016 was US$753 million a US$115
million reduction compared to US$868 million as of 31 December
2015. Net debt to EBITDA for the last twelve months reduced to 2.5x
as of 30 June 2016 compared to 2.8x as of 31 December 2015.
-- New trade finance facilities were secured in 1H 2016 with
US$9 million in place at period end. The Group's cash balance
increased US$9M to US$44 million as of 30 June 2016 compared to
US$35 million as of 31 December 2015.
-- In July 2016, the Group made the final amortisation of its
US$420 million pre-export finance facility that had been amortising
over the past 24 months.
There will be an analyst and investor meeting at 08.30 (UK time)
today at the offices of JP Morgan on 60 Victoria Embankment, London
EC4Y 0JP. A live video webcast and slide presentation of this event
will be available on www.ferrexpo.com. It is recommended that
participants register by 08.15. The presentation will be hosted by
Michael Abrahams (Chairman), Kostyantin Zhevago (CEO) and Chris
Mawe (CFO).
Webcast link: http://edge.media-server.com/m/p/vpofze3k
For further information contact:
Ferrexpo:
Ingrid McMahon +44 207 389 8304
Maitland: +44 207 379 5151
James Isola
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets
in Ukraine. It has been mining, processing and selling high quality
iron ore pellets to 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 currently the 3(rd) largest exporter of
pellets to the global steel industry and the largest exporter of
pellets from the CIS. In 2015, it produced a record 11.7 million
tonnes of pellets, a 6% increase compared to 2014. Ferrexpo has a
diversified customer base supplying steel mills in Austria,
Slovakia, the Czech Republic, Germany and other European states, as
well as in China, India, Japan, Taiwan and South Korea. Ferrexpo is
listed on the main market of the London Stock Exchange under the
ticker FXPO. For further information, please visit
www.ferrexpo.com
Introduction
Ferrexpo's 2016 interim results demonstrate the strength of the
business and its strategy enabling the Group to report an EBITDA
margin for the first half of 2016 in line with the first half of
2015 at 35% despite very challenging industry conditions.
Weak industry prices, particularly in the first quarter of 2016,
were offset by increased sales of higher quality product and
significantly lower costs allowing the Group to report EBITDA in
the first half 2016 of US$160 million (US$16 million below the
EBITDA of US$176 million reported for first half 2015). This strong
performance underpinned excellent net cash generation from
operations which increased to US$142 million, US$54 million higher
than the first half of 2015, reflecting lower tax, interest and
working capital.
During this period of near decade low iron ore prices, the Group
reduced borrowing by US$120 million, increased cash on hand by US$9
million and remains comfortably within the terms of its borrowing
facilities.
The Board has not declared an interim dividend for the period
(1H 2015: 3.3 US cents per Ordinary Share), however, it may review
this later in the year subject to the financial capacity of the
Company and to market conditions.
In July 2016, the Group made the final scheduled repayment of
its US$420 million pre-export finance facility which had been
amortising in equal instalments over the past 24 months.
Pricing and Sales
In the first six months of 2016 the PLATTS CFR China iron ore
fines price averaged US$52 per tonne compared to an average of
US$61 per tonne in the first half of 2015. The average price was
slightly higher than the average of US$51 per tonne in the second
half of 2015. The market was, however, volatile with iron ore
trading within a wide range from an eight year low of US$38 per
tonne in mid-December 2015 to a 15 month high of US$71 per tonne in
April 2016. The average iron ore price in July 2016 was US$57 per
tonne.
The pellet premium that the Group received in addition to the
PLATTS fines price improved throughout the first half of 2016
recovering from lows seen at the start of the year to finish the
period more strongly. In China the spot pellet premium traded at
US$11 per tonne in January 2016 before recovering to US$22 per
tonne in June 2016 (1H 2016 China spot average: US$17 per tonne; 1H
2015 China spot average: US$28 per tonne). The headline long term
contract pellet premium in the key markets of Western Europe and
North East Asia was slightly lower than the first half of 2015.
The Group's net realised FOB/DAP price was in line with the
second half of 2015 reflecting a weak environment in the first
quarter of the year before prices recovered in the second quarter
of 2016 driven by improved demand for iron ore and lower pellet
availability. The Group's pricing benefitted from reduced C3
freight rates (1H 2016 US$7.1 per tonne vs. 1H 2015 US$10.8 per
tonne) which increased its overall realised price.
The Group achieved record sales volumes for a half year period
with sales increasing 6% to 6.0 million tonnes compared to 5.7
million tonnes in the first half of 2015. Ferrexpo continues to
develop its customer portfolio and successfully agreed its first
long term contract in Korea during the period.
Sales of pellets exceeded production in the half year period,
partially unwinding the build-up of pellet stocks in the second
half of 2015. The Group sold 244 thousand tonnes of stocks during
the period and as of 30 June 2016 carried 479 thousand tonnes of
pellet stocks.
Production Performance and Costs
Ferrexpo's operations successfully increased production of
pellets from own ore by 4% to 5.7 million tonnes (1H 2015: 5.5
million tonnes) while increasing production of premium 65% Fe
pellet to 94% of total production volumes, a record level for a
half year period (1H 2015: 87% of total production volumes).
The Group remained one of the lowest cost pellet producers in
the world in the first half of 2016. Its C1 cash cost of production
fell by 23% or US$7.7 per tonne to US$25.7 per tonne compared to
US$33.4 per tonne in the first half of 2015.
Outlook
Ferrexpo is the third largest iron ore pellet exporter in the
world by volume with a well invested long life asset, a competitive
cost base and a diversified high quality customer portfolio. The
Group operates in a premium sector of the iron ore market with high
barriers to entry and is benefiting from its US$2 billion
investment programme since IPO in 2007.
The Group continues to control costs intensively through its
business improvement programme and to benefit from selling a niche
product to key customers under long term contracts. Pellet demand
remains strong and the Group believes it is well placed to continue
to generate positive net operating cash flows.
Financial Results
Revenue
Group revenue was US$458 million in the first half of 2016, 11%
lower than the first half of 2015 (US$512 million) reflecting a
lower iron ore price index which fell on average by 14% compared to
the same period in 2015. Ferrexpo increased its sales volumes by 6%
to 6.0 million tonnes (1H 2015: 5.7 million tonnes) while the
Group's net realised FOB/DAP price was in line with the second half
of 2015 reflecting a weak environment in the first quarter of the
year before prices recovered in the second quarter of 2016 driven
by improved demand for iron ore and lower pellet availability. The
Group's pricing benefitted from reduced C3 freight rates (1H 2016
US$7.1 per tonne vs. 1H 2015 US$10.8 per tonne) which increased its
overall realised price. For further information see Market
Environment and Marketing.
Costs
C1 Cost of Production
The Group's C1 cost of production reduced by US$7.7 per tonne to
US$25.7 per tonne compared to US$33.4 per tonne in the first half
of 2015. Of this 23% cost reduction, approximately US$2.8 per tonne
was driven by mining efficiency gains (for further information see
Production Costs), US$2.6 per tonne due to lower oil and gas
prices, and US$2.3 per tonne was due to the Hryvnia devaluation
against the US Dollar.
In the first half of 2016, the average Hryvnia per US dollar was
25.47 compared to 21.43 in the first half of 2015, a 19%
depreciation. The higher rate in the first half of 2016 reduced the
C1 cash cost by 7% as approximately 50% of the Group's cost to
produce a pellet is in Hryvnia. This includes electricity, salary,
royalties, some consumable products, spare parts and materials.
Local cost inflation during the period was primarily driven by
electricity price increases (+7% vs. average 1H 2015) following the
devaluation of the Hryvnia against the US Dollar. Overall, these
costs were still significantly lower in US dollar terms in the
first half of the year compared to the prior period. The table
below shows the year on year change in CPI for the first half of
2016. Inflation peaked in January 2016 at 40.3% and thereafter CPI
has slowed to 6.9% in June 2016. For further information see Update
on Risks: Ukrainian Inflation.
Ukrainian 2016 Year on Year CPI
January February March April May June
2016 2016 2016 2016 2016 2016
--------- -------- --------- ------ ------ ------ ------
Ukraine
CPI 140.3 132.7 120.9 109.8 107.5 106.9
--------- -------- --------- ------ ------ ------ ------
Source: www.ukrstat.gov.ua
The Group's C1 cost represents the cash cost of production for
iron ore pellets, from own ore, divided by production volume of
pellets from own ore, and excludes non-cash costs such as
depreciation, pension costs and inventory movements as well as
costs of purchased ore and concentrate and production cost of
gravel. Please see Note 3 of the accounts for a reconciliation of
C1 Costs.
Selling and Distribution Costs
Selling and distribution costs decreased by 10% to US$101
million (1H 2015: US$113 million) as a result of the depreciation
of the Hryvnia against the US Dollar as well as lower international
freight rates.
The cost to transport the Group's pellets to border points for
international dispatch declined 15% to US$8.6 per tonne (or US$52
million) compared to US$10.1 per tonne in the first half of 2015
(or US$57 million). All rail costs are in local currency and the
net reduction compared to the first half of 2015 is after taking
into account the Hryvnia depreciation against the US Dollar as well
as a 15% increase in rail tariffs from May 2016.
International freight costs reduced to US$31 million in the
first half of 2016 (1H 2015: US$36 million). This was driven by
lower oil prices and weaker freight rates due to depressed market
conditions in the shipping industry. For further information see
Marketing.
Currency
Ferrexpo prepares its accounts in US Dollars. The functional
currency of the Ukrainian operations is the Hryvnia.
During the first half of 2016 the Hryvnia devalued from UAH24.00
per US Dollar as of 1 January 2016 to UAH27.05 per US Dollar in
February 2016 before appreciating to UAH24.85 per US Dollar as of
30 June 2016. Over half of the Group's total cost base, including
inland logistics costs, are denominated in Hryvnia.
Ukrainian Hryvnia vs. US Dollar
Spot (1.8.16) Average Average Average
1H 2016 1H 2015 FY 2015
--------- -------------- --------- --------- ---------
UAH per
US$ 24.80 25.47 21.43 21.86
--------- -------------- --------- --------- ---------
Source: National Bank of Ukraine
Balances at 30 June 2016 are converted at the prevailing rate.
The devaluation of the currency since 31 December 2015 has resulted
in a US$33 million reduction in the net assets of the Group and has
been reflected in the translation reserve.
Operating Profit from Continuing Operations before Adjusted
Items
In the first half of 2016 Group revenue declined by US$54
million compared to the first half of 2015. The reduction in
revenue was largely offset by a US$44 million reduction in cost of
sales and lower selling and distribution, general and
administrative and other expenses. As a result operating profit
from continuing operations before adjusted items was US$133 million
in the first half of 2016 compared to US$142 million in the first
half of 2015.
EBITDA
EBITDA for the period was US$160 million compared to US$176
million in the first half of 2015. The fall in iron ore prices
during the period was offset by an improved sales mix, higher sales
volumes and cost reductions. The decline reflected lower operating
foreign exchange gains compared to the prior year due to a more
stable Hryvnia against the US Dollar in the first half of
2016.(1)
(1 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. Please see Note 3 of the accounts for a
reconciliation of EBITDA.)
Interest
Finance expense was in line with the first half of 2015 at US$38
million. This amount includes interest expense on interest bearing
loans of US$28 million compared to US$32 million in the first half
of 2015. Further details on finance expense are disclosed in Note
10 of the accounts.
The Group carried lower gross debt following the repayment of
US$120 million of facilities over the period. The average cost of
debt for the period ended 30 June 2016 was 6.6% (30 June 2015:
5.32%; 31 December 2015: 5.97%). The increased average rate
reflected US$204 million amortisation of the Group's US$420 million
pre-export banking facility over the last year which has a margin
of 225 bps over LIBOR and US$30 million of other facilities with an
average cost of 3%.
As of 30 June 2016 gross debt was US$797 million, a 29% decrease
or a US$326 million reduction compared to gross debt at 30 June
2015 of US$1.1 billion (31 December 2015: US$904 million).
Tax
The income tax expense for the first half of 2016 was US$14
million (1H 2015: US$27 million) based on a forecasted effective
tax rate of 12% to 13% for the full year which is in line with the
effective tax rate before special items for 2015 of 13.5%.
Over the past several years the Group has built a large prepaid
corporate profit tax balance as a result of the local practice of
linking VAT refunds to corporate profit tax payments. During the
period CPT paid in advance reduced to US$53 million as a result of
exchange rate differences. Following the period end, Ferrexpo
recovered UAH100 million in cash (approximately US$4 million).
Further details on prepaid corporate profit tax are disclosed in
Note 11 of the accounts.
Cash Flows
Working Capital
Cash generated from operating activities increased 32% to US$174
million in the first half of 2016 compared to US$131 million in the
first half of 2015. This strong performance reflected a US$16
million working capital inflow during the period due to the sale of
244 thousand tonnes of pellets held on stock at the end of 2015, a
reduction in trade receivables and the recovery of overdue VAT. The
Group secured new trade finance arrangements in the first half of
the year, of which US$9 million was in place at the end of June
2016.
Capital Investment
Total capital expenditure in the first half of 2016 was US$24
million, in-line with the first half of 2015 at US$25 million.
During the period, the Group paid US$7 million for medium and fine
crushing lines to Metso France.
Financial Management
Net debt declined by US$115 million to US$753 million as of 30
June 2016 compared to US$868 million as of 31 December 2015.
Net debt to EBITDA for the last 12 months was 2.5x compared to
2.8x as of 31 December 2015. As of 30 June 2016, Ferrexpo's cash
and cash equivalents balance had increased by US$9 million to US$44
million compared to US$35 million at the end of December 2015.
In the first six months of the year, the Group repaid US$105
million of debt under the US$420 million pre-export finance
facility in addition to US$15 million of debt under Export Credit
Agency funding lines.
The Group's debt amortisation schedule in the second half of
2016 is lower than the first half with repayments of US$76 million
falling due compared to US$120 million in the first six months of
the year.
In July 2016, the Group paid the final amortisation, US$17.5
million, of its US$420 million pre-export finance facility that had
been amortising over the past 24 months.
Ferrexpo will continue to assess new financing options while
repaying its debt obligations as they fall due.
As a result of the forecast cash flows of the business, the
large reserve base and Ferrexpo's competitive positioning on the
global iron ore and pellet cost curves, the accounts have been
drawn up on a going concern basis, however attention is drawn to
the Going Concern section of the financial statements, Note 2, and
the risks facing the business.
Market Environment
Compared to the first half of 2015, global hot metal output,
reflective of steel demand, fell 4% to 630 million tonnes compared
to 656 million tonnes in the first half of 2015 while total supply
of iron ore exports increased 4% from 721 million tonnes in the
first half of 2015 to 753 million tonnes in the first half of
2016(2) . This demand/supply dynamic impacted the iron ore price
compared to the first half of 2015 and the PLATTS CFR China iron
ore fines price averaged US$52 per tonne compared to an average of
US$61 per tonne in the first half of 2015.
Compared to the second half of 2015, global hot metal production
fell 2% to 630 million tonnes versus 644 million tonnes in the
second half of 2015 while total exports of iron ore fell 1.3% in
the first half of 2016 to 753 million tonnes compared to 763
million tonnes in the second half of 2015(2) . The PLATTS CFR China
iron ore fines price in the first half of 2016 was in line with the
second half of 2015 at US$51 per tonne. Nevertheless, pricing
remained volatile in 2015 and to date in 2016 trading within a wide
range reaching a high of US$71 per tonne and a low of US$38 per
tonne.
Global supply of pellet exports declined 19% to 59 million
tonnes in the first half of 2016 from 72 million tonnes in the
first half of 2015, according to CRU(2) , principally reflecting a
15 million tonne or 44% reduction in supply from Brazil(3) .
Compared to the second half of 2015 the supply of exported pellets
fell 5%, again due to reduced supply from Brazil following the
Samarco tailings dam accident in November 2015.
(2) (CRU July 2016 Market Outlook.)
(3) (Reflecting the production stoppage at Samarco following a
tailings dam failure in November 2015. Prior to the failure,
Samarco produced approximately 30 million tonnes of pellets per
annum or approximately 20% of global pellet exports.)
The pellet premium that the Group received in the first half of
2016 improved throughout the period recovering from lows seen at
the start of the year to finish the period more strongly. In China
the spot pellet premium fell to a low of US$11 per tonne in January
2016 before recovering to US$22 per tonne in June 2016 (1H 2016
average: US$17 per tonne, 1H 2015 average: US$28 per tonne). While
the headline long term contract pellet premium in the key markets
of Western Europe and North East Asia was slightly lower than the
same period last year.
CRU expects pellet utilisation rates to increase to 88% in 2016
from 70% in 2015 based on a recovery in steel mill profitability
from the lows seen in recent years. Together with an expected
deficit in pellet supply due to the outage of Samarco, demand and
pricing for pellets is expected to be well supported for the
remainder of 2016.
Operational Review
Marketing
In the first half of 2016, Ferrexpo increased sales volumes by
6% to 6.0 million tonnes of iron ore pellets compared to 5.7
million tonnes in the first half of 2015. The table below shows the
breakdown of sales by key market regions. Sales to Western Europe
increased to 17% in the first half of 2016 compared to 9% in the
first half of 2015 while sales to North East Asia increased to 13%
(1H 2015:8%). This significant increase in sales to the premium
steel markets follows the completion of the Group's quality upgrade
project in 2015.
Of total sales volumes, 93% represented Ferrexpo Premium Pellets
of 65% Fe, while 6% represented Ferrexpo Basic Pellets of 62% Fe
and 1% represented Ferrexpo Pellet Feed sold together with
Ferrexpo's premium pellets as part of a customer development
programme.
Sales Volume by Market Regions:
6 months 6 months
ended 30.06.16 ended 30.06.15
---------------------- ---------------- ----------------
Central Europe 46% 53%
---------------------- ---------------- ----------------
Western Europe 17% 9%
---------------------- ---------------- ----------------
China and South
East Asia 18% 24%
---------------------- ---------------- ----------------
North East Asia 13% 8%
---------------------- ---------------- ----------------
Turkey, Middle East,
India 6% 6%
---------------------- ---------------- ----------------
Total sales volume
(million tonnes) 6,017 5,680
---------------------- ---------------- ----------------
The Group's long term contracts are all based on a spot index
iron ore fines price using various reference periods. The table
below shows the breakdown of sales by pricing terms.
Sales Volume by Pricing Terms:
6 months 6 months
ended 30.06.16 ended 30.06.15
-------------------- ---------------- ----------------
Monthly spot index 79% 82%
-------------------- ---------------- ----------------
Current quarter
spot index 10% 5%
-------------------- ---------------- ----------------
Lagging 3 month
spot index 9% 6%
-------------------- ---------------- ----------------
Spot sales fixed
on day 3% 7%
-------------------- ---------------- ----------------
Total sales volume
(million tonnes) 6,017 5,680
-------------------- ---------------- ----------------
Ferrexpo's realised price for its 65% Fe iron ore pellets is
calculated by taking the average PLATTS CFR China iron ore fines
index for an agreed time period, adjusting for quality and adding a
pellet premium. For sales to the Far East, delivery is made on CFR
terms with the resulting FOB netback determined by the actual cost
of freight. For sales to European and regional markets, delivery is
generally made on FOB/DAP terms which is determined by deducting a
transparent freight market index such as C3.
Key Price Data:
1H 2H
US$ per tonne 1H 2016 2015 2015
-------------------------- -------- ------ ------
Avg PLATTS iron ore
fines CFR China index 52 61 51
-------------------------- -------- ------ ------
Avg China spot pellet
premium 17 28 18
-------------------------- -------- ------ ------
Avg long term contract
Atlantic pellet premium 31-32 32-33 32-33
-------------------------- -------- ------ ------
C3 freight index 7 11 12
-------------------------- -------- ------ ------
Note: source for China spot pellet premium in 1H 2016 is PLATTS
and for 2015 is PLATTS and Metal Bulletin.
The above table represents average numbers for a six monthly
period and does not show actual price movements during a period
which impacts customer pricing.
The C3 freight index, as published by the Baltic Exchange,
represents the industry benchmark price to transport goods by sea
from Tubarao, Brazil to Qingdao, China. The C3 index declined 34%
during the period compared to 1H 2015 following the substantial
fall in the oil price. On average C3 freight reduced to US$7.1 per
tonne in 1H 2016 (1H 2015: US$10.8 per tonne) resulting in a higher
net back price for the Group.
Overall, taking account of the PLATTS fines index in the first
half of 2016 compared to the second half of 2015 (as can be seen
from the table above), achieved pellet premiums, and freight costs,
the Group's realised price in the first half of 2016 remained in
line with the second half of 2015.
Production
Health and Safety
Most regrettably there was a contractor fatality at FPM during
the period when a light vehicle traveling on a FPM mine road
overturned whilst completing security operations. Following the
accident, Ferrexpo has further strengthened its focus on safe
behaviour when driving vehicles. The prevention of all incidents
and injuries to employees is the highest priority of the Board and
management, who follow the principle that all accidents are
avoidable.
Overall, the Group's LTIFR in the first half of 2016 was 0.89
per million man hours worked compared to 0.61 per million man hours
worked in the first half of 2015. The number of accidents at FPM
reduced to four in the first half of 2016 compared to 5 in the
first half of 2015 while FYM LTIFR reported one accident during the
period compared to zero in the first half of 2015. At the barging
operations, the number of accidents rose to three in the first half
of 2016 compared to one in the first half of 2015.
Both the mining and barging operations improved their LTIFR
compared to the second half of 2015 as can be seen from the table
below. The difference in LTIFR between the mining and barging
operations principally reflects the lower hours worked at the
barging operations compared to the mining operations.
Lost Time Injury Frequency Rate
1H 2H
LTIFR 1H 2016 2015 2015 2015
--------- -------- ------ ------ -----
- FPM 0.57 0.63 0.88 0.75
--------- -------- ------ ------ -----
- FYM 0.74 - 1.46 0.74
--------- -------- ------ ------ -----
Ukraine 0.59 0.54 0.96 0.75
--------- -------- ------ ------ -----
Barging 5.83 1.91 6.97 4.55
--------- -------- ------ ------ -----
Group 0.89 0.61 1.30 0.96
--------- -------- ------ ------ -----
Pellet Production
Pellet production from own ore increased 3.6% compared to 5.7
million tonnes (1H 2016: 5.5 million tonnes). This included a 12.3%
increase in production of the Group's premium 65% Fe pellets to a
record 5.4 million tonnes (1H 2015: 4.8 million tonnes). Overall
total production for the first half of 2016, was 5.7 million tonnes
compared to 5.8 million tonnes in first half of 2015 due to a
significant reduction in output of pellets from third party
concentrate. Approximately 94% of total production volumes were
Ferrexpo Premium Pellets of 65% Fe compared to 87% in the first
half of 2015.
The table below summarises production in the first half of 2016
compared to the first half of 2015.
Pellet Production 1H 2016 and 1H 2015 ('000)
Change
1H 2016 1H 2015 %
----------------------------------- -------- -------- -------
Pellet production from
own ore 5,700 5,504 3.6
62% Fe 364 750 -51.5
65% Fe 5,336 4,754 12.3
---------------------------------- -------- -------- -------
Pellet production from
third party materials 23 313 -92.6
62% Fe - 6 -100.0
65% Fe 23 307 -92.5
---------------------------------- -------- -------- -------
Total pellet production 5,723 5,816 -1.6
62% Fe 364 756 -51.9
65% Fe 5,359 5,060 5.9
---------------------------------- -------- -------- -------
Note: Production in April 2016 included 39kt of concentrate that
was sold as Pellet Feed to a customer in South East Asia.
Production Costs
The Group's average C1 cash cost reduced by 23% to US$25.7 per
tonne in 1H 2016 compared to US$33.4 per tonne in 1H 2015 and by
19% when compared to US$31.9 per tonne for FY 2015. The decline was
driven by fixed cost benefits from increased production of own ore
and more efficient operating practices, lower oil and gas prices
and the depreciation of the Hryvnia against the US dollar. For
further information see Costs and Currency.
The Group has several projects underway which are contributing
to cost savings and efficiency improvements. These include improved
drilling and blasting techniques which yield better ore
fragmentation and improved excavator dig rates as well as a project
to increase concentrate yield by optimising the amount of reagent
used and the blend ratios of ore.
The Group has continued to make good progress in reducing its
gas consumption through co-firing with bio fuel. Since the project
commenced in September 2015 approximately US$950,000 has been saved
through the reduced consumption of natural gas which has declined
by approximately 21 million cubic metres (representing circa 20% of
total natural gas consumption on an annualised basis). The Group
aims to replace up to 30% of its total natural gas consumption in
the pelletiser by this method.
Ferrexpo is a low cost and efficient pellet producer and is
competitively placed on the global benchmark cost curve for 62% Fe
iron ore fines after adjusting for the premium it receives relative
to the index fines price. This allows the Group to remain
profitable even in the current low iron ore price environment.
Capital Investment
Ferrexpo's brownfield operations lend themselves to incremental
additions of pellet supply subject to market conditions and funding
availability. A programme to increase pellet production has been
defined internally which would involve incremental investment in
the existing beneficiation, pelletising and mining facilities.
These projects are highly NPV accretive.
Ukraine
Economic activity in Ukraine is showing signs of recovery as
indicated by an increase in industrial production of 2%(4) in the
first half of 2016 compared with the first half of 2015 and a 9%(4)
increase in construction activity compared to the first half of
2015, albeit these increases are off a low base following a
recession over the past two years.
(4) (Source: State Statistics Service of Ukraine)
The Group is pleased to report that the Government continues to
reform the process of VAT recovery which has increased in
transparency and predictability.
To date Ukraine has received US$6.7 billion of a US$17.5 billion
IMF loan package which was approved in March 2015.
The Government has been in negotiations to receive a third
tranche of the package which is expected to be received in the
second half of the year.
Sovereign risk as measured by the yields on outstanding
Ukrainian government bonds have reduced significantly since the
start of 2016, for example, the outstanding Ukrainian 2019 bond is
currently trading above par while the yield to maturity has fallen
from a high of 11.4% in June 2016 to around 7.7% as of 1 August
2016, indicating a lower country risk environment. For further
information see Update on Risks: Political and Legal risks
pertaining to Ukraine.
Board
At the Annual General Meeting of the Company held on 19 May
2016, five of the Independent Directors (Oliver Baring, Wolfram
Kuoni, Ihor Mitiukov, Bert Nacken and Mary Reilly) did not receive
the requisite votes required for re-appointment by independent
shareholders. As stated in the Company's AGM Notice dated 12 April
2016 and under Listing Rule 9.2.2.F, the Company will put the
matter to a second vote of all shareholders, to be held between 90
and 120 days after the Annual General Meeting. Pending the second
vote, the relevant Directors are deemed to have been re-elected to
the Board. Wolfram Kuoni and Ihor Mitiukov, having completed 9
years on the Board on 1 June 2016, are now no longer deemed to be
independent, in accordance with the UK Corporate Governance Code.
Ihor Mitiukov will stand for re-election at the EGM on the basis
that he will step down when a suitable Ukrainian successor to him
has been found. Wolfram Kuoni will stand for re-election at the EGM
but is likely to step down from the Board later in the year. A
successor to Oliver Baring as Senior Independent Director is being
sought with a view to replacing him once he ceases to be
independent in December 2016.
Having consulted a number of the larger shareholders of the
Company, the Board intends to hold a second vote for the
re-election of all five of the above Directors, and notice of a
General Meeting for this purpose will be sent to shareholders
shortly.
Update on Risks
Since the publication of the 2015 annual results in March 2016,
the Group assesses that the risks facing the business, as
highlighted on pages 30 to 39 of the 2015 Annual Report and
Accounts, remain relevant. An update is provided below on material
developments of key risks during the first half of 2016.
-- Debt maturity profile
As at the end of July 2016, Ferrexpo has fully repaid a US$420
million pre export finance facility that had been amortising over
the past 24 months. The Group has a semi-annual US$18 million bond
coupon payment due on 6 October 2016 and it will begin quarterly
repayments of approximately US$44 million of its US$350 million pre
export finance facility in November 2016. Should the iron ore price
reduce from current levels there is a risk that the Group may not
be able to service these payments. As a result of lower gearing
resulting from net operating cash flow generation and good
performance in the first half of the year together with a lower
amortisation profile in the second half of the year the Group
considers this risk to have diminished but still remains.
For further information see Going Concern Basis - Note 2 of the
financial accounts.
-- Interest rate risk
The Group has a mix of debt facilities at fixed and floating
interest rates. An increase in US$ LIBOR could result in higher
costs for the Group. As of 30 June 2016 the proportion of debt with
floating interest reduced to 50% of outstanding debt (30 June 2015:
55% of outstanding debt; 31 December 2015: 56% of outstanding debt)
principally due to the monthly amortisation of a US$420 million
pre-export finance facility which completed in July 2016. Any new
debt facilities could result in an increase in interest costs. The
Group's average cost of debt for the period ended 30 June 2016 was
6.6% (30 June 2015: 5.32%; 31 December 2015: 5.97%).
-- Global macroeconomic growth
The demand for steel, and hence iron ore, is driven by global
economic growth trends, which in the recent past has been largely
determined by Chinese economic growth as China has produced more
than 45% of the world's steel output for the past 7 years. China
has reported real GDP growth of 6.7% for the first half of 2016
compared to 7% in the first half of 2015 following a Government
stimulus package in the first quarter of 2016. A reduction in world
or Chinese GDP growth could impact demand for steel and iron
ore.
-- Iron ore price and pellet premiums
Fluctuations in the iron ore price have negatively impacted the
financial results of the Group in the first half of 2016 compared
to the comparative period in 2015. In the first six months of 2016
the PLATTS CFR China iron ore fines price averaged US$52 per tonne
compared to an average of US$61 per tonne in 1H 2015. The price was
volatile, however, and traded within a wide range from an eight
year low of US$38 per tonne in mid-December 2015 to a 15 month high
of US$71 per tonne in April 2016 before settling at around US$50
per tonne broadly in line with the average of the second half of
2015. Should the iron ore price decline further in the second half
of the year there is a risk it could negatively impact the Group's
profitability and cash generation ability.
Ferrexpo receives a pellet premium in addition to the iron ore
fines price. Currently, a substantial portion of the Group's profit
is due to this premium. The pellet premium improved throughout the
first half of 2016 recovering from lows seen at the start of the
year. In China the spot pellet premium traded at US$11 per tonne in
January 2016 before recovering to US$22 per tonne in June 2016 (1H
2016 average: US$17 per tonne, 1H 2015 average: US$28 per tonne).
While the headline long term contract pellet premium in the key
markets of Western Europe and North East Asia was set at US$31 per
tonne to US$32 per tonne in the first half of 2016 compared to
US$32 per tonne to US$33 per tonne in the first half of 2015. The
pellet premium currently represents a high proportion of the
underlying iron ore fines price and there is a risk that premiums
could reduce negatively impacting the Group's profitability and
cash generation ability. For further information see Introduction
and Market Environment.
-- C3 freight
Ferrexpo is exposed to international freight rates as all of its
long term contracts are priced with reference to transparent
indices such as the Baltic Exchange C3 freight price (capesize
route from Tubarao, Brazil to Qingdao, China). Fronthaul capesize
voyage rates are currently trading at just above historic low
levels, with the reductions driven by low oil prices and
overcapacity. The C3 index declined 39% to US$7 per tonne in 1H
2016 to US$7 per tonne compared to US$11 per tonne in 1H 2015. An
increase in freight rates would directly reduce the Group's
received net back price.
-- Political and legal risks pertaining to Ukraine
The economic recovery in Ukraine remains fragile and Ferrexpo
remains exposed to the Government's ability to meet its payment
obligations to Ferrexpo on amounts due, such as VAT refunds.
Furthermore the economic recession of the past two years has
impacted the Government's ability to fund usual social services and
this could lead to social upheaval and political tension within
local communities. Any escalation of the rebels conflict in Eastern
Ukraine could have a further adverse effect on the economy and
impact the ability of local companies and financial institutions to
obtain funding from the international capital markets, including
Ferrexpo's ability to obtain financing.
Other risks include a weak judicial system that is susceptible
to outside influence, and can take an extended period of time for
the courts to reach final judgment. For further information see
Ukraine above and Note 20 of the financial accounts.
-- Ukrainian banking sector
The Ukrainian banking sector continues to go through a period of
industry rationalisation. Year to date in 2016, the National Bank
of Ukraine has placed 15 banks into temporary administration and
the number of operating banks in Ukraine has reduced from 180 at
the start of 2014 to 102 as of 30 June 2016. The sector is still
considered to be under capitalised and there remains a risk that
funds held by Ferrexpo in the Ukrainian banking system could be
lost.
For further information see Note 16 and Note 20 of the financial
accounts.
-- Ukrainian currency
The Group receives all of its income from pellet sales in US
dollars while more than half of its total cost base is denominated
in Ukrainian Hryvnia. Following a period of sharp devaluation
against the US dollar in 2014 and 2015 the Hryvnia has been
relatively stable. The average Hryvnia per US dollar in 1H 2016 was
25.5 compared to an average rate of UAH21.4 per US dollar in 1H
2015 (average FY 2015: UAH21.9 per US dollar). Since 30 June 2016,
the Hryvnia has appreciated slightly against the US dollar to
24.8.
Should the Hryvnia appreciate further against the US dollar it
could increase local costs in US dollar terms reducing Group
profitability.
-- Ukrainian inflation
In 2015 consumer price inflation reached a high of 49% following
the substantial devaluation of the Hryvnia against the US Dollar in
2014 and 2015 when the Hryvnia depreciated from UAH8 per US Dollar
as of 1 January 2014 to UAH24 per US Dollar as of 31 December 2015.
As of 30 June 2016, year on year inflation had reduced to 6.9%. The
areas of inflation that the Group is most exposed to are wages,
electricity and rail tariffs. The Group looks to partly offset cost
inflation through increases in mining and production efficiencies.
There is a risk that the Group is unable to offset inflation
through production efficiencies and that the Group's cost base
could increase as a result. For further information see Costs and
Ukrainian currency above.
-- Ukrainian VAT
During 1H 2016, the Group received VAT refunds in full,
including outstanding VAT balances from previous years. As such the
current balance of VAT outstanding is a significant improvement
over recent years. The process of recovering VAT in Ukraine has
become more transparent for all industry participants. The risk
remains, however, that there could be delays in recovering
outstanding VAT should the Government's finances deteriorate.
-- Ukrainian Taxes
In 2014 and 2015, VAT receivable balances in Ukraine were mainly
recovered in exchange for prepayments of corporate profit tax
(CPT). To date in 2016, the prepayment of CPT is no longer a
requirement and the Group recovered a small portion of prepaid CPT
in July 2016. Ferrexpo is hopeful that the Government will take
further steps in the second half of 2016 in resolving the issue of
prepaid CPT. There is a risk, however, that the Government's
financial position could deteriorate and that the previous practice
of prepaying CPT could resume which would absorb significant
amounts of working capital. For further information see Note 11 of
the financial accounts.
Directors' Responsibility Statement
The Interim Report complies with the Disclosure and Transparency
Rules ('DTR') of the United Kingdom's Financial Conduct Authority
in respect of the requirement to produce a half-yearly financial
report. The Interim Report is the responsibility of, and has been
approved by, the Directors.
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34;
-- the Interim Management Report includes a fair review of the
important events during the first six months and description of the
principal risks and uncertainties for the remaining six months of
the year, as required by DTR4.2.7R; and
-- the Interim Management Report includes a fair review of
disclosure of related party transactions and changes therein, as
required by DTR 4.2.8R.
The Directors are also responsible for the maintenance and
integrity of the Ferrexpo plc website.
A list of current Directors is maintained on the Ferrexpo plc
website which can be found at www.ferrexpo.com.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
For and on behalf of the Board
Michael Abrahams CBE DL
Chairman
Chris Mawe
Chief Financial Officer
Independent Review Report to Ferrexpo PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2016 which comprises the Interim
Consolidated Income Statement, Interim Consolidated Statement of
Comprehensive Income, Interim Consolidated Statement of Financial
Position, Interim Consolidated Statement of Cash Flows, Interim
Consolidated Statement of Changes in Equity and related notes 1 to
22. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2016 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Emphasis of matter - Going concern
In forming our opinion, which is not qualified in this respect,
we have also considered the adequacy of the disclosures made in
note 2 to the financial statements concerning the Company's ability
to continue as a going concern. The conditions described in note 2
indicate the existence of a material uncertainty which may cast
significant doubt about the Company's ability to continue as a
going concern. The financial statements do not include the
adjustments that would result if the Company was unable to continue
as a going concern.
Ernst & Young LLP
London
2 August 2016
Interim Consolidated Income Statement
6 months ended 30.06.16 6 months ended 30.06.15 Year ended 31.12.15
US$000 Notes Before special items Special items (unaudited) Before special items Special items (unaudited) Before special items Special items (audited)
Revenue 4 457,921 - 457,921 511,881 - 511,881 961,003 - 961,003
Cost of sales 3/5 (192,054) - (192,145) (235,801) - (235,801) (446,756) - (446,756)
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Gross profit 265,867 - 265,776 276,080 - 276,080 514,247 - 514,247
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Selling and
distribution
expenses (101,251) - (101,251) (112,934) - (112,934) (226,222) - (226,222)
General and
administrative
expenses 6 (18,189) - (18,189) (20,495) - (20,495) (37,103) - (37,103)
Other income 1,649 - 1,649 3,031 - 3,031 6,852 - 6,852
Other expenses 7 (17,446) - (17,446) (18,180) - (18,180) (32,726) - (32,726)
Operating foreign
exchange gains 8 2,119 - 2,119 14,865 - 14,865 26,025 - 26,025
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Operating profit
from continuing
operations before
adjusted items 132,750 - 132,750 142,367 - 142,367 251,073 - 251,073
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Allowance for
restricted cash
and deposits 20 - - - - - - - (174,579) (174,579)
Write-offs and
impairment losses 9 - (13) (13) - (981) (981) - (5,555) (5,555)
Gain on disposal of
available-for-sale
investment - - - - 41,767 41,767 - 41,385 41,385
Share of profit
from associates 1,285 - 1,285 4,014 - 4,014 4,620 - 4,620
Losses on disposal
of property, plant
and equipment (1,615) - (1,615) (2,698) - (2,698) (4,541) - (4,541)
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Profit/(loss)
before tax and
finance from
continuing
operations 132,420 (13) 132,407 143,683 40,786 184,469 251,152 (138,749) 112,403
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Finance income 10 90 - 90 1,671 - 1,671 2,494 - 2,494
Finance expense 10 (37,984) - (37,984) (36,587) - (36,587) (71,797) - (71,797)
Non-operating
foreign exchange
losses 8 (2,537) - (2,537) (6,181) - (6,181) (17,750) - (17,750)
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Profit/(loss)
before tax 91,987 (13) 91,974 102,586 40,786 143,372 164,099 (138,749) 25,350
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Income tax
(expense)/credit 11 (14,197) - (14,197) (27,223) - (27,223) (22,312) 28,420 6,108
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Profit/(loss) for
the year from
continuing
operations 77,790 (13) 77,777 75,363 40,786 116,149 141,787 (110,329) 31,458
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Profit/(loss)
attributable to:
Equity shareholders
of Ferrexpo plc 77,135 (13) 77,122 74,046 40,786 114,832 140,030 (106,993) 33,037
Non-controlling
interests 655 - 655 1,317 - 1,317 1,757 (3,336) (1,579)
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Profit/(loss) for
the year from
continuing
operations 77,790 (13) 77,777 75,363 40,786 116,149 141,787 (110,329) 31,458
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Earnings/(loss) per
share:
Basic (US cents) 12 13.17 - 13.17 12.83 6.78 19.61 23.92 (18.27) 5.65
Diluted (US cents) 12 13.14 - 13.14 12.80 6.77 19.57 23.86 (18.23) 5.63
-------------------- ------ --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------------- --------------------
Interim Consolidated Statement of Comprehensive Income
6 months ended Year ended
US$000 Notes 30.06.16 6 months ended 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Profit for the period/year 77,777 116,149 31,458
Items that may subsequently be reclassified to
profit or loss:
Exchange differences on translating foreign
operations (32,824) (335,332) (472,492)
Current income tax effect 15,886 15,456 28,811
Deferred income tax effect (11,385) 7,659 12,167
Net gains on available-for-sale financial assets 21 - 41,767 41,767
Income tax effect - - -
-------------------------------------------------- ------ --------------- ------------------------ -----------
Net other comprehensive loss before
reclassification of items to profit or loss (28,323) (270,450) (389,747)
-------------------------------------------------- ------ --------------- ------------------------ -----------
Reclassification to profit or loss relating to
available-for-sale investments sold or impaired - (41,767) (41,767)
-------------------------------------------------- ------ --------------- ------------------------ -----------
Net other comprehensive loss to be reclassified
to profit or loss in subsequent periods (28,323) (312,217) (431,514)
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement (losses)/gains on defined benefit
pension liability (395) (249) 3,878
Income tax effect 37 24 (722)
-------------------------------------------------- ------ --------------- ------------------------ -----------
Net other comprehensive (loss)/income not being
reclassified to profit or loss in subsequent
periods (358) (225) 3,156
-------------------------------------------------- ------ --------------- ------------------------ -----------
Other comprehensive income/(loss) for the
period/year, net of tax (28,681) (312,442) (428,358)
-------------------------------------------------- ------ --------------- ------------------------ -----------
Total comprehensive income/(loss) for the
period/year, net of tax 49,096 (196,293) (396,900)
-------------------------------------------------- ------ --------------- ------------------------ -----------
Total comprehensive income/(loss) attributable
to:
Equity shareholders of Ferrexpo plc 48,929 (192,199) (387,958)
Non-controlling interests 167 (4,094) (8,942)
-------------------------------------------------- ------ --------------- ------------------------ -----------
49,096 (196,293) (396,900)
-------------------------------------------------- ------ --------------- ------------------------ -----------
Interim Consolidated Statement of Financial Position
As at As at As at
US$000 Notes 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Assets
Property, plant and equipment 13 615,598 717,001 654,392
Goodwill and other intangible assets 38,598 45,524 40,024
Investments in associates 2,478 9,392 5,801
Available-for-sale financial assets 21 5 23 9
Inventories 15 117,773 80,369 98,802
Other non-current assets 5,748 12,455 4,652
Income taxes recoverable and prepaid 11 36,522 53,902 54,482
Other taxes recoverable and prepaid 14 - 1,182 -
Deferred tax assets 63,463 36,515 71,096
---------------------------------------------------------- ------ ------------ ------------ ------------
Total non-current assets 880,185 956,363 929,258
---------------------------------------------------------- ------ ------------ ------------ ------------
Inventories 15 100,799 112,038 96,021
Trade and other receivables 66,258 64,846 83,379
Prepayments and other current assets 19,441 28,752 18,952
Income taxes recoverable and prepaid 11 16,826 - 2,829
Other taxes recoverable and prepaid 14 34,483 54,181 50,482
Cash and cash equivalents 3/16 44,440 470,535 35,330
Restricted cash and deposits 20 8,988 - 9,308
---------------------------------------------------------- ------ ------------ ------------ ------------
291,235 730,352 296,301
---------------------------------------------------------- ------ ------------ ------------ ------------
Assets classified as held for sale 1 - 18
---------------------------------------------------------- ------ ------------ ------------ ------------
Total current assets 291,236 730,352 296,319
---------------------------------------------------------- ------ ------------ ------------ ------------
Total assets 1,171,421 1,686,715 1,225,577
---------------------------------------------------------- ------ ------------ ------------ ------------
Equity and liabilities
Share capital 17 121,628 121,628 121,628
Share premium 185,112 185,112 185,112
Other reserves 17 (1,904,265) (1,759,538) (1,876,624)
Retained earnings 1,891,362 1,912,333 1,814,598
---------------------------------------------------------- ------ ------------ ------------ ------------
Equity attributable to equity shareholders of the parent 293,837 459,535 244,714
---------------------------------------------------------- ------ ------------ ------------ ------------
Non-controlling interest (616) 4,065 (783)
---------------------------------------------------------- ------ ------------ ------------ ------------
Total equity 293,221 463,600 243,931
---------------------------------------------------------- ------ ------------ ------------ ------------
Interest-bearing loans and borrowings 3/18 602,341 597,447 700,351
Defined benefit pension liability 17,687 24,781 17,034
Provision for site restoration 1,027 1,814 975
Deferred tax liabilities 186 419 382
---------------------------------------------------------- ------ ------------ ------------ ------------
Total non-current liabilities 621,241 624,461 718,742
---------------------------------------------------------- ------ ------------ ------------ ------------
Interest-bearing loans and borrowings 3/18 194,770 525,643 203,299
Trade and other payables 27,364 25,826 27,566
Accrued liabilities and deferred income 18,411 27,974 16,188
Income taxes payable 11 8,976 9,869 8,161
Other taxes payable 7,438 9,342 7,690
---------------------------------------------------------- ------ ------------ ------------ ------------
Total current liabilities 256,959 598,654 262,904
---------------------------------------------------------- ------ ------------ ------------ ------------
Total liabilities 878,200 1,223,115 981,646
---------------------------------------------------------- ------ ------------ ------------ ------------
Total equity and liabilities 1,171,421 1,686,715 1,225,577
---------------------------------------------------------- ------ ------------ ------------ ------------
The financial statements were approved by the Board of Directors
on the 2 August 2016.
Kostyantin Zhevago Christopher Mawe
Chief Executive Chief Financial Officer
Officer
Interim Consolidated Statement of Cash Flows
6 months
ended 6 months Year ended
US$000 Notes 30.06.16 ended 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Profit before tax 91,974 143,372 25,350
Adjustments for:
Depreciation of property, plant and equipment and amortisation
of intangible assets 25,690 29,328 56,596
Interest expense 36,891 35,064 68,917
Interest income 10 (90) (1,671) (2,494)
Share of profit from associates (1,285) (4,014) (4,620)
Movement in allowance for doubtful receivables 738 (29) 114
Allowance for restricted cash and deposits 20 - - 174,579
Losses on disposal of property, plant and equipment 1,615 2,698 4,541
Gain on disposal of available-for-sale investment - (41,767) (41,385)
Write-offs and impairment losses 9 13 981 5,555
Site restoration provision (448) 53 (634)
Employee benefits 1,705 3,754 3,543
Share based payments 194 256 515
Operating foreign exchange gains 8 (2,119) (14,865) (26,025)
Non-operating foreign exchange losses 8 2,537 6,181 17,750
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Operating cash flow before working capital changes 157,415 159,341 282,302
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Changes in working capital:
Decrease in trade and other receivables 13,296 14,160 2,341
Increase in inventories (15,261) (36,807) (63,965)
Increase/(decrease) in trade and other accounts payable 2,584 (7,771) (14,787)
Decrease/(increase) in VAT recoverable and other taxes
recoverable and payable 15,524 2,184 (113)
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Cash generated from operating activities 173,558 131,107 205,778
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Interest paid (28,641) (34,017) (65,080)
Income tax paid (1,735) (8,131) (11,054)
Post-employment benefits paid (746) (926) (1,778)
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Net cash flows from operating activities 142,436 88,033 127,866
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (23,558) (24,610) (64,739)
Proceeds from disposal of property, plant and equipment 35 174 242
Purchase of intangible assets (179) (330) (645)
Proceeds from sale of available-for-sale investment - 41,767 41,767
Reclassification to restricted cash and deposits 16/20 - - (184,523)
Interest received 84 1,602 2,056
Dividends from associates 3,076 - 1,716
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Net cash flows used in investing activities (20,542) 18,603 (204,126)
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Cash flows from financing activities
Proceeds from borrowings and finance 9,267 - -
Repayment of borrowings and finance (119,775) (179,944) (393,876)
Arrangement fees paid - (4,416) (15,308)
Dividends paid to equity shareholders of Ferrexpo plc() - (58,184) (77,548)
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Net cash flows used in financing activities (110,508) (242,544) (486,732)
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Net increase/(decrease) in cash and cash equivalents 11,386 (135,908) (562,992)
Cash and cash equivalents at the beginning of the period/year 35,330 626,509 626,509
Effect of exchange rate changes on cash and cash equivalents (2,276) (20,066) (28,187)
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Cash and cash equivalents at the end of the period/year 16 44,440 470,535 35,330
--------------------------------------------------------------- -------- ------------ ---------------- -----------
Interim Consolidated Statement of Changes in Equity
For the financial year
2015 and the six months
ended 30 June 2016 Attributable to equity shareholders of Ferrexpo plc
Uniting Employee
of Treasury Benefit Total
interest share Trust Translation capital
Issued Share reserve reserve reserve reserve Retained and Non-controlling Total
US$000 capital premium (Note 17) (Note 17) (Note 17) (Note 17) earnings reserves interests equity
At 1 January
2015 121,628 185,112 31,780 (77,260) (6,012) (1,401,496) 1,855,690 709,442 8,159 717,601
--------------- ---------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
Profit for the
period - - - - - - 33,037 33,037 (1,579) 31,458
Other
comprehensive
loss - - - - - (424,151) 3,156 (420,995) (7,363) (428,358)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
Total
comprehensive
loss for the
year - - - - - (424,151) 36,193 (387,958) (8,942) (396,900)
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - (77,285) (77,285) - (77,285)
Share-based
payments - - - - 515 - - 515 - 515
At 31 December
2015
(audited) 121,628 185,112 31,780 (77,260) (5,497) (1,825,647) 1,814,598 244,714 (783) 243,931
--------------- ---------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
Profit for the
period - - - - - - 77,122 77,122 655 77,777
Other
comprehensive
loss - - - - - (27,835) (358) (28,193) (488) (28,681)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
Total
comprehensive
income for
the period - - - - - (27,835) 76,764 48,929 167 49,096
Equity - - - - - - - - - -
dividends paid
to
shareholders
of Ferrexpo
plc
Share-based
payments - - - - 194 - - 194 - 194
--------------- ---------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
At 30 June
2016
(unaudited) 121,628 185,112 31,780 (77,260) (5,303) (1,853,482) 1,891,362 293,837 (616) 293,221
--------------- ---------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
For the six
months ended
30 June 2015 Attributable to equity shareholders of Ferrexpo plc
Uniting Employee
of Treasury Benefit Total
interest share Trust Translation capital
Issued Share reserve reserve reserve reserve Retained and Non-controlling Total
US$000 capital premium (Note 17) (Note 17) (Note 17) (Note17) earnings reserves interests equity
At 1 January
2015 121,628 185,112 31,780 (77,260) (6,012) (1,401,496) 1,855,690 709,442 8,159 717,601
--------------- -------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
Profit for the
period - - - - - - 114,832 114,832 1,317 116,149
Other
comprehensive
loss - - - - - (306,806) (225) (307,031) (5,411) (312,442)
--------------- -------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
Total
comprehensive
loss for the
period - - - - - (306,806) 114,607 (192,199) (4,094) (196,293)
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - (57,964) (57,964) - (57,964)
Share-based
payments - - - - 256 - - 256 - 256
--------------- -------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
At 30 June
2015
(unaudited) 121,628 185,112 31,780 (77,260) (5,756) (1,708,302) 1,912,333 459,535 4,065 463,600
--------------- -------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------------- ----------
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, which is considered to be the country of domicile, with
its registered office at 55 St James's Street, London, SW1A 1LA,
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, Dubai, Japan,
China, Singapore 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 incorporated in Luxembourg and
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 June 2015:
50.3%; 31 December 2015: 50.3%) of Ferrexpo plc's issued share
capital.
The Group's interests in its subsidiaries are held indirectly by
the Company, with the exception of Ferrexpo AG, which is directly
held. The Group's consolidated subsidiaries are disclosed in Note
37 of the Annual Report and Accounts 2015.
At 30 June 2016, the Group also holds through OJSC Ferrexpo
Poltava Mining an interest of 48.6% (30 June 2015: 48.6%; 31
December 2015: 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
six months period ended 30 June 2016 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
for the year ended 31 December 2015.
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 2015. 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 2015, have been delivered to the Register of Companies.
The auditors' report under section 495 of the Companies Act 2006 in
relation to those accounts was (i) unqualified, (ii) included a
reference to a matter to which the auditors drew attention by way
of emphasis without qualifying their report, and (iii) did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Going Concern Basis
Over the next year from the approval of the financial
statements, US$158,150 thousand of debt amortisation falls due for
repayment. Iron ore pricing levels have been volatile and could
reduce to levels where, without associated cost relief, the Group's
net cash flow generation would only be able to meet these payments
over a longer period triggering cross default across part or all of
its debt facilities.
The Group expects to be able to repay its facilities and meet
its liabilities as they fall due based on current forecasts and
also expects, that if necessary, it would be able to agree
amendments to relevant facilities to make repayments over a longer
period or obtain additional financing. As a result the financial
statements have been drawn up on a going concern basis.
The impact of the uncertainty of the future level of the iron
ore price and operating cost inputs are material uncertainties and
may cast significant doubt upon the Group's ability to meet its
debt amortisation obligations as they fall due and to continue as a
going concern. Under these circumstances it would be necessary to
restate amounts in the balance sheet, which will materially change
the amounts and classification of figures contained in the
financial statements.
Accounting policies adopted
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
2015.
The following new standards and interpretations have been
applied from 1 January 2016, with no effect on reported results,
financial position or disclosure in the interim financial
statements:
Amendments to IFRS 11: Joint arrangements: Accounting for
acquisitions of interests
Amendments to IAS 16 and IAS 38: Clarification of acceptable
methods of depreciation and amortisation
Annual Improvements to IFRSs - 2012-2014 Cycle
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.
6 months ended Year ended
US$000 Notes 30.06.16 6 months ended 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Profit before tax and finance 132,407 184,469 112,403
Allowance for restricted cash 20 - - 174,579
Write-offs and impairment losses 9 13 981 5,555
Gain on disposal of available-for-sale investments 21 - (41,767) (41,385)
Share based payments 194 256 515
Losses on disposal of PPE 1,615 2,698 4,541
Depreciation and amortisation 25,690 29,328 56,596
---------------------------------------------------- ------ --------------- ------------------------ -----------
EBITDA 159,919 175,965 312,804
---------------------------------------------------- ------ --------------- ------------------------ -----------
C1 costs
The Group's C1 costs represent the cash costs of production of
iron ore pellets from own ore divided by production volume of
pellets produces from own ore, and excludes non-cash costs such as
depreciation, pension costs and inventory movements as well as
costs of purchased ore and concentrate and production cost of
gravel.
Notes 6 months ended Year ended
US$000 30.06.16 6 months ended 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Cost of sales - pellet production 5 174,897 215,679 405,863
Depreciation and amortisation 5 (18,458) (22,249) (42,750)
Purchased concentrate and other items for resale 5 (2,122) (15,571) (21,142)
Inventory movements 5 (7,422) 12,546 20,163
Other non-C1 cost components (291) (6,463) (2,539)
-------------------------------------------------- ------ --------------- ------------------------ -----------
C1 cost 146,604 183,942 359,595
-------------------------------------------------- ------ --------------- ------------------------ -----------
Own ore produced (tonnes) 5,700,097 5,503,932 11,258,446
-------------------------------------------------- ------ --------------- ------------------------ -----------
C1 cash cost per tonne US$ 25.7 33.4 31.9
-------------------------------------------------- ------ --------------- ------------------------ -----------
Net financial indebtedness
Net financial indebtedness as defined by the Group comprises
cash and cash equivalents less interest bearing loans and
borrowings.
US$000 Notes As at 30.06.16 As at 30.06.15 As at 31.12.15
(unaudited) (unaudited) (audited)
Cash and cash equivalents 16 44,440 470,535 35,330
Interest bearing loans and borrowings - current 18 (194,770) (525,643) (203,299)
Interest bearing loans and borrowings - non-current 18 (602,341) (597,447) (700,351)
----------------------------------------------------- ------ --------------- --------------- ---------------
Net financial indebtedness (752,671) (652,555) (868,320)
----------------------------------------------------- ------ --------------- --------------- ---------------
The Group's net financial indebtedness increased in the second
half of the financial year 2015 by the insolvency of the Group's
transactional bank in Ukraine resulting in a reduction of the
balance of cash and cash equivalents available in Ukraine (see Note
16 and Note 20).
The Group's balance of cash and cash equivalents increased by
US$9,110 thousand after debt repayments of US$119,775 thousand
during the period ended 30 June 2016 (30 June 2015: US$179,944
thousand, 31 December US$393,876 thousand).
Note 4: Revenue
Revenue for the six months period ended 30 June 2016 consisted
of the following:
6 months ended Year ended
US$000 30.06.16 6 months ended 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Revenue from sales of ore pellets and concentrate:
Export 428,552 477,081 895,520
------------------------------------------------------------ --------------- ------------------------ -----------
Total revenue from sale of iron ore pellets and concentrate 428,552 477,081 895,520
------------------------------------------------------------ --------------- ------------------------ -----------
Revenue from logistics and bunker business 27,834 32,766 61,247
Revenue from other sales and services provided 1,535 2,034 4,236
Total revenue 457,921 511,881 961,003
------------------------------------------------------------ --------------- ------------------------ -----------
No sales were made in Ukraine during the periods presented.
Export sales of iron ore pellets and concentrate by geographical
destination were as follows:
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Central Europe 182,636 246,808 431,429
Western Europe 79,443 43,628 105,858
North East Asia 60,224 46,995 119,170
China and South East Asia 81,933 113,157 193,566
Turkey, Middle East and India 24,316 26,493 45,497
Total export revenue 428,552 477,081 895,520
-------------------------------- --------------- --------------- -----------
The Group markets its products across various regions. The sales
segmentation data was previously disclosed by Traditional Markets,
Natural Markets and Growth Markets and the disclosure of this
segmentation has been changed for the period ended as of 30 June
2016 to better reflect how the Group now makes its business
decisions and monitors its sales.
Information about the composition of the regions is provided in
the Glossary.
Note 5: Cost of sales
Cost of sales for the six months period ended 30 June 2016
consisted of the following:
Notes 6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Energy 74,166 98,331 186,312
Personnel 10,878 17,399 28,773
Materials 30,830 35,255 72,653
Repairs and maintenance 14,928 18,562 37,388
Depreciation and amortisation 18,458 22,249 42,750
Royalties and levies 8,760 9,797 19,653
Purchased concentrate and other items for resale 2,122 15,571 21,142
Inventory movements 7,422 (12,546) (20,163)
Logistics and bunker business 17,157 20,122 40,893
Other 7,333 11,061 17,355
Total cost of sales 192,054 235,801 446,756
-------------------------------------------------- ------ --------------- --------------- -----------
Thereof for pellet production 3 174,897 215,679 405,863
Thereof for logistics and bunker business 17,157 20,122 40,893
-------------------------------------------------- ------ --------------- --------------- -----------
Note 6: General and administrative expenses
General and administrative expenses for the six months period
ended 30 June 2016 consisted of the following:
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Personnel 9,912 10,967 22,123
Office, maintenance and security 2,408 2,422 4,788
Professional fees 3,766 4,392 5,697
Audit and audit related fees 905 785 1,564
Non-audit fees 34 9 23
Depreciation and amortisation 756 825 1,540
Other 408 1,095 1,368
Total general and administrative expenses 18,189 20,495 37,103
-------------------------------------------- --------------- --------------- -----------
During the six months period ended 30 June 2016, non-audit
services in the amount of US$225 thousand provided for debt
management activities of the Group are included in other finance
cost and not included in the table above.
During the comparative period ended 31 December 2015, non-audit
services totalling US$681 thousand have been capitalised as prepaid
arrangement fees and are not included in the table above.
Note 7: Other expenses
Other expenses for the period ended 30 June 2016 consisted of
the following:
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Community support donations 13,874 15,527 25,820
Movements in allowance for doubtful receivables and prepayments made 736 (29) 114
Other personnel costs 431 652 1,261
Other 2,405 2,030 5,531
Total other expenses 17,446 18,180 32,726
--------------------------------------------------------------------- --------------- --------------- -----------
Note 8: Foreign exchange gains and losses
Foreign exchange gains and losses for the six months period
ended 30 June 2016 consisted of the following:
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Operating foreign exchange gains
Revaluation of trade receivables 2,287 14,685 25,943
Revaluation of trade payables (163) 150 118
Others (5) 30 (36)
---------------------------------------------- --------------- --------------- -----------
Total operating foreign exchange gains 2,119 14,865 26,025
---------------------------------------------- --------------- --------------- -----------
Non-operating foreign exchange losses
Revaluation of interest-bearing loans (2,203) (27,160) (39,858)
Revaluation of cash and cash equivalents (102) 17,667 26,368
Others (232) 3,312 (4,260)
---------------------------------------------- --------------- --------------- -----------
Total non-operating foreign exchange losses (2,537) (6,181) (17,750)
---------------------------------------------- --------------- --------------- -----------
Total foreign exchange (losses)/gains (418) 8,684 8,275
---------------------------------------------- --------------- --------------- -----------
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 June 2016, the devaluation of the
Ukrainian Hryvnia compared to the US Dollar was significantly less
than in the comparative periods presented above. The local currency
in Ukraine has devalued by approximately 4% compared to the US
Dollar; from 24.001 as at 31 December 2015 to 24.854 as at the end
of this reporting period compared to 33% and 52% during the
comparative periods ended 30 June 2015 and 31 December 2015.
Note 9: Write-offs and impairment losses
Impairment losses relate to adjustments made to the carrying
value of assets where this is higher than the recoverable amount.
Write-offs and impairment losses for the six months period ended 30
June 2016 consisted of the following:
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Write-off of receivables and prepayments - - 4,598
Write-off of inventories / (reversal of write-off of inventories) 9 1 (59)
Write-off of property, plant and equipment - 969 992
Impairment of available-for-sale investments 4 11 24
Total write-offs and impairment losses 13 981 5,555
-------------------------------------------------------------------- --------------- --------------- -----------
The write-off of receivables and prepayments in the comparative
period ended 31 December 2015 is predominantly related to the
cancellation of a contract for equipment ordered and partially
prepaid in line with the terms of the contract.
Note 10: Finance income and expense
Finance income and expense for the period ended 30 June 2016
consisted of the following:
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Finance income
Interest income 90 1,099 1,268
Other finance income - 572 1,226
Total finance income 90 1,671 2,494
--------------------------------------------------------------------- --------------- --------------- -----------
Finance expense
Interest expense on financial liabilities measured at amortised cost (28,172) (32,055) (61,505)
Effect from capitalised borrowing costs 2,489 2,546 5,440
Interest on defined benefit plans (1,093) (1,523) (2,880)
Bank charges (5,952) (5,465) (12,282)
Other finance costs (5,256) (90) (570)
--------------------------------------------------------------------- --------------- --------------- -----------
Total finance expense (37,984) (36,587) (71,797)
--------------------------------------------------------------------- --------------- --------------- -----------
Net finance expense (37,894) (34,916) (69,303)
--------------------------------------------------------------------- --------------- --------------- -----------
Fees for liability management activities of the Group for the
amount of US$5,230 thousand (30 June 2015: nil, 31 December 2015:
nil) are included in other finance costs.
Note 11: 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, the United Kingdom and Dubai, as well
as the level of non-deductible expenses for tax purposes in each of
these jurisdictions. For the period ended 30 June 2016, the income
tax expense was based on an expected weighted average tax rate of
12.2% for the financial year 2016, adjusted for some one-off items
for the period, compared to an effective tax rate before special
items of 13.5% for the financial year 2015.
The income tax credit of US$6,108 thousand shown as of the end
of the financial year 2015 was a result of a deferred tax credit of
US$28,420 thousand recognised as a deferred tax asset in respect of
the allowance for the restricted cash and deposits for which the
Group expects that it will become tax deductible in a future period
(see Note 20 for further details).
During the financial years 2014 and 2015, current VAT receivable
balances in Ukraine were mainly recovered in exchange for
prepayments of corporate profit tax. As at 30 June 2016, the
balance of these prepayments made in previous periods amounted to
US$52,616 thousand (30 June 2015: US$53,902 thousand; 31 December
2015: US$54,482 thousand) and it is management's view that this
balance will be offset with future profits or will be refunded in
cash.
The Group received a refund of prepaid corporate profit tax in
Ukraine in the amount of US$4,029 thousand in July 2016 and expects
further refunds in the following months. The amount already
refunded or expected to be recovered later in 2016 of US$16,826
thousand was classified as current whereas the remaining balance of
US$36,522 thousand is still shown as non-current due to the
uncertainty as to the timing of the recovery of this balance.
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Income tax receivable balance - current 16,826 - 2,829
Income tax receivable balance - non-current 36,522 53,902 54,482
Income tax payable balance (8,784) (9,869) (8,161)
---------------------------------------------- --------------- --------------- -----------
Net income tax receivable 44,564 44,033 49,150
---------------------------------------------- --------------- --------------- -----------
Note 12: 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.
6 months ended 30.06.16 6 months ended 30.06.15 Special Year ended 31.12.15
Before special items Special items (unaudited) Before special items Special items (unaudited) Before special items items (audited)
Earnings/(loss)
for the
period/year
attributable to
equity
shareholders per
share
Basic (US cents) 13.17 - 13.17 12.83 6.78 19.61 23.92 (18.27) 5.65
Diluted (US cents) 13.14 - 13.14 12.80 6.77 19.57 23.86 (18.23) 5.63
---------------------- --------------------- -------------- ------------------------ --------------------- -------------- ------------------------ --------------------- -------- --------------------
The calculation of the basic and diluted earnings per share is
based on the following data:
6 months ended 6 months ended Year ended
Thousands 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Weighted average number of shares
Basic number of ordinary shares outstanding 585,462 585,462 585,462
Effect of dilutive potential ordinary shares 1,646 1,347 1,422
------------------------------------------------ --------------- --------------- -----------
Diluted number of ordinary shares outstanding 587,108 586,809 586,884
------------------------------------------------ --------------- --------------- -----------
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
Neither a final dividend for the financial year 2015 nor an
interim dividend for 2016 were proposed.
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Dividend proposed per Ordinary Share
Interim dividend for 2015: 3.3 US cents - 19,320 -
Total dividends proposed - 19,320 -
---------------------------------------- --------------- --------------- -----------
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Dividend Paid per Ordinary Share
Interim dividend for 2015: 3.3 US cents per - - 19,364
Final dividend for 2014: 3.3 US cents - 19,517 19,517
Special dividend for 2014: 6.6 US cents - 38,667 38,667
Total dividends paid during the period - 58,184 77,548
---------------------------------------------- --------------- --------------- -----------
Note 13: Property, plant and equipment
During the six months period ended 30 June 2016, the Group
acquired property, plant and equipment with a cost of US$15,811
thousand (30 June 2015: US$36,223 thousand; 31 December 2015:
US$93,467 thousand) and disposed of property, plant and equipment
with original costs of US$4,748 thousand (30 June 2015: US$8,944
thousand; 31 December 2015: US$17,563 thousand). The total
depreciation charge for the period was US$29,825 thousand (30 June
2015: US$29,693 thousand; 31 December 2015: US$66,758
thousand).
During the reporting period, the Ukrainian Hryvnia has further
devalued compared to the US Dollar from 24.001 as of 31 December
2015 to 24.854 as of 30 June 2015 reducing property, plant and
equipment by US$19,368 thousand (30 June 2015: US$207,209 thousand;
31 December 2015: US$286,742 thousand). This effect is reflected in
the translation reserve included in shareholder's equity. See also
Note 17.
The carrying value of property, plant and equipment includes
capitalised borrowing costs on qualifying assets of US$14,332
thousand (30 June 2015: US$11,996 thousand; 31 December 2015:
US$13,021 thousand).
Note 14: Other taxes recoverable and prepaid
As at 30 June 2016 taxes recoverable and prepaid comprised:
US$000 As at 30.06.16 As at 30.06.15 As at 31.12.15
(unaudited) (unaudited) (audited)
VAT receivable 34,372 54,073 50,395
Other taxes prepaid 111 108 87
---------------------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid - current 34,483 54,181 50,482
---------------------------------------------------------- --------------- --------------- ---------------
VAT receivable - 1,182 -
--------------------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid - non-current - 1,182 -
--------------------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid 34,483 55,363 50,482
---------------------------------------------------------- --------------- --------------- ---------------
As at 30 June 2016, US$32,607 thousand of the VAT receivable
relates to the Group's Ukrainian business operations (30 June 2015:
US$53,286 thousand; 31 December 2015: US$48,280 thousand). The
table below provides a reconciliation of the VAT receivable
balances in Ukraine:
6 months ended 6 months ended Year ended
US$000 30.06.16 30.06.15 31.12.15
(unaudited) (unaudited) (audited)
Opening balance, gross 49,339 72,837 72,837
Net VAT incurred 40,074 46,700 91,149
VAT received in cash (54,972) (45,975) (89,034)
Translation difference (833) (18,566) (25,613)
Closing balance, gross 33,608 54,996 49,339
------------------------- --------------- --------------- -----------
Allowance (1,001) (1,710) (1,059)
Closing balance, net 32,607 53,286 48,280
------------------------- --------------- --------------- -----------
During the period ended 30 June 2016, the devaluation of the
Ukrainian Hryvnia compared to the US Dollar was significantly less
than in the comparative periods presented above. The local currency
in Ukraine has devalued by approximately 4% compared to the US
Dollar; from 24.001 as at 31 December 2015 to 24.854 as at the end
of this reporting period, compared to 33% and 52% during the
comparative periods ended 30 June 2015 and 31 December 2015. As a
result of the significant devaluation of the Ukrainian Hryvnia
during the comparative period ended 31 December 2015, the balance
of the outstanding VAT balances expressed in US Dollar decreased by
US$25,613 thousand, compared to US$833 thousand in the period ended
30 June 2016. This effect is reflected in the translation reserve.
See also Note 17.
As at 30 June 2016, management expect that overdue balances
totalling US$8,594 thousand (30 June 2015: US$26,101 thousand; 31
December 2015: US$30,613 thousand) to be recovered within one year.
The total VAT receivable balance shown in the table above is net of
an allowance of US$1,001 thousand (30 June 2015: US$1,710 thousand;
31 December 2015: US$1,059 thousand) to reflect the uncertainties
in terms of the recovery of VAT receivable balances related to one
of the Ukrainian subsidiaries with its mine still being
developed.
Note 15: Inventories
Inventories are held at the lower of cost or net realisable
value.
As at 30 June 2016 ore stockpiles amounting to US$117,773
thousand (30 June 2015: US$80,369 thousand; 31 December 2015:
US$98,802 thousand) were classified as non-current as this ore is
not planned to be processed within one year.
Note 16: Cash and cash equivalents
As at 30 June 2016 cash and cash equivalents comprised:
US$000 Notes As at 30.06.16 As at 30.06.15 As at 31.12.15
(unaudited) (unaudited) (audited)
Cash at bank and on hand 44,440 320,695 35,330
Short-term deposits - 149,840 -
--------------------------------- ------ --------------- --------------- ---------------
Total cash and cash equivalents 3 44,440 470,535 35,330
--------------------------------- ------ --------------- --------------- ---------------
The available cash and cash equivalents balance reduced during
the second half of the financial year 2015 following the insolvency
of the Group's transactional bank in Ukraine (see Note 20 for
further information) and debt repayments amounting to US$393,876
thousand during the financial year 2015. The debt repayments during
the period ended 30 June 2016 totalled US$119,775 thousand (30 June
2015: US$179,944 thousand). Further information on the Group's
gross debt is provided in Note 18.
The balance of cash and cash equivalents held in Ukraine amounts
to US$12,447 thousand as at 30 June 2016 (30 June 2015: US$167,030
thousand; 31 December 2015: US$13,896 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 31 of the Annual Report and
Accounts 2015.
Note 17: Share capital and reserves
The share capital of Ferrexpo plc at 30 June 2016 was
613,967,956 (30 June 2015: 613,967,956; 31 December 2015:
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 June 2015: 25,343,814
shares; 31 December 2015: 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 June 2015:3,192,399 shares; 31 December 2015:
3,162,399 shares).
The translation reserve includes the effect from the exchange
differences arising on translation of non-US Dollar functional
currency operations (mainly in Ukrainian Hryvnia). During the
period ended 30 June 2016, the devaluation of the Ukrainian Hryvnia
compared to the US Dollar was significantly less than in the
comparative periods ended 30 June 2015 and 31 December 2015. The
local currency in Ukraine has devalued from 24.001 as at 31
December 2015 to 24.854 as at the end of this reporting period
compared to the US Dollar (approximately 4%); compared to 33% and
52% during the comparative periods ended 30 June 2015 and 31
December 2015. 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 of these financial statements for
further details.
As at 30 June 2016 other reserves attributable to equity
shareholders of Ferrexpo plc comprised.
For the
financial year
2015 and the six
months ended 30
June 2016
Uniting of Treasury share Employee Benefit Translation Total other
US$000 interest reserve reserve Trust reserve reserve reserves
At 1 January 2015 31,780 (77,260) (6,012) (1,401,496) (1,452,988)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Foreign currency
translation
differences - - - (465,129) (465,129)
Tax effect - - - 40,978 40,978
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total
comprehensive
loss for the
year - - - (424,151) (424,151)
Share based
payments - - 515 - 515
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
At 31 December
2015 (audited) 31,780 (77,260) (5,497) (1,825,647) (1,876,624)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Foreign currency
translation
differences - - - (32,336) (32,336)
Tax effect - - - 4,501 4,501
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total
comprehensive
income/(loss)
for the period - - - (27,835) (27,835)
Share based
payments - - 194 - 194
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
At 30 June 2016
(unaudited) 31,780 (77,260) (5,303) (1,853,482) (1,904,265)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
For the six months
ended 30 June 2015
Total
Uniting of Treasury share Employee Benefit Translation other
US$000 interest reserve reserve Trust reserve reserve reserves
At 1 January 2015 31,780 (77,260) (6,012) (1,401,496) (1,452,988)
-------------------- ------------------- ------------------- ------------------- ------------------- ------------
Foreign currency
translation
differences - - - (329,921) (329,921)
Tax effect - - - 23,115 23,115
-------------------- ------------------- ------------------- ------------------- ------------------- ------------
Total comprehensive
loss for the
period - - - (303,806) (303,806)
Share based
payments - - 256 - 256
-------------------- ------------------- ------------------- ------------------- ------------------- ------------
At 30 June 2015
(unaudited) 31,780 (77,260) (5,756) (1,708,302) (1,759,538)
-------------------- ------------------- ------------------- ------------------- ------------------- ------------
Note 18: 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 Notes As at 30.06.16 As at 30.06.15 As at 31.12.15
(unaudited) (unaudited) (audited)
Current
Eurobond issued - 284,411 -
Syndicated bank loans - secured 148,750 204,000 166,250
Other bank loans - secured 21,803 21,193 21,504
Other bank loans - unsecured 345 1,499 1,431
Obligations under finance leases 3,550 3,912 3,444
Trade finance facilities 9,306 - -
Interest accrued 11,016 10,628 10,670
--------------------------------------------------------- ------ --------------- --------------- ---------------
Total current interest bearing loans and borrowings 3 194,770 525,643 203,299
--------------------------------------------------------- ------ --------------- --------------- ---------------
Non-current
Eurobond issued 335,530 156,074 333,536
Syndicated bank loans - secured 218,750 367,500 306,250
Other bank loans - secured 35,304 54,946 43,867
Other bank loans - unsecured 4,864 7,487 6,939
Obligations under finance leases 7,893 11,440 9,759
--------------------------------------------------------- ------ --------------- --------------- ---------------
Total non-current interest bearing loans and borrowings 3 602,341 597,447 700,351
--------------------------------------------------------- ------ --------------- --------------- ---------------
Total interest bearing loans and borrowings 797,111 1,123,090 903,650
--------------------------------------------------------- ------ --------------- --------------- ---------------
As at 30 June 2016 the Group has a revolving syndicated US$350
million pre-export finance facility, which is fully drawn, and a
remaining drawn balance of US$17,500 thousand of a syndicated
US$420 million pre-export finance facility. The amortisation of the
US$350 million facility commences in November 2016 with eight
quarterly instalments to the final maturity date of 8 August 2018.
The US$420 million facility was fully repaid by 31 July 2016 and
cancelled.
As at 30 June 2016 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, which the Group exchanged and cancelled through the issuance
of new notes at par value totalling US$346,385 thousand and the
repayment of US$153,615 thousand in cash. The exchange was
completed in two transactions on 24 February 2015 and 6 July 2015.
As a result of the two exchanges completed, the tenor of the notes
outstanding was extended from April 2016 to April 2019 with two
equal instalments of US$173,193 thousand falling due on 7 April
2018 and 2019, respectively. The new notes have a 10.375% interest
coupon payable semi-annually, compared to 7.875% for the initially
issued notes in April 2011.
As at 30 June 2016, the Group has open trade finance facilities
in the amount of US$9,306 thousand (30 June 2015: nil, 31 December
2015: nil), which are secured against receivables related to these
specific trades.
Further information on the Group's exposure to interest rate,
foreign currency and liquidity risk is provided in Note 31 of the
Annual Report and Accounts 2015.
Note 19: 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 tables on the following
pages.
Revenue, expenses, finance income and finance expenses
6 months ended 30.06.16 (unaudited) 6 months ended 30.06.15 Year ended 31.12.15 (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
Sales of
pellets (a) 1,975 - - - - - 2,871 - -
Other sales (b) 120 - 36 168 - 377 334 - 496
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
party
transactions
within revenue 2,095 - 36 168 - 377 3,205 - 496
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Materials (c) 3,119 - 4 3,269 - 6 6,909 - 12
Purchased
concentrate
and other
items for
resale (d) - - - 277 - - 277 - -
Spare parts and
consumables
(e) 715 - - 513 - 2 1,298 - 2
Gas (f) 4,297 - - 21,750 - - 45,869 - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
parties
transactions
within cost of
sales 8,131 - 4 25,809 - 8 54,353 - 14
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Selling and
distribution
expenses (g) 5,384 10,710 436 5,456 11,024 3,796 10,896 22,248 5,023
General and
administration
expenses (h) 345 - 317 397 - 320 849 - 382
Allowance for
restricted cash
and deposits
(i) - - - - - - 174,579 - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
parties
transactions
within
expenses 13,860 10,710 757 31,662 11,024 4,124 240,677 22,248 5,419
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Finance income
(j) - - - 1,343 - - 2,039 - -
Finance
expenses (j) (22) - - (30) - - (58) - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Net finance
income (22) - - 1,313 - - 1,981 - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
The Group entered into various related party transactions. 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.
Entities under common control
a Spot sales of pellets in the amount of US$1,975 thousand (30
June 2015: nil; 31 December 2015: US$2,871 thousand) to VA
Intertrading AG.
c Purchases of compressed air, oxygen and metal scrap from
Kislorod PCC for US$1,543 thousand (30 June 2015: US$1,906
thousand; 31 December 2015: US$3,918 thousand);
c Purchases of cast iron balls from AutoKraZ Holding Co. for
US$495 thousand (30 June 2015: US$659 thousand; 31 December 2015:
US$1,063 thousand); and
c Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas
for US$976 thousand (30 June 2015: US$652 thousand; 31 December
2015: US$1,787 thousand).
d Purchases of concentrate and other items for resale from
Vostok Ruda Ltd. amounting to US$277 thousand during the financial
year 2015. No such purchases during the six months period ended 30
June 2016 (30 June 2015: US$277 thousand).
e Purchases of spare parts from CJSC Kyiv Shipbuilding and Ship
Repair Plant ("KSRSSZ") in the amount of US$190 thousand (30 June
2015: US$107 thousand; 31 December 2015: US$338 thousand);
e Purchases of spare parts from Valsa GTV of US$250 thousand (30
June 2015: US$52 thousand; 31 December 2015: US$273 thousand);
and
e Purchases of ferromanganese from Raw and Refined Commodities
AG for US$102 thousand (30 June 2015: US$209 thousand; 31 December
2015: US$484 thousand).
f Procurement of gas for US$4,297 thousand (30 June 2015:
US$21,750 thousand; 31 December 2015: US$45,869 thousand) from OJSC
Ukrzakordongeologia.
g Purchases of advertisement, marketing and general public
relations services from FC Vorskla of US$5,384 thousand (30 June
2015: US$5,436 thousand; 31 December 2015: US$10,855 thousand).
h Insurance premiums of US$185 thousand (30 June 2015: US$213
thousand; 31 December 2015: US$429 thousand) paid to ASK Omega for
workmen's insurance and other insurances; and
h Fees of US$147 thousand and US$273 thousand paid to Bank
Finance & Credit (Bank F&C) during the comparative periods
ended 30 June 2015 and 31 December 2015 for bank services. No such
fees paid during the financial year 2016 (see also footnote i
below).
i The Group recorded during the financial year 2015 an allowance
for its cash and deposits (including the deposits previously shown
as non-current assets) held at Bank F&C resulting in a charge
of US$174,579 thousand recognised in the income statement
subsequent to the insolvency of the bank declared by the National
Bank of Ukraine (see also Note 16 and Note 20).
j Transactional banking services were provided to certain
subsidiaries of the Group by Bank F&C in previous periods.
Finance income and expense relate to these transactional banking
services.
Associated companies
g Purchases of logistics services in the amount of US$10,710
thousand (30 June 2015: US$11,024 thousand; 31 December 2015:
US$22,248 thousand) relating to port operations, including port
charges, handling costs, agent commissions and storage costs.
Other related parties
b Sales of material and services to Slavutich Ruda Ltd. in the
amount of US$364 thousand and US$481 thousand during the
comparative periods ended 30 June 2015 and 31 December 2015,
respectively. No such sales during the period ended 30 June
2016.
g Purchases of logistics management services from Slavutich Ruda
Ltd. relating to customs clearance services and the coordination of
rail transit totalling US$436 thousand (30 June 2015: US$3,796
thousand; 31 December 2015: US$5,023 thousand).
h Consulting fees paid to Nage Capital Management AG of US$61
thousand (30 June 2015: US$320 thousand; 31 December 2015: US$382
thousand) controlled by former member of the board of directors of
Ferrexpo plc who resigned in August 2014. The Group entered into
this transaction within one year of his resignation and therefore
considered it to be a transaction with a related party.
h Consulting fees totalling US$256 thousand (30 June 2015: nil;
31 December 2015: US$106 thousand) paid to David L. Frauman, who
was appointed as Board member on 26 October 2015 and retired from
the Board on 10 March 2016. The Group entered into the agreement
with David L. Frauman when he was appointed as a member of the
Board and this agreement was cancelled at the time of his
retirement from the Board.
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.
6 months ended 30.06.15 (unaudited) 6 months ended 30.06.15 Year ended 31.12.15 (audited)
(unaudited)
------------------------------------- ----------------------------------- ---------------------------------
Entities Asso-ciated Other Entities Asso- Other Entities Asso- Other
under companies related under ciated related under ciated related
common parties common companies parties common companies parties
US$000 control control control
Purchases
with
shareholder
approval - - - 842 - - 842 - -
Purchases in
the
ordinary
course of
business 27 - - 1,195 - - 1,257 - 5
------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
Total
purchases
of
property,
plant and
equipment
(k) 27 - - 2,037 - - 2,099 - 5
------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
Individual transactions of a capital nature which exceeded
US$200 thousand are described below.
Entities under common control
Current year
k During the period ended 30 June 2016, the Group entered in
various transactions of a capital nature with related parties
totalling US$27 thousand. These transactions were in the ordinary
course of business.
Prior periods:
k During the financial year 2015, the Group entered into various
transactions of a capital nature with related parties totalling to
US$1,257 thousand, which were in the ordinary course of
business:
-- The Group procured a filter in the amount of US$958 thousand
from OJSC Berdichev Machine-Building Plant Progress for the quality
upgrade of the pelletising plant at Ferrexpo Poltava Mining;
and
-- The Group procured design documentation services from OJSC DIOS totalling US$288 thousand.
In April 2015 the Group received 27 rail cars totalling US$1,431
thousand (US$842 thousand at the prevailing exchange rate at
delivery) in addition to 25 rail cars received in 2015. A total of
300 rail cars were ordered in February 2014 under the authority of
a shareholder approval obtained on 24 May 2012. As a consequence of
the conflict in the Eastern part of Ukraine, the producer of the
rail cars was not in the position to produce and deliver all rail
cars ordered and prepaid. The remaining balance of the prepayment
was fully written-off as of 31 December 2015, after having provided
for it already as of 31 December 2014.
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:
6 months ended 30.06.16 (unaudited) 6 months ended 30.06.15 Year ended 31.12.15 (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 companies parties common companies parties
US$000 control control control
Available-for-sale
financial assets
(l) 5 - - 23 - - 9 - -
Other non-current
assets (m) - - - 3,546 - - - - -
Prepayments for
property, plant
and equipment 28 - - 44 - - 24 - -
-------------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
Total non-current
assets 33 - - 3,613 - - 33 - -
-------------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
Trade and other
receivables (n) 282 3,608 179 685 - 52 688 2,273 8
Prepayments and
other current
assets (o) 186 - - 2,501 - 30 680 - -
Cash and cash
equivalents (p) - - - 165,381 - - - - -
-------------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
Total current
assets 468 3,608 179 168,567 - 82 1,368 2,273 8
-------------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
Trade and other
payables (q) 636 1,469 60 1,246 578 66 902 2,625 91
-------------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
Current liabilities 636 1,469 60 1,246 578 66 902 2,625 91
-------------------- --------- ------------ ------------ --------- ---------- ------------ --------- ---------- ----------
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
l The balance of the investments available-for-sale comprised
shareholdings in PJSC Stakhanov Railcar Company (1.10%) and Vostok
Ruda Ltd. (1.10%). The ultimate beneficial owner of these companies
is Kostyantin Zhevago. PJSC Stakhanov Railcar Company is further
listed on the Ukrainian stock exchange. The changes of the values
in the table above are related to fair value adjustments recorded
during the respective reporting periods. The shareholdings for all
investments remained unchanged during the periods disclosed above.
The balance of US$5 thousand as at 30 June 2016 related to the
investment in PJSC Stakhanov Railcar Company (30 June 2015: US$23
thousand; 31 December 2015: US$9 thousand).
m As at the end of the comparative period ended 30 June 2015,
other non-current assets related to a deposit of US$3,109 thousand
with Bank F&C, which was deposited for loans and mortgages
granted by the bank to employees of the Group under the Group's
social loyalty programme. As at 31 December 2015, an allowance for
the full amount of US$3,105 thousand (at the exchange rate at the
end of the period) with Bank F&C was recorded subsequent to the
insolvency of Bank F&C declared by the National Bank of Ukraine
on 17 September 2015. Further information is provided in footnote
(q) below and in Note 20.
n As of 31 December 2015, trade and other receivables included
outstanding amounts due from Kislorod PCC of US$404 thousand (30
June 2015: US$343 thousand) for the sale of power, steam and water.
No such receivable balance as of 30 June 2016.
o The balances as at the end of the comparative periods ended 30
June 2015 and 31 December 2015 include prepayments of US$659
thousand and US$577 thousand made to Vostok Ruda Ltd. for purchases
of concentrate. An allowance for the full amount prepaid was
recorded during the period ended 30 June 2016 as a result of the
bankruptcy filed by the related party.
o The balance as of the end of the comparative period ended 30
June 2015 included a prepayment in the amount of US$1,748 thousand
made to OJSC Ukrzakordongeologia for the procurement of gas. No
such prepayment was made as of 30 June 2016 and 31 December
2015.
p As at the end of the comparative period ended 30 June 2015,
cash and cash equivalents with Bank F&C were US$164,681
thousand. On 17 September 2015, the National Bank of Ukraine
announced that it had adopted a decision to declare Bank F&C
insolvent and the bank was put into temporary administration by the
Deposit Guarantee Fund. As a consequence, a full allowance was
recorded in September 2015 for the balance of cash and deposits
held at Bank F&C at this point of time. See footnote (i) and
Note 20 for further information.
q As at the end of the comparative period ended 30 June 2015,
trade and other payables included US$494 thousand for compressed
air and oxygen purchased from Kislorod PCC (31 December 2015:
US$475 thousand). No such outstanding balance as of 30 June
2016.
Associated companies
n Trade and other receivables included US$3,608 thousand (30
June 2015: nil; 31 December 2015: US$2,273 thousand) for dividends
receivable from TIS Ruda LLC.
q Trade and other payables included US$1,469 thousand (30 June
2015: US$578 thousand; 31 December 2015: US$2,625 thousand) related
to purchases of logistics services from TIS Ruda LLC.
Transactional banking arrangements
The Group had transactional banking arrangements with Bank
Finance & Credit ('Bank F&C') in Ukraine which was under
common control of Kostyantin Zhevago. See Note 16 and Note 20 for
further information.
Note 20: Commitments and contingencies
Commitments
US$000 As at 30.06.16 As at 30.06.15 As at 31.12.15
(unaudited) (unaudited) (audited)
Operating lease commitments 42,150 30,371 39,552
Capital commitments on purchase of PPE 27,330 91,015 32,591
----------------------------------------- --------------- --------------- ---------------
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.
Deposit Guarantee Fund and Liquidator of Bank F&C
The Group's principal subsidiary, OJSC Ferrexpo Poltava Mining
('FPM'), received a credit of US$9,984 thousand (US$8,988 thousand
at the exchange rate as at 30 June 2016) to its account with Bank
F&C following the introduction of the temporary administration
on 18 September 2015. FPM filed a claim against Bank F&C under
the management of the Administrator, as appointed by the Deposit
Guarantee Fund, on 30 October 2015 in the Kyiv City Commercial
Court for the release of this amount in accordance with applicable
legislation. The hearing on 4 December 2015 ruled in favour of FPM.
This court ruling was subsequently appealed. During the hearing on
25 May 2016, the initial decision in favour of the Group was upheld
by the Kyiv Appellate Commercial Court and on 10 June 2016, the
decision was further appealed by the Liquidator of Bank F&C
with a hearing date yet to be confirmed.
Based on the positive decisions from the Kyiv City Commercial
Court and the Kyiv Appellate Commercial Court, despite the recent
further appeal, management of the Group expects to be successful in
the upcoming appeal and that this amount ultimately will be
recovered in full as required under Ukrainian legislation. See also
Note 16 for further information.
The Group recorded a full allowance for the cash balance held in
Bank F&C in September 2015 following its insolvency and
temporary administration (see also Note 16). As at 30 June 2016,
the balance of restricted cash and deposits with a full allowance
amounts to US$162,632 thousand (31 December 2015: US$168,575
thousand with full allowance). The level of recoverability of
balances that were held with Bank F&C at the point of time of
the insolvency declared by the NBU cannot be reasonably assessed at
the current time due to the complexity, uncertainties and the level
of the ultimate recovery of the bank's loan portfolio net of costs
during liquidation.
Salvage of grounded vessel
The Group is currently involved in arbitration proceedings in
respect of the costs incurred for the salvage of a grounded vessel
off the coast of Singapore carrying the Group's iron ore pellets to
China. Although the Group's customer was at risk in respect of the
insurance cover for the pellets shipped, the Group received a claim
from the salvage operator as the Group still had the title to the
goods during the vessel's period of salvage. The arbitration
hearing took place on 6 May 2016 in London and the final award from
the Arbitrator is expected to be received in August 2016. In case
of a decision by the Arbitrator in favour of the opposing party,
the Group would still aim to claim the amount in the amount of
approximately US$5,000 thousand from the insurance company of the
customer who was on risk for the vessel's period of salvage.
Share dispute
The Group was involved in a share dispute which commenced in
2005 and has been disclosed in its various public documents since
IPO in 2007. On 20 October 2014, the Kyiv City Commercial Court
dismissed the claim of the opposing party in full. This judgment
was confirmed by the Kyiv Appeal Commercial Court and the Higher
Commercial Court of Ukraine on 28 January 2015 and 14 April 2015,
respectively. No further court proceedings have been initiated by
the opposing party.
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 also includes a 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.
As at 30 June 2016, there are no recoverable VAT balances in the
process of being considered by the Ukrainian court system (30 June
2015: US$2,491 thousand; 31 December 2015: US$1,147 thousand).
Note 21: 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 30.06.16 As at 30.06.15 As at 31.12.15 As at 30.06.16 As at 30.06.15 As at 31.12.15
US$000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Financial assets
Cash and cash
equivalents 44,440 470,535 35,330 44,440 470,535 35,330
Restricted cash and
deposits 8,988 - 9,308 8,988 - 9,308
Trade and other
receivables 66,258 64,846 83,379 66,258 64,846 83,379
Available-for-sale
financial assets 5 23 9 5 23 9
Other financial
assets 8,102 12,278 5,757 8,102 12,278 5,757
-------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
assets 127,793 547,682 133,783 127,793 547,682 133,783
-------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Financial
liabilities
Trade and other
payables 27,364 25,826 27,566 27,364 25,826 27,566
Accrued liabilities 18,411 24,826 14,223 18,411 24,826 14,223
Interest bearing
loans and
borrowings 797,111 1,123,090 903,650 743,667 1,079,801 1,204,836
-------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
liabilities 842,866 1,173,742 945,439 789,442 1,173,742 1,267,684
-------------------- --------------- --------------- --------------- --------------- --------------- ---------------
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 9 June 2015, the Group disposed its 15.5%
available-for-sale equity investment in Ferrous Resources Limited
("Ferrous") for a total cash consideration of US$41,767 thousand
resulting in a gain in this amount realised in the period ended 30
June 2015. This investment was acquired during the financial year
2013 with total transaction costs of US$82,382 thousand and fully
impaired as at 30 September 2014 due to uncertainties in respect of
the operational activity and the future development of the mining
operation at this point of time. In the period ended 30 June 2015,
the investment was revalued to US$41,800 thousand based on an
irrevocable tender and support agreement signed on 29 April 2015
for the disposal of the stake in Ferrous for a cash consideration
of US$41,800 thousand, which was considered to be the fair value of
the investment at the end of this reporting period and the gain
from this revaluation was recognised in the statement of other
comprehensive income. This gain was reclassified to profit or loss
at the point of time of the completion of the disposal.
The available-for-sale equity investment in PJSC Stakhanov
Railcar Company in the amount of US$5 thousand (30 June 2015: US$23
thousand; 31 December 2015: US$9 thousand) is measured at its fair
value based on the quoted market price for its shares on the
Ukrainian Stock exchange ('PFTS') and are categorised as Level 1
financial instrument within the fair value hierarchy
As of 30 June 2016, the fair value of the available-for-sale
financial assets in Level 1 decreased by US$18 thousand (30 June
2015: decrease of US$23 thousand; 31 December 2015: decrease of
US$37 thousand).
Other financial assets and liabilities
The fair values of cash and cash equivalents, trade and other
receivables and payables, restricted cash and deposits, other
financial assets and accrued liabilities are approximately equal to
their carrying amounts due to their short maturity.
There were no transfers between the different levels during the
reporting period.
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 30.06.16 As at 30.06.15 As at 31.12.15
(unaudited) (unaudited) (audited)
Opening balance - - -
Total gains or losses: - - -
- in profit or loss - 41,767 41,767
- in other comprehensive income - - -
Disposal - (41,767) (41,767)
Transfer out of Level 3 - - -
---------------------------------- --------------- --------------- ---------------
Closing balance - - -
---------------------------------- --------------- --------------- ---------------
Further information on the Group's exposure to interest rate,
foreign currency and liquidity risk is provided in Note 31 of the
Annual Report and Accounts 2015.
Note 22: Events after the reporting period
No material adjusting or non-adjusting events have occurred
subsequent to the period.
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 A number of processes whereby the mineral
Process 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
Central Europe This segmentation for the Group's sales
includes Austria, Czech Republic, Hungary
and Serbia
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
China and South This segmentation for the Group's sales
East Asia includes China, Indonesia, Malaysia,
Taiwan and Vietnam
CIF Delivery including cost, insurance and
freight
CIS The Commonwealth of Independent States
Code The UK Corporate Governance Code
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
EBITDA margin EBITDA (see definition above) as a percentage
of revenue
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 The index of Financial Times Stock Exchange
consisting of the 101(st) to the 350(th)
largest companies listed on the London
Stock Exchange
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 Fine iron ore screened to -6.3mm
fines
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 Non-executive Directors of the Company
Directors
NOPAT Net operating profit after tax
North East Asia This segmentation for the Group's sales
includes Japan and Korea
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
Western Europe This segmentation for the Group's sales
includes Germany and Italy
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
IR UGUMGRUPQPUP
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August 03, 2016 02:01 ET (06:01 GMT)
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