TIDMFXPO
RNS Number : 5955W
Ferrexpo PLC
02 August 2018
2 August 2018
Ferrexpo plc
("Ferrexpo", the "Group" or the "Company")
2018 Half Year Results
Ferrexpo plc today announces its financial results for the six
months ended 30 June 2018.
Steve Lucas, Non-Executive Chairman, said:
"Our high quality product is in strong demand reflected in the
record price premiums realised during the first half. This has
helped offset a lower underlying iron ore price and higher costs
driven primarily by rising commodity prices and local inflation.
Despite these costs, which are expected to show a further modest
increase in the second half of the year, our cash generation has
allowed us to increase capex, pay down debt and retain very low
leverage while dividends payments made in the first half of 2018
were US$74 million compared to US$39 million in 1H 2017.
We remain committed to increasing our output which in the near
term is on track to increase by 1.5MT to 12MT by 2020. Thereafter,
Ferrexpo is one of the few pellet producers globally which is able
to increase output significantly on a low risk basis. This will
ensure the Group's long-term future as one of the world's leading,
premium pellet producers."
1H 2018 Financial Summary:
US$ million (unless otherwise 6 months 6 months Change Year
stated) ended ended % ended
30.06.18 30.06.17 31.12.17
------------------------------- ---------- ---------- ------- ----------
Total pellet production
(kt) 5,096 5,160 -1.2 10,444
------------------------------- ---------- ---------- ------- ----------
Sales volumes(kt) 4,798 5,065 -5.3 10,467
------------------------------- ---------- ---------- ------- ----------
Avg PLATTS CFR 62% Fe
iron ore fines price (US$/t) 69.8 74.4 -6.2 71.3
------------------------------- ---------- ---------- ------- ----------
Revenue 617 591 4.4 1,197
------------------------------- ---------- ---------- ------- ----------
Averge C1 cash cost(A)
(per tonne) 41.6 31.7 31.2 32.3
------------------------------- ---------- ---------- ------- ----------
Underlying EBITDA(A) 234 287 -18.5 551
------------------------------- ---------- ---------- ------- ----------
Profit for the period
after special items 152 216 -29.6 394
------------------------------- ---------- ---------- ------- ----------
Diluted EPS after special
items (US cents) 25.79 36.60 -29.5 66.85
------------------------------- ---------- ---------- ------- ----------
Interim dividend per share
declared (US cents) 3.3 3.3 - 16.5
------------------------------- ---------- ---------- ------- ----------
Net cash flow from operating
activities 156 194 -19.6 353
------------------------------- ---------- ---------- ------- ----------
Capital investment(A) 56 45 24.4 103
------------------------------- ---------- ---------- ------- ----------
Net debt(1) 369 472(1) -21.8 394(1)
------------------------------- ---------- ---------- ------- ----------
Cash 82 93 -11.8 98
------------------------------- ---------- ---------- ------- ----------
Net debt to last twelve
months' EBITDA (A) 0.74x 0.96x -22.9 0.73x
------------------------------- ---------- ---------- ------- ----------
(1) Note: accrued interest has been re-classified from
borrowings to accrued liabilities and re-presented for comparative
periods. This has reduced net debt from $403M as of 31 December
2017 to $394M and from $481M as of 30 June 2017 to $472M.
Health and Safety
-- No work related fatalities (1H 2017: one)
-- Group Lost Time Injury Frequency Rate 0.97 per million man hours (1H 2017: 0.95)
-- FYM Lost Time Injury free for 7 months
Market Environment
-- Strong market environment for high grade iron ore products including pellets
-- Increase in pellet premiums reflected strong demand for high grade product
-- Average realised FOB price increased 5% compared to 1H 2017
-- Strong customer demand from the Group's long term customers
Operational
-- 1H 2018 pellet production 5.1MT (1H 2017: 5.2MT) reflects
planned refurbishment of a pelletiser line
-- Sales volumes 4.8 MT reflects 300kt increase in stocks
-- Rail shipments below normal levels in May and June due to
temporary capacity constraints. Stocks expected to reduce by year
end.
-- Industry cost inflation, local inflation, an appreciation of
the Hryvnia against the Dollar during the period and higher repair
and mining costs led to an increase in the C1 cash cost to US$41.60
per tonne (1H 2017: US$31.7 per tonne)
-- Higher capex (A) of US$56 million (1H 2017: US$45 million)
reflects modernisation of the processing facilities and near term
organic growth opportunities to increase production by 1.5MT to
12MTPA
Financial
-- Revenue up 4.4% to US$617 million (1H 2017: US$591 million)
on higher pellet premiums offset by lower iron ore prices, higher
freight and lower sales volumes
-- Underlying EBITDA (A) of US$234 million (1H 2017: US$287
million) reflected a higher received price and higher costs
-- Profit after tax of US$152 million (1H 2017: US$216 million) reflecting lower EBITDA
-- Net cash flows from operating activities of US$156 million
(1H 2017: US$194 million) reflecting higher stocks
-- US$74 million of dividends paid out in 1H 2018 (1H 2017: US$39 million)
-- Cash as of 30 June 2018 US$82 million (31 December 2017:
US$98 million; 30 June 2017: US$93 million)
-- Net debt (A) of US$369 million (31 December 2017: US$394
million; 30 June 2017: US$472 million)
-- 2018 interim dividend of 3.3 US cents declared (1H 2017: 3.3 US cents)
Outlook
-- Demand for high quality iron ore, especially pellet, is
expected to remain strong through 2H 2018 and 2019.
-- 2H 2018 EBITDA to reflect higher sales volumes while cost
inflation is expected to persist, though at a lower rate,
reflecting the full impact of rising oil and energy prices as well
as higher mining costs
-- Ferrexpo is investing to increase its processing plant
capacity while completing a large maintenance programme at its
pelletising facilities. Once these programmes are complete in 2020
the Group expects production to increase by approximately 1.5
million tonnes to 12 million tonnes per annum compared to 10.4
million tonnes in 2017.
Alternative Performance Measures
Words with the symbol (A) are defined in the Alternative
Performance Measures section below.
There is an analyst and investor meeting at 09.00 GMT today at
the offices of Deutsche Bank at Winchester House, 75 London Wall,
London EC2N 2DB. A live video webcast and slide presentation of
this event will be available on www.ferrexpo.com. It is recommended
that participants register at 08.45. The presentation will be
hosted by Steve Lucas (Chairman), Kostyantin Zhevago (CEO) and
Chris Mawe (CFO).
Webcast link: https://edge.media-server.com/m6/p/3mk2vpog
For further information contact:
Ferrexpo:
Ingrid McMahon +44 207 389 8304
Maitland:
Neil Bennett / Mads Neumann +44 207 379 5151
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 40 years.
Ferrexpo's resource base is one of the largest iron ore deposits in
the world. In 2017, the Group sold 10.5 million tonnes of pellets
ranking it as the 3(rd) largest exporter of pellets to the global
steel industry with a market share of approximately 8.5%. Ferrexpo
has a diversified customer base supplying steel mills in Austria,
Germany, Japan, South Korea, Taiwan, China, Slovakia, the Czech
Republic, Turkey and Vietnam. Ferrexpo has a premium listing on the
main market of the London Stock Exchange under the ticker FXPO. For
further information, please visit www.ferrexpo.com
Introduction
The iron ore market in 1H 2018 was notable to previous periods
for a number of reasons. The benchmark 62% iron ore fines price was
relatively stable, trading in a US$17 per tonne range averaging
US$69.7 per tonne, which was 6% lower than 1H 2017, while premiums
and discounts for higher and lower quality iron ore material
expanded. The most significant increase in pricing was for iron ore
pellets, with the Platts Atlantic pellet premium rising 28% to
US$58 per tonne compared to 1H 2017, representing a record 83% of
the average benchmark iron ore fines price. Prices for low quality
ore with high levels of alumina and phosphorus were heavily
discounted.
There was also a dislocation in the relationship with the 62%
iron ore fines price and the oil price, which increased 37% in 1H
2018. The higher oil price led to significantly higher freight
rates, thereby reducing the received price for suppliers as well as
leading to cost inflation for Ferrexpo and the industry. Due to the
higher freight rates, at some points during the period, lower
quality producers were realising prices similar to levels of
2016.
As a producer of high quality iron ore pellets, Ferrexpo was
well placed to benefit from the above price dynamics.
In line with the rest of the industry, the Group experienced
commodity cost inflation. Together with a stronger local currency
which appreciated by 7% against the Dollar. Local PPI inflation was
18% during the period. C1 cost per tonne growth should moderate
along with local inflation, assuming the Hryvnia remains broadly
stable against the Dollar. Approximately half of the Group's
operating costs are in local currency which are related to the
Hryvnia exchange rate and local inflation rates.
In 2Q 2018, Ferrexpo successfully completed a major
refurbishment of one of its four pellet lines. The Group's
production rate is expected to increase in 2H 2018, with further
significant improvement expected once the final pellet line has
been refurbished in 2H 2019 and the Group has completed its
investment to expand pellet feed production by 2020. This will
allow the Group to increase production by approximately 1.5 million
tonnes to 12 million tonnes per annum compared to 10.4 million
tonnes in 2017.
Ferrexpo is one of the few pellet producers globally with the
capacity to increase production significantly on a brownfield basis
within its existing infrastructure. The Group has initiated
engineering studies to expand its pelletising capacity from its
currently planned 12 million tonnes to over 20 million tonnes per
annum. It expects engineering studies to be complete by the end of
2019.
The Group's capital allocation strategy remains to keep an
appropriate balance between a strong balance sheet, attractive
shareholder returns (in the form of dividends) and investment in
volume growth. This strategy has been designed to reduce the risks
inherent in growing output in an emerging market (where it can from
time to time experience constraints on the availability of debt)
while selling its product in a volatile commodities market.
Dividends
The Directors have declared an interim dividend of 3.3 US cents
per Ordinary Share (1H 2017: 3.3 US cents per Ordinary Share) for
payment on 26 September 2018 to shareholders on the register at the
close of business on 24 August 2018. The ex-dividend date will be
23 August 2018. The dividend will be paid in UK Pounds Sterling,
with an election to receive in US Dollars.
Ferrexpo's dividend policy is to pay a base level of sustainable
dividends through the commodities cycle of approximately US$40
million per annum (or 6.6 US cents per year). The dividend will be
split equally between an interim dividend and a final dividend
payable normally in October and May, following respectively the
Company's interim results and Annual General Meeting.
The Board will assess the merits of paying additional returns to
shareholders via special dividends, to be paid from cash flows in
excess of the Group's needs when taking into account debt
repayments and development capital expenditure (A) . If
appropriate, the Group will pay special dividends at an appropriate
time in its reporting cycle.
Health and Safety
In 1H 2018, there were no fatalities at the Group's operations
(FY 2017: one fatality).
The Group's Lost Time Injury Frequency Rate ("LTIFR") in 1H 2018
was 0.97 per million man hours compared to 1.38 per million man
hours in 2H 2017 and in line with 1H 2017* at 0.95 per million man
hours.
The 1H 2018 result included an improvement at FYM which has now
operated without lost-time injuries ("LTIs") for seven months. At
the Group's barging operations, one LTI occurred during the period
compared to nil in 1H 2017 and 5 in 2H 2017.
Lost Time Injury Frequency
Rate
LTIFR 1H 2018 1H 2017 2H 2017 2017
--------- -------- -------- -------- -----
- FPM 1.09 1.19 0.87 1.03
--------- -------- -------- -------- -----
- FYM 0.00 0.00 1.44 0.74
--------- -------- -------- -------- -----
- FBM 0.00 0.00 0.00 0.00
--------- -------- -------- -------- -----
Ukraine 0.92 1.01 0.95 0.98
--------- -------- -------- -------- -----
Barging 1.86 0.00 8.33 4.32
--------- -------- -------- -------- -----
Group 0.97 0.95* 1.38 1.17
--------- -------- -------- -------- -----
(*Figure restated due to amended hours worked during 1H
2017.)
Financial Review
Revenue
Group revenue increased by 4% to US$617 million (1H 2017: US$591
million). This was driven by a 5% increase in Ferrexpo's realised
FOB price.
The Group's received FOB price is calculated by taking the
average Platts 62% iron ore fines price, adjusting for iron content
and impurities, adding a pellet premium (which is typically
negotiated annually, half-yearly or quarterly) and deducting the
cost of freight, which is typically the C3 index(2) .
In 1H 2018, the Platts 62% iron ore fines index fell 6% to an
average of US$69.7 per tonne from US$74.2 per tonne in 1H 2017. Net
pellet premiums increased 32% in 1H 2018. For further information
see Market Review on page 9.
In line with higher oil prices, C3 freight costs increased
approximately 37% from US$13 per tonne to US$18 per tonne in 1H
2018, reducing the increase in the Group's overall realised FOB
netback price.
For further information see Introduction, Market Review and
Update on Risks.
Sales volumes for the period of 4.8 million tonnes (1H 2017: 5.1
million tonnes) were impacted by delayed rail shipments on national
railways due to "go slow" industrial action in May and June.
Shipments have returned to normal levels and it is expected that
the increase in pellet stocks of approximately 300 thousand tonnes
will be sold in 2H 2018.
(2) C3 freight is the benchmark freight index from Tubarao,
Brazil to Qingdao, China and used as reference in the pellet
industry for pricing contracts.
Costs
C1 Cost of Production
The Group's average C1 cash cost of production (A) was US$41.6
per tonne in 1H 2018 compared to US$31.7 per tonne in 1H 2017.
The increase in costs was primarily due to commodity and local
cost inflation with commodity linked costs increasing US$3.3 per
tonne and local inflation related costs increasing approximately
US$1.9 per tonne. Together these increases amounted to
approximately US$4.9 per tonne or half of the cost increase. This
included a 15% increase in electricity tariffs which are linked to
the ARA coal price, while higher gas and fuel costs reflected a
US$19 per barrel, or 37%, increase in the European Brent spot price
in 1H 2018 compared to 1H 2017. Higher grinding media costs
reflected higher steel prices.
Local PPI was 18% in 1H 2018 compared to 1H 2017, and wages
increased by US$1 per tonne or 20% in 1H 2018. The Hryvnia
appreciated by 7% against the Dollar from 1 January 2018 to 30 June
2018. Approximately half of the Group's operating costs are in
local currency and are impacted by the Hryvnia exchange rate and
inflation. For further information see Currency below.
Repair and maintenance costs increased by US$2.6 per tonne due
to higher levels of maintenance activities in 1H 2018.
At FPM, higher levels of stripping increased mining costs by
approximately US$2.6 per tonne reflecting increased delivery of
high grade material to support higher quality pellet
production.
Improved consumption norms reduced costs by US$0.23 per
tonne.
The table below breaks down the Group's C1 cash cost by input,
approximately 60% of costs are commodity related.
US$ per tonne % of C1
cost
----------------- --------
Electricity 24%
----------------- --------
Gas 10%
----------------- --------
Fuel 10%
----------------- --------
Materials 14%
----------------- --------
Spare parts 9%
----------------- --------
Personnel 9%
----------------- --------
Maintenance and
repairs 8%
----------------- --------
Grinding media 8%
----------------- --------
Royalties 6%
----------------- --------
Explosives 2%
----------------- --------
The Group's C1 cost represents 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, also the costs of purchased ore,
concentrate and gravel.
Selling and Distribution Costs
Total selling and distribution costs of US$122 million (1H 2017:
US$100 million) included higher international freight costs arising
from CFR sales of US$45 million (1H 2017: US$33 million), also the
full impact of a 15% increase in rail tariffs in November 2017 and
higher bunker costs at the Group's barging business which were
substantially offset by higher revenue.
Currency
Ferrexpo prepares its accounts in US Dollars. The functional
currency of the Ukrainian operations is the Hryvnia.
In 1H 2018, the Hryvnia appreciated from UAH28.067 per Dollar on
1 January to UAH26.189 per Dollar as of 30 June 2018. This resulted
in a non-cash operating forex loss of US$16 million (1H 2017: US$5
million).
Ukrainian Hryvnia vs. US Dollar
Spot (1.8.17) Opening Closing Average Average
rate 1.1.18 rate 30.6.18 1H 2018 1H 2017
--------- -------------- ------------- -------------- --------- ---------
UAH per
US$ 26.233 28.067 26.189 26.747 26.762
--------- -------------- ------------- -------------- --------- ---------
Source: National Bank of Ukraine
Underlying EBITDA (A)
Underlying EBITDA (A) for the period was US$234 million compared
to US$287 million in 1H 2017. This reflected a higher received
price compared to 1H 2017 due to record pellet premiums offset by
an increase in the C1 cash cost per tonne and increased rail
tariffs. On a net basis these factors reduced EBITDA by
approximately US$25 million. An increase in stocks of approximately
300 thousand tonnes reduced EBITDA by circa US$14 million while
slightly lower production volumes, reflecting a pellet line
refurbishment, impacted EBITDA by US$3 million. Non-cash operating
forex losses, reflected the appreciation of the Hryvnia against the
Dollar, lowered EBITDA by approximately US$10 million.
Interest
Interest expense declined 14% to US$24 million compared to US$28
million for 1H 2017 due to a lower outstanding debt balance. The
average cost of debt for the period ended 30 June 2018 was 8.1%
(average 30 June 2017: 7.7%). The increased average rate reflected
amortisation of the Group's pre-export finance facility which has a
lower cost than the Group's outstanding US$173 million
Eurobond.
Further details on finance expense are disclosed in Note 8 of
the accounts.
Tax
The income tax expense for 1H 2018 was US$27 million (1H 2017:
US$25 million) based on an expected weighted average tax rate of
15% for the full year.
Further details on taxation are disclosed in Note 9 of the
accounts.
Profit for the Period
Profit for the period was US$152 million compared to US$216
million in 1H 2017 reflecting lower profit before tax and finance
of US$59 million, as described above.
Cash Flows
Net cash flow from operating activities was US$156 million (1H
2017: US$194 million). Working capital included an outflow of US$24
million related to the increase in stocks of ore for processing (1H
2017: US$27 million). This ore is of lower grade and is expected to
be processed once the Group has additional beneficiation capacity
in place. Inventories also included a US$14 million increase in
pellet stocks due to the temporary delay in rail shipments in May
and June, while spare parts increased by US$12 million due to a
higher level of repair and maintenance activity.
During 1H 2018, the Group paid out US$74 million of dividends
related to dividends declared in December 2017 and March 2018 (1H
2017: US$39 million).
Capital Investment (A)
Capital expenditure (A) in 1H 2018 was US$56 million compared to
US$45 million in 1H 2017. Of this, approximately US$28 million was
spent on sustaining capital, including a substantial refurbishment
of one of the Group's four pellet lines during the period as well
as reconstruction of two grinding sections in the concentrator.
As part of the Group's concentrator expansion programme to
increase production by 1.5 million tonnes of pellets per annum, the
Group is near completion of a new medium fine crushing unit which
is expected to commence operation in 3Q 2018. This will improve
equipment reliability and increase the amount of ore crushed by up
to 6 million tonnes per annum. This additional capacity will be
fully utilised once the remaining sections to increase concentrator
capacity to the equivalent of 12 million tonnes of pellets per
annum are completed in 2020.
Debt
Ferrexpo has low leverage with net debt to EBITDA (A) for the
last 12 months of 0.74x in line with 31 December 2017 at 0.73x. In
1H 2018 gross debt reduced to US$451 million and net debt, as of 30
June 2018, was US$369 million reflecting a cash balance of US$82
million. On 27 July 2018, the Group made the final amortisation of
its 2013 US$350 million PXF of US$44 million. The Group's remaining
debt maturing in 2H 2018 is US$11 million of ECA funding, with no
other debt repayments until March 2019.
The Group's debt facilities consist of US$195 million
outstanding on its 2017 PXF facility which will commence quarterly
amortisation of US$24 million in 1Q 2019, US$173 million of
Eurobonds which are due for repayment in April 2019 and US$26
million of export credit agency funding amortising monthly over the
next 48 months (including the US$11 million mentioned above).
The Group has trade finance facilities of US$70 million which
can be used to finance certain shipments, of which US$16 million
was utilised at the end of June 2018.
Related Party Transactions
Related party transactions are disclosed in Note 19 to the
accounts.
Iron Ore Market Review
Iron Ore Pricing
In 1H 2018, the benchmark 62% Fe iron ore fines price was
notable for being relatively stable compared to previous periods,
while high grade ore prices showed steadily increasing premiums
over mid and lower grade iron ore prices. Of all iron ore market
segments, pellet premiums saw the largest increase in pricing
during the period reflecting strong demand and a continued supply
deficit.
The average benchmark 62% Fe iron ore fines price in 1H 2018 was
US$69.7 per tonne, 6% lower than the US$74.2 per tonne average of
1H 2017. The price traded in a US$17 per tonne range between US$63
and US$80 per tonne, including 15 successive weeks when the price
traded between US$63 and US$68 per tonne. By contrast, in 1H 2017
the price traded in a US$41 per tonne range between US$54 and a
high of US$95 per tonne.
High and low grade iron ore prices are diverging
The average price premium of 65% Fe fines over 62% Fe fines in
1H 2018 was US$19 per tonne (1H 2017: US$13 per tonne), increasing
to an average of US$24 per tonne in June 2018. This reflected value
being ascribed to low alumina, low phosphorus and high iron content
ore.
See Figure 1 at this link
http://www.rns-pdf.londonstockexchange.com/rns/5955W_1-2018-8-2.pdf
Premiums and discounts are widening reflecting iron content and
impurities
See Figure 2 at this link
http://www.rns-pdf.londonstockexchange.com/rns/5955W_1-2018-8-2.pdf
Pellet premiums increased significantly during the period. The
Platts Atlantic pellet premium increased by 28% from US$45 per
tonne in 1H 2017 to US$58 per tonne in 1H 2018, while the Chinese
blast furnace spot pellet premium was trading at close to US$60 per
tonne as of 30 June 2018.
In general terms, pellet prices are currently based on the
average benchmark 62% Fe fines price together with a pellet
premium, less freight costs.
Part of the increase in pellet premiums during the period
reflected the value being assigned to higher quality 65% Fe
material in the market compared to 62% Fe fines.
Freight rates increased in line with the oil price in 1H 2018,
reducing the overall received price.
Demand environment
According to the World Steel Association, global crude steel
production increased 4.6% in the 1H of 2018 compared to 1H 2017 to
881 million tonnes with growth seen across all major regions. China
increased steel production by 6.0% while the key pellet markets of
Europe (including Turkey) and North East Asia (South Korea and
Japan) increased production by 2.1% and 2.2% respectively.
Encouragingly, other emerging economies in South Asia, South East
Asia, Middle East and North Africa continued to increase their
steel production at impressive rates which, if sustained, will
mitigate the impact on the global iron ore market of a potential
slowdown in Chinese steel production in the years ahead.
Higher steel production, continued positive profit margins for
steel mills and further rationalisation of the Chinese steel
industry led to an increase in global utilisation rates which
partly underpinned demand for higher grade ores, including pellets.
Macquarie believe global capacity utilisation in 1H 2018 was in the
region of 84% while Chinese crude steel capacity utilisation was
approximately 94%, as can be seen from the graph below.
Crude steel capacity utilisation
See Figure 3 at this link
http://www.rns-pdf.londonstockexchange.com/rns/5955W_1-2018-8-2.pdf
Since 2016, China has embarked on supply side reforms and
implementation of environmental standards in the steel sector in
order to eliminate excess capacity, improve the financial
performance of state owned enterprises and significantly improve
air quality. This has resulted in record profit margins for steel
mills, which increasingly require imported high grade raw materials
to reduce their environmental impact and to maximise their steel
production.
In 2017, around 50 million tonnes of steel capacity was closed
in China and in 2018 a further 30 million tonnes of steel capacity
is expected to be shut.
Ongoing environmental reforms require steel mills to
significantly reduce their emissions of sulphur dioxide, nitrogen
oxide and carbon dioxide over the next three years to 2020. This
encourages mills to demand high-quality raw materials, especially
those that do not require sintering, and to install
desulphurisation equipment to capture sulphur dioxide released in
the sintering process. Failure to comply with the regulation can
potentially result in the forced suspension of iron making
operations.
The response of Chinese steel makers to this new operating
environment and the impact of a maturing steel market (following
many years of high growth peaking in 2014) mean that the
requirements of Chinese mills are converging with steel mills in
developed countries where lower grade iron ore is no longer as
demanded.
In Europe, expected consolidation of the steel industry should
underpin profitability and continue to support global capacity
utilisation over the long term.
Steel mills look to use pellets to maximise output and increase
efficiencies, to lower emissions and to increase the quality of
their final product as they look to move up the value chain.
As a pellet exporter with established operations relatively
close to major import markets, Ferrexpo stands to benefit from
increasing demand for pellets. Incumbent pellet producers benefit
from high barriers to entry, while Ferrexpo maintains a competitive
cost relative to the majority of its peers.
Pellet supply
In 1H 2018, the supply of pellets to the global export market
remained in deficit. Supply was impacted by a ten-week strike at
the fourth largest exporter of pellets (whose 2017 market share was
approximately 8% of the global export market). Production and
shipments from this pellet exporter recommenced in June 2018 but it
is estimated that approximately two million tonnes of production
were lost during the strike. There was also a reduction in Russian
exports during the period (of around 2.5 million tonnes) compared
to 1H 2017 as a supplier opted to sell to the domestic market
instead.
The largest exporter of pellets increased its supply of pellets
by approximately 1 million tonnes in 1H 2018 as it re-introduced
higher-cost marginal capacity. It is expected to add a further 3
million tonnes of high-cost supply in 2H 2018. CRU expects that
these restarts could add approximately 12 million tonnes a year to
the seaborne market once in full operation.
The pellet feed market in 1H 2018 was also impacted by
suspension of operations at a major supplier in Brazil, reducing
pellet feed supply by approximately 12 million tonnes on an
annualised basis. This has negatively impacted pellet production in
Bahrain and China. Currently the operation is expect to restart at
the end of 2018.
The overall size of the supply-constrained pellet export market
in 2018 is expect to be in line with 2017 at around 124 million
tonnes. The restart of further seaborne supply from Brazil, which
has been out of the market since 2016, remains uncertain in terms
of timing and the volume to be produced, while the high capital
intensity associated with developing greenfield pellet supply is
unlikely to lead to any significant new supply in coming years.
Higher structural capacity utilisations in the steel sector
should continue to support demand for higher quality iron ore
inputs and Ferrexpo believes pellet demand will remain strong for
the foreseeable future.
Operational Review
Marketing
Ferrexpo's sales volumes for 1H 2018 totalled 4.8 million tonnes
(1H 2017: 5.1 million tonnes), reflecting delays in rail shipments
during May and June 2018. Pellets tied up in the supply chain
between production and customers, as of 30 June 2018, were
approximately 700 thousand tonnes. Given the strong demand
environment, the Group plans to reduce this stock to normal levels
of around 400 to 450 thousand tonnes in 2H 2018.
The table below shows the breakdown of sales by key market
regions. Sales to China and South East Asia include sales to
Vietnam and Taiwan.
Sales Volume by Market Regions:
6 months 6 months 12 months
ended 30.06.18 ended 30.06.17 ended 31.12.2017
---------------------- ---------------- ---------------- ------------------
Central Europe 50% 52% 49%
---------------------- ---------------- ---------------- ------------------
North East Asia 16% 20% 16%
---------------------- ---------------- ---------------- ------------------
Western Europe 16% 17% 15%
---------------------- ---------------- ---------------- ------------------
China and South
East Asia 12% 4% 12%
---------------------- ---------------- ---------------- ------------------
Turkey, Middle East,
India 6% 7% 8%
---------------------- ---------------- ---------------- ------------------
Total sales volume
(million tonnes) 4,798 5,065 10,467
---------------------- ---------------- ---------------- ------------------
Ferrexpo benefits from a diversified sales portfolio with
leading steel mills, while its logistics routes to customers
provide a competitive advantage given Ukraine's central
geographical location. Ferrexpo's average shipping duration to Asia
is 30 days compared to its main pellet-producing competitors in
Brazil (40 days shipping time), Canada (55 days) and Norway (50
days).
Ferrexpo's realised price for its 65% Fe iron ore pellets is
calculated by taking the average PLATTS 62% Fe CFR China iron ore
fines index for an agreed time period (see sales volume by pricing
terms), adjusted 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. The current average length of the
Group's sales contracts is approximately three years.
The table below shows the split of sales volume priced according
to agreed reference periods for the 62% Fe fines spot price. Most
sales (around 62%) are priced on the current month average 62% Fe
fines price. No volume during the period was sold on a spot basis
given the strong demand from the Group's long-term target
customers.
Sales Volume by Pricing Terms:
6 months 6 months 12 months
ended 30.06.18 ended 30.06.17 ended 31.12.2017
-------------------- ---------------- ---------------- ------------------
Current month 63% 63% 61%
-------------------- ---------------- ---------------- ------------------
Current quarter 21% 20% 20%
-------------------- ---------------- ---------------- ------------------
One month forward 9% 3% 8%
-------------------- ---------------- ---------------- ------------------
Lagging 3 month
spot index 7% 14% 9%
-------------------- ---------------- ---------------- ------------------
Spot sales fixed
on day 0% 0% 2%
-------------------- ---------------- ---------------- ------------------
Total sales volume
(million tonnes) 4,798 5,065 10,467
-------------------- ---------------- ---------------- ------------------
For further information on iron ore prices and freight see
Market Review and Revenue.
Pellet Production
1H 2018, pellet production was similar to 1H 2017 at 5.1 million
tonnes (1H 2017: 5.2 million tonnes). Production during the period
was impacted by a planned 65 day pellet line refurbishment in 2Q.
The Group has now refurbished 3 out of its 4 pellet lines. The
final pellet line refurbishment is currently expected to take place
in 2H 2019.
The Group continues to maintain a high proportion of 65% Fe
pellets within its production mix. The ratio of Ferrexpo Premium
Pellets of the total was 94% compared to 95% in 1H 2017. The table
below summarises production in the first half of 2017 compared to
the first half of 2016.
Pellet Production 1H 2018 and 1H 2017 ('000)
1H 2018 1H 2017 %
======== ======== ======
Pellet production
from own ore 5,081.7 5,138.6 -1.1
- 62% Fe pellets 317.1 257.9 23.0
- 65% Fe pellets 4,764.6 4,880.7 -2.4
Production from third
party materials 14.5 21.6 -32.9
- 62% Fe pellets 0.0 0.0
- 65% Fe pellets 14.5 21.6 -32.9
Total Pellets Produced 5,096.2 5,160.1 -1.2
------------------------ -------- -------- ------
- 62% Fe pellets 317.1 257.9 23.0
- 65% Fe pellets 4,779.1 4,902.2 -2.5
------------------------ -------- -------- ------
Capital Investment for Future Growth
Ferrexpo has initiated engineering studies to expand its
pelletising capacity from the currently planned 12 million tonnes
up to 20 million tonnes. This would be achieved by increasing the
capacity of each of the four pelletising lines together with the
required increases in processing capacity (either by further
expanding the existing FPM beneficiation plant, or by installing
primary crushing and concentrate capacity at FYM). The Group
expects to start this development programme in 2020, once the
current investment to increase production to 12 million tonnes of
pellets per annum, is complete.
For information on capital investment in 1H 2018 see Capital
Investment under Financial review.
Update on Risks
The Group considers that the risks facing the business, as
highlighted on pages 34 to 39 of the 2017 Annual Report and
Accounts published in March 2018, remain relevant. An update is
provided below on material developments of key risks during the
first half of 2018.
Realised Price
Ferrexpo continues to be exposed to international freight rates,
as all of its long term contracts are priced with reference to
transparent freight indices such as the Baltic Exchange C3 freight
price(3) . In 1H 2018, the C3 index increased by 37% to US$18.2 per
tonne compared to 1H 2017. Freight rates are largely influenced by
the price of oil. In 1H 2018, the Brent price increased by US$19
per tonne, or 37%, compared to 1H 2017. A further increase in oil
prices and / or freight rates could reduce the Group's received
price.
(3) Seaborne freight rates, such as C3, are published by the
Baltic Exchange and represent the cost for ocean transportation of
iron ore from the Brazilian port of Tubarão (where the largest
seaborne suppliers of pellets are based) to Qingdao, China (the
largest steel producing country in the world). As Ferrexpo sells to
international customers, the price it receives includes reference
to C3 or other global benchmarks.
Operating Risks
The Group continues to be subject to fluctuations in commodity
prices, particularly to changes in energy prices including oil. The
Group's cost base is also subject to fluctuations in the
Hryvnia/Dollar exchange rate as approximately half of operating
costs are in local currency. In 1H 2018, the Hryvnia was broadly
stable against the Dollar.
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 negatively impacting the financial results of the Group.
For further information see Costs in the Financial Review and
Pellet Production in the Operational Review.
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
Steve Lucas
Chairman
Chris Mawe
Chief Financial Officer
1 August 2018
Independent Review Report to Ferrexpo plc
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 2018 which comprises the Consolidated
Income Statement, the Consolidated Statement of Financial Position,
the Consolidated Statement of Changes in Equity, the Consolidated
Cash Flow statement and related notes 1 to 20. 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
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 Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
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 Guidance 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 Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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 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 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, UK
1 August 2018
Interim Consolidated Income Statement
Year-ended 31.12.17
6 months ended 30.06.2018 (unaudited) 6 months ended 30.06.2017 (unaudited) (audited)
Before
Before Special Before Special special Special
US$000 Notes special items items Total special items items Total items items Total
Revenue 3/4 616,717 - 616,717 591,049 - 591,049 1,197,494 - 1,197,494
Operating
expenses 5/7 (402,148) - (402,148) (328,017) (79) (328,096) (716,947) (407) (717,354)
Other operating
income 1,454 - 1,454 1,387 - 1,387 3,238 - 3,238
Operating foreign
exchange
(losses)/gains 6 (15,564) - (15,564) (5,159) - (5,159) 6,661 - 6,661
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Operating profit 200,459 - 200,459 259,260 (79) 259,181 490,446 (407) 490,039
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Share of profit
from associates 2,476 - 2,476 2,995 - 2,995 5,527 - 5,527
Profit/(loss)
before tax and
finance 202,935 - 202,935 262,255 (79) 262,176 495,973 (407) 495,566
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Net finance
expense 8 (24,025) - (24,025) (27,804) - (27,804) (54,766) - (54,766)
Non-operating
foreign exchange
gains/(losses) 6 165 - 165 6,583 - 6,583 9,033 - 9,033
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Profit/(loss)
before tax 179,075 - 179,075 241,034 (79) 240,955 450,240 (407) 449,833
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Income tax
(expense)/credit 7/9 (26,861) - (26,861) (28,682) 3,426 (25,256) (58,787) 3,426 (55,361)
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Profit/(loss) for
the period/year 152,214 - 152,214 212,352 3,347 215,699 391,453 3,019 394,472
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Profit/(loss)
attributable to:
Equity
shareholders of
Ferrexpo plc 151,666 - 151,666 211,477 3,578 215,055 389,675 3,254 392,929
Non-controlling
interests 548 - 548 875 (231) 644 1,778 (235) 1,543
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Profit/(loss) for
the period/year 152,214 - 152,214 212,352 3,347 215,699 391,453 3,019 394,472
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Earnings/(loss)
per share:
Basic (US cents) 10 25.88 - 25.88 36.11 0.61 36.72 66.53 0.56 67.09
Diluted (US
cents) 10 25.79 - 25.79 35.99 0.61 36.60 66.30 0.55 66.85
------------------ ------ -------------- ------------ ------------ -------------- ------------ ------------ ---------- -------- ----------
Interim Consolidated Statement of Comprehensive Income
6 months ended Year ended
US$000 Notes 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Profit for the period/year 152,214 215,699 394,472
Items that may subsequently be reclassified to profit
or loss:
Exchange differences on translating foreign
operations 6 79,443 38,203 (41,415)
Income tax effect (9,991) (6,015) 4,557
Net other comprehensive income/loss that may be
reclassified to profit or loss in subsequent
periods 69,452 32,188 (36,858)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement gains/(losses) on defined benefit
pension liability 143 255 (9,172)
Income tax effect (18) (25) 1,556
------------------------------------------------------ ------ --------------- ------------------------ -----------
Net other comprehensive (loss)/income not being
reclassified to profit or loss in subsequent
periods 125 230 (7,616)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Other comprehensive income/(loss) for the
period/year, net of tax 69,577 32,418 (44,474)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Total comprehensive income for the period/year, net
of tax 221,791 248,117 349,998
------------------------------------------------------ ------ --------------- ------------------------ -----------
Total comprehensive income attributable to:
Equity shareholders of Ferrexpo plc 220,822 247,245 348,686
Non-controlling interests 969 872 1,312
------------------------------------------------------ ------ --------------- ------------------------ -----------
221,791 248,117 349,998
------------------------------------------------------ ------ --------------- ------------------------ -----------
Interim Consolidated Statement of Financial Position
As at As at As at
US$000 Notes 30.06.18 31.12.17 30.06.17
(unaudited) (audited) (unaudited)
Assets
Property, plant and equipment 11 689,568 623,359 617,391
Goodwill and other intangible assets 40,613 36,858 36,694
Investments in associates 4,386 5,947 3,837
Inventories 13 212,806 175,831 162,740
Other non-current assets 22,018 10,501 12,085
Income taxes recoverable and prepaid 9 5,846 5,454 5,866
Deferred tax assets 35,756 40,408 51,892
------------------------------------------------------------ ------ ------------ ------------ ------------
Total non-current assets 1,010,993 898,358 890,505
------------------------------------------------------------ ------ ------------ ------------ ------------
Inventories 13 125,176 96,645 101,430
Trade and other receivables 80,529 88,327 80,539
Prepayments and other current assets 25,003 17,514 19,114
Income taxes recoverable and prepaid 9 11 14 142
Other taxes recoverable and prepaid 12 27,465 23,192 21,421
Cash and cash equivalents 3/14 82,250 97,742 92,645
Total current assets 340,434 323,434 315,291
------------------------------------------------------------ ------ ------------ ------------ ------------
Total assets 1,351,427 1,221,792 1,205,796
------------------------------------------------------------ ------ ------------ ------------ ------------
Equity and liabilities
Issued capital 18 121,628 121,628 121,628
Share premium 185,112 185,112 185,112
Other reserves 18 (1,951,422) (2,020,864) (1,952,514)
Retained earnings 2,404,848 2,310,226 2,178,821
------------------------------------------------------------ ------ ------------ ------------ ------------
Equity attributable to equity shareholders of Ferrexpo plc 760,166 596,102 533,047
------------------------------------------------------------ ------ ------------ ------------ ------------
Non-controlling interest 1,339 370 (45)
------------------------------------------------------------ ------ ------------ ------------ ------------
Total equity 761,505 596,472 533,002
------------------------------------------------------------ ------ ------------ ------------ ------------
Interest-bearing loans and borrowings 3/15 151,331 186,294 228,853
Defined benefit pension liability 22,449 20,514 16,615
Provision for site restoration 2,305 2,070 1,162
Deferred tax liabilities 372 381 572
------------------------------------------------------------ ------ ------------ ------------ ------------
Total non-current liabilities 176,457 209,259 247,202
------------------------------------------------------------ ------ ------------ ------------ ------------
Interest-bearing loans and borrowings 3/15 299,574 305,412 335,450
Trade and other payables 47,720 48,428 34,048
Accrued liabilities and deferred income 28,529 27,554 24,820
Income taxes payable 9 26,944 23,715 22,698
Other taxes payable 10,698 10,952 8,576
------------------------------------------------------------ ------ ------------ ------------ ------------
Total current liabilities 413,465 416,061 425,592
------------------------------------------------------------ ------ ------------ ------------ ------------
Total liabilities 589,922 625,320 672,794
------------------------------------------------------------ ------ ------------ ------------ ------------
Total equity and liabilities 1,351,427 1,221,792 1,205,796
------------------------------------------------------------ ------ ------------ ------------ ------------
The financial statements were approved by the Board of Directors
on 1 August 2018.
Kostyantin Zhevago Christopher Mawe
Chief Executive Officer Chief Financial Officer
Interim Consolidated Statement of Cash Flows
6 months 6 months
ended ended Year ended
US$000 Notes 30.06.18 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Profit before tax 179,075 240,955 449,833
Adjustments for:
Depreciation of property, plant and equipment and amortisation of
intangible assets 5 27,809 22,295 46,392
Finance expense 8 23,269 26,949 53,044
Finance income 8 (454) (184) (372)
Losses on disposal and liquidation of property, plant and equipment 5 2,969 2,103 7,754
Cash elements included in losses on disposal of property, plant and
equipment (73) - (2,953)
Operating special items 7 - 79 407
Share of profit from associates (2,476) (2,995) (5,527)
Movement in allowance for doubtful receivables 45 (182) 576
Movement in site restoration provision 84 42 1,070
Employee benefits 1,817 1,538 (1,632)
Share-based payments 411 285 586
Operating foreign exchange losses/(gains) 6 15,564 5,159 (6,661)
Non-operating foreign exchange (gains)/losses 6 (165) (6,583) (9,033)
Other adjustments (2,750) - (6,458)
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Operating cash flow before working capital changes 245,125 289,461 527,026
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Changes in working capital:
Decrease/(increase) in trade and other receivables 1,279 2,800 (3,024)
Increase in inventories (45,339) (45,945) (78,892)
Increase/(decrease) in trade and other accounts payable 8,831 (22,974) (27,317)
(Increase)/decrease in other taxes recoverable and payable (incl.
VAT) (65) 3,526 (511)
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Cash generated from operating activities 209,831 226,868 417,282
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Interest paid (26,296) (26,461) (48,576)
Income tax paid (26,236) (5,383) (13,721)
Post-employment benefits paid (879) (708) (1,539)
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Net cash flows from operating activities 156,420 194,316 353,446
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (55,765) (45,284) (102,953)
Proceeds from disposal of property, plant and equipment and
intangible assets 387 103 138
Interest received 449 181 358
Dividends from associates 1,693 2,628 4,982
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Net cash flows used in investing activities (53,236) (42,372) (97,475)
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Cash flows from financing activities
Proceeds from borrowings and finance 15 210,866 - -
Repayment of borrowings and finance 15 (254,390) (162,507) (238,670)
Arrangement fees paid - - (4,042)
Dividends paid to equity shareholders of Ferrexpo plc (1) 10 (73,996) (39,050) (58,316)
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Net cash flows used in financing activities (117,520) (201,557) (301,028)
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Net decrease in cash and cash equivalents (14,336) (49,613) (45,057)
Cash and cash equivalents at the beginning of the period/year 97,742 144,751 144,751
Currency translation differences (1,156) (2,493) (1,952)
--------------------------------------------------------------------- ------ ------------ ------------ -----------
Cash and cash equivalents at the end of the period/year 14 82,250 92,645 97,742
--------------------------------------------------------------------- ------ ------------ ------------ -----------
(1) () Dividend paid in the period ended 30 June 2018 is net of
withholding tax of US$3,187 thousand that is payable subsequent to
the period end.
Interim Consolidated Statement of Changes in Equity
For the financial year
2017 and the six months
ended Attributable to equity shareholders
30 June 2018 of Ferrexpo plc
------------------------------------------------------------
Issued Other reserves Retained Total capital Non-controlling Total
US$000 capital Share premium (Note 18) earnings and reserves interests equity
At 1 January
2017 121,628 185,112 (1,984,758) 2,002,153 324,135 (847) 323,288
---------------- --------- -------------- --------------- ---------- --------------- ---------------- ---------
Profit for the
period - - - 392,929 392,929 1,543 394,472
Other
comprehensive
loss - - (36,692) (7,550) (44,242) (230) (44,472)
---------------- --------- -------------- --------------- ---------- --------------- ---------------- ---------
Total
comprehensive
loss for the
year - - (36,692) 385,379 348,687 1,313 350,000
Equity
dividends paid
to
shareholders
of Ferrexpo
plc - - - (77,332) (77,332) - (77,332)
Effect from
increase of
shareholding
in subsidiary - - - 26 26 (96) (70)
Share-based
payments - - 586 - 586 - 586
At 31 December
2017 (audited) 121,628 185,112 (2,020,864) 2,310,226 596,102 370 596,472
---------------- --------- -------------- --------------- ---------- --------------- ---------------- ---------
Application of
new IFRSs (see
Note 2) - - - 989 989 - 989
At 1 January
2018 - after
application of
new IFRSs
(unaudited) 121,628 185,112 (2,020,864) 2,311,215 597,091 370 597,461
Profit for the
period - - - 151,666 151,666 548 152,214
Other
comprehensive
income - - 69,031 125 69,156 421 69,577
---------------- --------- -------------- --------------- ---------- --------------- ---------------- ---------
Total
comprehensive
income for the
period - - 69,031 151,791 220,822 969 221,791
Equity
dividends paid
to
shareholders
of Ferrexpo
plc - - - (58,158) (58,158) - (58,158)
Share-based
payments - - 411 - 411 - 411
---------------- --------- -------------- --------------- ---------- --------------- ---------------- ---------
At 30 June 2018
(unaudited) 121,628 185,112 (1,951,422) 2,404,848 760,166 1,339 761,505
---------------- --------- -------------- --------------- ---------- --------------- ---------------- ---------
For the six
months ended Attributable to equity shareholders
30 June 2017 of Ferrexpo plc
------------------------------------------------------------
Issued Share Other reserves Retained Total capital Non-controlling Total
US$000 capital premium (Note 18) earnings and reserves interests equity
At 1 January
2017 121,628 185,112 (1,984,758) 2,002,153 324,135 (847) 323,288
---------------- --------- --------- --------------- --------------- --------------- ---------------- ---------
Profit for the
period - - - 215,055 215,055 644 215,699
Other
comprehensive
income - - 31,959 231 32,190 228 32,418
---------------- --------- --------- --------------- --------------- --------------- ---------------- ---------
Total
comprehensive
income for the
period - - 31,959 215,286 247,245 872 248,117
Equity
dividends paid
to
shareholders
of Ferrexpo
plc - - - (38,675) (38,675) - (38,675)
Effect from
increase of
shareholding
in subsidiary - - - 57 57 (70) (13)
Share-based
payments - - 285 - 285 - 285
---------------- --------- --------- --------------- --------------- --------------- ---------------- ---------
At 30 June 2017
(unaudited) 121,628 185,112 (1,952,514) 2,178,821 533,047 (45) 533,002
---------------- --------- --------- --------------- --------------- --------------- ---------------- ---------
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-Plavninske and Lavrykivske ("GPL") and Yerystivske
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% (31 December
2017: 50.3%; 30 June 2017: 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 the
Additional Disclosures of the Annual Report and Accounts 2017.
At 30 June 2018, the Group also holds through PJSC Ferrexpo
Poltava Mining an interest of 49.5% (31 December 2017: 49.5%; 30
June 2017: 49.4%) 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 2018 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 2017.
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 2017. 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 2017, 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 unqualified and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
Going concern
The Group has assessed that, taking into account: i) its
available cash and cash equivalents available at the date of
authorisation of the interim condensed consolidated financial
statements; ii) its cash flow projections for the period of
management's going concern assessment; and iii) events and
conditions beyond the period of management's going concern
assessment, it has sufficient liquidity to meet its present
obligations and cover working capital needs for the aforementioned
period and will remain in compliance with its financial covenants
throughout this period. Therefore, the Group continues to adopt the
going concern basis of accounting for the preparation
Accounting policies adopted
The accounting policies and methods of computation adopted in
the preparation of the interim condensed consolidated financial
statements are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 31
December 2017 except for the adoption of the new standards that
became effective as of 1 January 2018.
New standards and interpretations adopted with an impact on the
Group's consolidated financial statements
IFRS 9 Financial instruments
The Group applied IFRS 9 Financial instruments for the first
time as of 1 January 2018 and elected to apply the modified
retrospective method. The new standard became effective as of 1
January 2018 and replaces IAS 39 and includes a new expected loss
impairment model, changes to the classification and measurement
requirements of financial assets as well as to hedge
accounting.
The impact from the application of IFRS 9 on the Group's
consolidated financial statements is predominantly related to the
expected loss impairment model as the new standard established a
new approach for the assessment of loans and receivable balances,
including trade receivables, with a focus on the risk of default in
the future rather than based on incurred losses in the past. The
changes to classification and measurement of financial instruments
is unchanged on application of the new standard and the Group does
not intend to apply hedge accounting under IFRS 9.
IFRS 15 Revenue from customer contracts
The Group applied IFRS 15 Revenue from customer contracts for
the first time as of 1 January 2018. The Group elected to apply the
"modified retrospective" method, under which comparative financial
information is not restated. The new standard establishes the
principles for the disclosure of useful information in the
financial statements about the nature, amount, timing and
uncertainties of revenue and cash flows arising from contracts with
customers. Under IFRS 15 the revenue recognition model changed from
one based on the transfer of risk and reward of ownership to the
transfer of control of ownership. The Group's revenue is
predominantly derived from sales of iron pellets, where the point
of recognition is dependent on the contractual sales terms based on
the International Commercial terms ("Incoterms"). As the time of
the transfer of risks and rewards coincides with the transfer of a
control, the timing and the amount of revenue recognised is not
affected for the majority of the Group's sales. For the Incoterms
Cost, Insurance and Freight ("CIF"), and Cost and Freight ("CFR"),
the Group must contract for and pay the freight necessary to bring
the goods to the named port of destination. Consequently, the
freight service on sales contracts with CIF and CFR Incoterms meet
the criteria of a separate performance obligation and a portion of
the revenue earned under these contracts, representing the
obligation to perform freight
service, is deferred and recognised over time as this obligation
is fulfilled, along with the associated costs.
The tables on the following page provide the details of the
cumulative effects from the application of the new standards on the
consolidated statement of financial position as of 1 January 2018
and the consolidated statement of financial position and the
consolidated income statement as at 30 June 2018.
Effect from application Effect from application Year ended
US$000 Balance as at 01.01.18 of IFRS 15 of IFRS 9 31.12.17
(unaudited) (unaudited) (unaudited) (audited)
Consolidated statement
of financial position
Assets
Trade and other
receivables 88,109 - (218) 88,327
Prepayments and other
current assets 24,727 7,213 - 17,514
Liabilities
Accrued liabilities and
deferred income (24,202) (6,006) - (18,196)
Equity
Retained earnings (2,308,801) 1,207 218 (2,310,226)
------------------------- ----------------------- ------------------------ ------------------------ ------------
The freight service on sales contracts with CIF and CFR
Incoterms meets the criteria of a separate performance obligation
so that the portion of the revenue earned under these contracts,
representing the obligation to perform freight services, is
deferred and recognised over time as this obligation is fulfilled,
along with the associated costs. The effect from the expected loss
impairment model to be applied under the new standard is primarily
calculated based on publically available ratings default risks of
the Group's customers with outstanding receivable balances as at
end of a reporting period. There are no non-current receivable
balances to be considered in the computation of the Group's
expected loss as all of the Group's receivable balance are
classified as current based on the agreed terms and conditions.
Effect from Effect from Balance without
As reported as at application of IFRS application of IFRS effect from new
Notes 30.06.18 15 9 IFRSs
(unaudited) (unaudited) (unaudited) (unaudited)
Consolidated income
statement
Freight revenue
related to sales
of iron ore
pellets and
concentrate 4 32,567 2,508 - 30,059
Operating expenses (402,148) (3,693) 50 (398,505)
Consolidated
statement of
financial position
Assets
Trade and other
receivables 80,529 - (168) 80,697
Prepayments and
other current
assets 25,003 3,521 - 21,482
Liabilities
Accrued liabilities
and deferred
income (28,529) (3,498) - (25,031)
-------------------- ------ -------------------- -------------------- -------------------- --------------------
The table above shows the impact on the operating result from
the application of the new accounting standards only. The impact
from the separate presentation of the total freight revenue related
to the sales of iron pellets and concentrate is shown in Note
4.
New standards, interpretations and amendments adopted without
impact on the Group's consolidated financial statements
-- IFRIC 22 Foreign currency transactions and advance
considerations clarifies the accounting for transactions that
include the receipt or payment of advance consideration in a
foreign currency.
-- Amendment to IFRS 2 Share-based payments: Classification and
measurement of share-based payments clarifies the classification of
share-based payment transactions with net settlement features, the
measurement of cash-settled share-based payment transactions that
include a performance condition and of modifications of share-based
payment transactions from cash-settled to equity-settled.
-- Annual improvements to IFRS standards 2014-2016 cycle
contains amendments to IFRS 1 First-time Adoption of IFRS and IAS
28 Investments in associates and joint ventures.
New standards, interpretations and amendments not yet
adopted
A detailed description of the expected impact from the adoption
of new accounting standards and interpretations that are in issue,
but are not yet effective is provided in Note 3 of the Annual
Report & Accounts for the year ended 31 December 2017 and
outlines the expected impact of the following standards and
interpretations that will become effective in future periods.
-- IFRS 16 Leases is effective for the financial year beginning
on 1 January 2019. If the new standard were applied as of 30 June
2018, right-of-use assets and corresponding lease liabilities of
US$15,167 thousand, before the effect from discounting, would have
been recognised without a material effect on the operating
result.
-- IFRIC 23 Uncertainty over income tax treatments is effective
for the financial year beginning on 1 January 2019. The Group is
currently in the process to complete the impact assessment, but
does not expect a material impact on its consolidated financial
statements from this new interpretation.
-- Annual Improvements to IFRS Standards 2015-2017 Cycle is
effective for the financial year beginning on 1 January 2020 and
contains amendments to IAS 12 Income taxes and IAS 23 Borrowing
costs. The Group does not expect a material impact on its
consolidated financial statements from these annual
improvements.
-- Amendments to IFRS 9 Financial instruments: Prepayment
features with negative compensation is effective for the financial
year beginning on 1 January 2019 and clarifies the classification
of particular pre-payable financial assets and the accounting for
financial liabilities following a modification. The Group does not
expect a material impact on its consolidated financial statements
from these amendments.
-- Amendments to IAS 19 Employee benefits: Plan amendment,
curtailment or settlement is effective for the financial year
beginning on 1 January 2020. The amendments provide guidance, in
the case of plan amendment, curtailment or settlement, on the
measurement of the current service cost and the net interest for
the period after the re-measurement and clarify the effect of a
plan amendment, curtailment or settlement on the requirements
regarding the asset ceiling. The Group does not expect a material
impact on its consolidated financial statements from these
amendments.
-- Amendments to References to the Conceptual Framework in IFRS
standards is effective for the financial year beginning on 1
January 2020 and introduces a new chapter on measurement, guidance
on reporting financial performance, improved definitions of an
asset and a liability and clarifications in areas, such as the
roles of stewardship, prudence and measurement uncertainty in
financial reporting.
Full disclosure of the final assessment of the impact of these
standards, interpretations and amendments will be provided in the
Annual Report & Accounts for the year ending 31 December
2018.
Use of critical estimates and judgements
In the course of preparing financial statements, management has
to make estimates and judgements that can have a significant impact
on the Group's consolidated financial statements. The most critical
accounting estimates include taxation (recoverability of deferred
tax assets), capitalisation of deferred stripping costs and the
recoverability of capitalised lean and weathered ore. Critical
judgements relate to taxation (tax legislation in Ukraine) and
classification of net investments in foreign operations. The use of
inaccurate assumptions in assessments made for any of these
estimates and judgements could result in a significant impact on
the Group's financial position and/or financial performance. The
critical estimates and judgements are the same as those disclosed
in the Group's consolidated financial statements for the year ended
31 December 2017.
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. Management
monitors the operating result of the Group based on a number of
measures including Underlying EBITDA, gross profit and the net
debt.
Underlying EBITDA and gross profit
The Group presents the Underlying EBITDA as it is a useful
measure for evaluating the Group's ability to generate cash and its
operating performance. The Group's full definition of Underlying
EBITDA is disclosed in the Glossary on page 41.
6 months ended Year ended
US$000 Notes 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Profit before tax and finance 202,935 262,176 495,566
Losses on disposal and liquidation of property, plant
and equipment 5 2,995 2,103 7,754
Share based payments 411 285 586
Operating special items 7 - 79 407
Depreciation and amortisation 5 27,809 22,295 46,392
------------------------------------------------------ ------ --------------- ------------------------ -----------
Underlying EBITDA 234,150 286,938 550,705
------------------------------------------------------ ------ --------------- ------------------------ -----------
6 months ended Year ended
US$000 Notes 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Revenue 4 616,717 591,049 1,197,494
Cost of sales 5 (238,359) (189,504) (411,490)
Gross profit 378,358 401,545 786,004
--------------- ------ --------------- ------------------------ -----------
Net debt
Net debt as defined by the Group comprises cash and cash
equivalents less interest bearing loans and borrowings.
US$000 Notes As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Cash and cash equivalents 14 82,250 97,742 92,645
Interest bearing loans and borrowings - current 15 (299,574) (305,412) (335,450)
Interest bearing loans and borrowings - non-current 15 (151,331) (186,294) (228,853)
----------------------------------------------------- ------ --------------- --------------- ---------------
Net debt (368,655) (393,964) (471,658)
----------------------------------------------------- ------ --------------- --------------- ---------------
The Group's balance of cash and cash equivalents decreased by
US$15,492 thousand after net debt repayments of US$43,524 thousand
during the period ended 30 June 2018 (31 December 2017: US$238,670
thousand; 30 June 2017: US$162,507 thousand). Net debt is an
Alternative Performance Measure ("APM"). Further information on the
APMs used by the Group, including the definitions, is provided on
pages 36 and 37.
In the current period, management have reviewed the presentation
of the accrued interest and have re-classified it from interest
bearing loans and borrowings to accrued liabilities in order to
better reflect the nature of this balance in the presentation.
US$9,358 thousand and US$9,599 thousand have been re-presented for
the comparative periods ended 31 December 2017 and 30 June 2017 to
be on a consistent basis and reducing the net debt by these
amounts.
Note 4: Revenue
Revenue for the six months period ended 30 June 2018 consisted
of the following:
6 months ended Year ended
US$000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Revenue from sales of iron ore pellets and concentrate 544,206 537,959 1,062,871
Freight revenue related to sales of iron ore pellets and
concentrate 32,567 24,798 63,447
------------------------------------------------------------ --------------- ------------------------ -----------
Total revenue from sale of iron ore pellets and concentrate 576,773 562,757 1,126,318
------------------------------------------------------------ --------------- ------------------------ -----------
Revenue from logistics and bunker business 38,424 26,956 68,449
Revenue from other sales and services provided 1,520 1,336 2,727
Total revenue 616,717 591,049 1,197,494
------------------------------------------------------------ --------------- ------------------------ -----------
The Group applied IFRS 15 Revenue from customer contracts for
the first time as of 1 January 2018 and elected to apply the
modified retrospective method.
As required under IFRS 15, the freight revenue related to the
sales of iron ore pellets is shown separate from the revenue from
sales of iron ore pellets and concentrate due to its separate
performance obligations. This applies to sales made under the
Incoterms Cost, Insurance and Freight ("CIF") and Cost and Freight
("CFR"). The information of the comparative periods have been
re-presented to be on a consistent basis with the current period.
There has been no restatement of the underlying financial
information.
Total revenue from sales of iron ore pellets and concentrate by
geographical destination were as follows:
6 months ended Year ended
US$'000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Central Europe 280,552 289,714 536,836
Western Europe 85,403 92,742 170,295
North East Asia 103,251 120,162 198,165
China and South East Asia 78,425 23,123 142,812
Turkey, Middle East and India 29,142 37,016 78,210
Total revenue from sale of iron ore pellets and concentrate 576,773 562,757 1,126,318
------------------------------------------------------------ --------------- ------------------------ -----------
The Group markets its products across various regions. The
disclosure of the segmentation reflects how the Group makes its
business decisions and monitors its sales. Information about the
composition of the regions is provided in the Glossary.
Note 5: Operating expenses before special items
Operating expenses for the six months period ended 30 June 2018
consisted of the following:
6 months ended Year ended
US$000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Cost of sales 238,359 189,504 411,490
Selling and distribution expenses 121,915 100,176 219,703
General and administrative expenses 22,222 19,542 41,954
Other operating expenses 19,652 18,795 43,800
Total operating expenses 402,148 328,017 716,947
-------------------------------------- --------------- ------------------------ -----------
Operating expenses include:
Inventories recognised as an expense upon sale of goods 209,109 172,558 367,161
Employee costs 37,596 25,420 53,293
Inventory movements (24,965) (8,621) (1,846)
Depreciation of property, plant and equipment 3 27,484 22,100 45,920
Amortisation of intangible assets 3 325 195 472
Royalties and levies 14,140 9,794 19,610
Costs of logistics and bunker business 38,656 25,219 63,127
Audit and non-audit services 810 1,020 1,342
Community support donations 11,865 14,085 28,384
Losses on disposal and liquidation of property, plant and equipment 2,969 2,103 7,754
Special items not included in the operating expenses are shown
in Note 7.
Note 6: Foreign exchange losses and gains
Foreign exchange losses and gains for the six months period
ended 30 June 2018 consisted of the following:
6 months ended Year ended
US$000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Operating foreign exchange (losses)/gains
Revaluation of trade receivables (15,967) (5,098) 7,113
Revaluation of trade payables 363 (48) (394)
Others 40 (13) (58)
-------------------------------------------------- --------------- ------------------------ -----------
Total operating foreign exchange (losses)/gains (15,564) (5,159) 6,661
-------------------------------------------------- --------------- ------------------------ -----------
Non-operating foreign exchange gains/(losses)
Revaluation of interest-bearing loans 1,789 9,459 10,136
Conversion of cash and cash equivalents (838) (1,997) (1,497)
Others (786) (879) 394
-------------------------------------------------- --------------- ------------------------ -----------
Total non-operating foreign exchange gains 165 6,583 9,033
-------------------------------------------------- --------------- ------------------------ -----------
Total foreign exchange (losses)/gains (15,399) 1,424 15,694
-------------------------------------------------- --------------- ------------------------ -----------
Operating foreign exchange gains and losses are those items that
are directly related to the production and sale of pellets (e.g.
trade receivables, trade payables on operating expenditure).
Non-operating gains and losses are those associated with the
Group's financing and treasury activities and with local income tax
payables.
The translation differences and foreign exchange gains and
losses are predominantly depended on the fluctuation of the
exchange rate of the Ukrainian Hryvnia against the US Dollar. The
table below shows the closing and average rate of the most relevant
currencies of the Group compared to the US Dollar.
Average exchange rate Closing exchange rate
US$ 6 months ended 6 months ended Year ended As at As at As at
30.06.18 30.06.17 31.12.17 30.06.18 31.12.17 30.06.17
UAH 26.747 26.762 26.597 26.189 28.067 26.099
EUR 0.826 0.925 0.887 0.864 0.838 0.876
----- --------------- --------------- ----------- ---------- ---------- ----------
Exchange differences arising on translation of non-USD
functional currency operations (mainly in Ukrainian Hryvnia) are
included in the translation reserve. See Note 18 for further
details.
Note 7: Special items
Special items for the six months period ended 30 June 2018
consisted of the following:
Note 6 months ended Year ended
US$000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Operating special items
Write-offs and impairment losses - 79 407
Total operating special items - 79 407
----------------------------------------------- ------ --------------- ------------------------ -----------
Total special items before related tax effect - 79 407
----------------------------------------------- ------ --------------- ------------------------ -----------
Tax effect on special items - - -
----------------------------------------------- ------ --------------- ------------------------ -----------
Total special items after related tax effect - 79 407
----------------------------------------------- ------ --------------- ------------------------ -----------
Special tax items 9 - (3,426) (3,426)
----------------------------------------------- ------ --------------- ------------------------ -----------
Special items include those items, which due to their expected
infrequency of the events or non-operational nature giving rise to
them, are reported separately on the face of the income statement.
These items are excluded from Underlying EBITDA, which is an
Alternative Performance Measure ("APM"). Further information on the
APMs used by the Group, including the definitions, is provided on
pages 36 and 37.
Special items comprise:
-- Operating special items are those that relate to the
operating performance of the Group and principally include
write-offs and impairment losses and restructuring charges, if
any.
-- Non-operating special items are items relating to changes in the Group's asset portfolio.
-- Tax special items are significant non-recurring tax items or
the tax effect of other special items. Further details are provided
in Note 9.
Note 8: Net finance expense
Net finance expense for the period ended 30 June 2018 consisted
of the following:
6 months ended Year ended
US$000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Finance expense
Interest expense on loans and borrowings (24,029) (27,947) (53,560)
Less capitalised borrowing costs 2,252 2,580 3,637
Interest on defined benefit plans (1,210) (1,039) (2,094)
Bank charges (340) (1,314) (2,537)
Other finance costs (1,152) (268) (584)
------------------------------------------- --------------- ------------------------ -----------
Total finance expense (24,479) (27,988) (55,138)
------------------------------------------- --------------- ------------------------ -----------
Finance income
Interest income 454 184 364
Other finance income - - 8
------------------------------------------- --------------- ------------------------ -----------
Total finance income 454 184 372
------------------------------------------- --------------- ------------------------ -----------
Net finance expense (24,025) (27,804) (54,766)
------------------------------------------- --------------- ------------------------ -----------
The presentation of the interest expense on loans and borrowings
has been changed in the current period to reflect an interest
expense measured at amortised cost using the effective interest
rate method by presenting the effect from the amortisation of
prepaid arrangement fees in interest expense on loans and
borrowings and not in bank charges as done in the previous periods.
In order to be consistent with the presentation in the current
period, the amounts of US$3,532 thousand and US$7,013 thousand have
been reclassified from bank charges to interest expense on loans
and borrowings for the comparative periods ended 30 June 2017 and
31 December 2017. The total finance expense remained unchanged.
Note 9: 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 2018, the income
tax expense was based on an expected weighted average tax rate of
15.0% for the financial year 2018, compared to an effective tax of
12.3% for the financial year 2017.
No special tax items during the period ended 30 June 2018,
compared to US$3,426 thousand recorded during the comparative
periods ended 31 December 2017 and 30 June 2017, respectively,
reflecting the net effect from the capitalisation of a deferred tax
asset from available tax loss carry forwards and temporary
differences totalling US$28,822 thousand for an Ukrainian
subsidiary and the de-recognition of a deferred tax asset of
US$25,396 thousand as a result of the latest development of ongoing
court proceedings in Ukraine. Further information on the ongoing
court proceedings is provided in Note 17.
During the financial years 2013, 2014 and 2015, current VAT
receivable balances in Ukraine were mainly recovered in exchange
for prepayments of corporate profit tax resulting in a remaining
income tax receivable balance of US$5,846 thousand as at 30 June
2018 (31 December 2017: US$5,454 thousand; 30 June 2017: US$5,866
thousand) relating to prepayments made by two other Ukrainian
subsidiaries and is classified as non-current due to the
uncertainty in respect of the timing of the recovery.
Year ended
US$000 6 months ended 30.06.18 31.12.17 6 months ended 30.06.17
(unaudited) (audited) (unaudited)
Income tax receivable balance - current 11 14 142
Income tax receivable balance - non-current 5,846 5,454 5,866
Income tax payable balance (26,944) (23,715) (22,698)
---------------------------------------------- ------------------------ ----------- ------------------------
Net income tax payable (21,087) (18,247) (16,690)
---------------------------------------------- ------------------------ ----------- ------------------------
Note 10: Earnings per share and dividends paid and proposed
Basic EPS is calculated by dividing the net profit for the
period attributable to ordinary equity shareholders of Ferrexpo plc
by the weighted average number of Ordinary Shares.
Diluted earnings per share 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.
Year-ended 31.12.17
6 months ended 30.06.2018 (unaudited) 6 months ended 30.06.2017 (unaudited) (audited)
Earnings/(loss)
for the
period/year
attributable to
equity Before Before Before
shareholders per special Special After special special Special After special special Special
share items items items items items items items items After special items
-------------- ------------ ------------ -------------- -------- -------- --------------------
Basic (US cents) 25.88 - 25.88 36.11 0.61 36.72 66.53 0.56 67.09
Diluted (US cents) 25.79 - 25.79 35.99 0.61 36.60 66.30 0.55 66.85
---------------------- ------------ ------------ -------------- ------------ ------------ -------------- -------- -------- --------------------
The calculation of the basic and diluted earnings per share is
based on the following data:
Year ended
Thousands 6 months ended 30.06.18 31.12.17 6 months ended 30.06.17
(unaudited) (audited) (unaudited)
Weighted average number of shares
Basic number of ordinary shares outstanding 585,940 585,674 585,641
Effect of dilutive potential ordinary shares 2,107 2,074 2,033
------------------------------------------------ ------------------------ ----------- ------------------------
Diluted number of ordinary shares outstanding 588,047 587,748 587,674
------------------------------------------------ ------------------------ ----------- ------------------------
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 proposed and paid
Prior to the dividend proposed below and taking into account
relevant thin capitalisation rules and dividend-related covenants
for the Group's major bank debt facilities, the total available
distributable reserves of Ferrexpo plc is US$86,114 thousand as of
30 June 2018.
6 months ended Year ended
US$000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Dividends proposed
Interim dividend for 2018: 3.3 US cents per Ordinary Share 19,348 - -
Final dividend for 2017: 3.3 US cents per Ordinary Share - - 19,328
Special dividend for 2017: 6.6 US cents per Ordinary Share - - 38,656
Special dividend for 2017: 3.3 US cents per Ordinary Share - - 19,328
Interim dividend for 2017: 3.3 US cents per Ordinary Share - 19,328 -
Total dividends proposed 19,348 19,328 77,312
------------------------------------------------------------ --------------- ------------------------ -----------
6 months ended Year ended
US$000 30.06.18 6 months ended 30.06.17 31.12.17
(unaudited) (unaudited) (audited)
Dividends paid during the year
Final dividend for 2017: 3.3 US cents per Ordinary Share 18,929 - -
Special dividend for 2017: 6.6 US cents per Ordinary Share 38,615 - -
Special dividend for 2017: 3.3 US cents per Ordinary Share 19,639 - -
Interim dividend for 2017: 3.3 US cents per Ordinary Share - - 19,266
Final dividend for 2016: 3.3 US cents per Ordinary Share - 19,679 19,679
Special dividend for 2016: 3.3 US cents per Ordinary Share - 19,371 19,371
------------------------------------------------------------ --------------- ------------------------ -----------
Total dividends paid during the period 77,183 39,050 58,316
------------------------------------------------------------ --------------- ------------------------ -----------
The final dividend paid for 2017 includes withholding tax of
US$3,187 thousand that is payable subsequent to the period ended 30
June 2018.
Note 11: Property, plant and equipment
During the six months period ended 30 June 2018, the additions
to property, plant and equipment totalled US$62,396 thousand (30
June 2017: US$45,539 thousand; 31 December 2017: US$123,643
thousand) and the net book value of the disposals of property,
plant and equipment totalled US$3,409 thousand (30 June 2017:
US$1,635 thousand; 31 December 2017: US$6,447 thousand). The total
depreciation charge for the period was US$30,192 thousand (30 June
2017: US$26,863 thousand; 31 December 2017: US$55,520
thousand).
The carrying value of property, plant and equipment includes
capitalised borrowing costs on qualifying assets of US$21,178
thousand (31 December 2017: US$17,810 thousand; 30 June 2017:
US$17,698 thousand).
Note 12: Other taxes recoverable and prepaid
As at 30 June 2018, taxes recoverable and prepaid comprised:
US$000 As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
VAT receivable 27,205 23,081 21,290
Other taxes prepaid 260 111 131
-------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid 27,465 23,192 21,421
-------------------------------------------- --------------- --------------- ---------------
As at 30 June 2018, US$26,667 thousand of the VAT receivable
relates to the Group's Ukrainian business operations (31 December
2017: US$21,254 thousand; 30 June 2017: US$19,673 thousand) of
which US$726 thousand (31 December 2017: US$678 thousand; 30 June
2017: US$109 thousand) was overdue. Management is of the opinion
that the overdue balances will be recovered during the next 12
months in full.
The total VAT receivable balance shown in the table above is net
of an allowance of US$1,366 thousand (31 December 2017: US$1,190
thousand; 30 June 2017: US$1,052 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 13: Inventories
As at 30 June 2018, inventories comprised:
US$000 As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Raw materials and consumables 31,701 34,295 32,338
Spare parts 53,882 42,053 43,147
Finished ore pellets 34,249 15,482 20,119
Work in progress 3,049 2,475 4,064
Other 2,295 2,340 1,762
------------------------------------ --------------- --------------- ---------------
Total inventories - current 125,176 96,645 101,430
------------------------------------ --------------- --------------- ---------------
Lean and weathered ore 212,806 175,831 162,740
------------------------------------ --------------- --------------- ---------------
Total inventories - non - current 212,806 175,831 162,740
------------------------------------ --------------- --------------- ---------------
Total inventories 337,982 272,476 264,170
------------------------------------ --------------- --------------- ---------------
Inventories are held at the lower of cost or net realisable
value.
Inventories classified as non-current comprise lean and
weathered ore stockpiles that are, based on the Group's current
processing plans, not planned to be processed within the next year.
It is the Group's intention to process this ore at a later point of
time and it is expected that it will take more than one year to
process this stockpile, depending on the Group's future mining
activities, processing capabilities and anticipated market
conditions.
Note 14: Cash and cash equivalents
As at 30 June 2018, cash and cash equivalents comprised:
US$000 Notes As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Cash at bank and on hand 82,250 97,742 92,645
Total cash and cash equivalents 3 82,250 97,742 92,645
--------------------------------- ------ --------------- --------------- ---------------
The debt repayments net of proceeds during the period ended 30
June 2018 totalled US$43,524 thousand (31 December 2017: US$238,670
thousand; 30 June 2017: US$162,507 thousand) affecting the balance
of cash and cash equivalents. Further information on the Group's
gross debt is provided in Note 15.
The balance of cash and cash equivalents held in Ukraine amounts
to US$27,205 thousand as at 30 June 2018 (31 December 2017:
US$10,281 thousand; 30 June 2017: US$13,593 thousand).
Note 17 provides details on the Group's balance of restricted
cash and deposits which has been fully provided for as currently
not available to the Group.
Note 15: 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 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Current
Eurobond issued 171,165 171,202 169,987
Syndicated bank loans - secured 92,500 112,500 135,000
Other bank loans - secured 14,733 16,218 17,660
Other bank loans - unsecured 1,494 1,523 1,494
Obligations under finance leases 3,816 3,969 3,817
Trade finance facilities 15,866 - 7,492
Total current interest bearing loans and borrowings 3 299,574 305,412 335,450
--------------------------------------------------------- ------ --------------- --------------- ---------------
Non-current
Eurobond issued - 171,202 169,987
Syndicated bank loans - secured 146,250 - 33,750
Other bank loans - secured 1,773 9,267 16,502
Other bank loans - unsecured 3,005 3,752 4,499
Obligations under finance leases 303 2,073 4,115
--------------------------------------------------------- ------ --------------- --------------- ---------------
Total non-current interest bearing loans and borrowings 3 151,331 186,294 228,853
--------------------------------------------------------- ------ --------------- --------------- ---------------
Total interest bearing loans and borrowings 450,905 491,706 564,303
--------------------------------------------------------- ------ --------------- --------------- ---------------
In the current period, management have reviewed the presentation
of the accrued interest and have re-classified it from interest
bearing loans and borrowings to accrued liabilities in order to
better reflect the nature of this balance in the presentation.
US$9,358 thousand and US$9,599 thousand have been re-presented for
the comparative periods ended 31 December 2017 and 30 June 2017 to
be on a consistent basis. There has been no restatement of the
underlying financial information.
At 30 June 2018, the Group's major external debt facilities
comprised:
-- a syndicated revolving US$350,000 thousand pre-export finance
facility, of which US$43,750 thousand was available (31 December
2017: US$131,250 thousand; 30 June 2017: US$218,750 thousand) and
fully drawn. The amortisation of this facility commenced in
November 2016 with eight quarterly amortisations and commitment
reductions of US$43,750 thousand to the final maturity date of 8
August 2018; and
-- a syndicated revolving US$195,000 thousand pre-export finance
facility, signed on 16 November 2017, which has been fully drawn in
March 2018. Following a grace period, the facility will be
amortised in eight quarterly instalments. The first instalment is
due on 31 March 2019 and the final maturity date is 31 December
2020.
The aforementioned 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;
-- PJSC 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 sales proceeds from certain assigned
sales contracts are exclusively received.
In addition to the major bank debt facilities listed above, the
Group has outstanding unsecured Notes at par value totalling
US$173,181 thousand as at 30 June 2018 (31 December 2017:
US$346,385 thousand; 30 June 2017: US$346,385 thousand) which fall
due in one instalment on 7 April 2019. The first instalment of
US$173,181 thousand fell due and was repaid on 7 April 2018. The
Notes have a 10.375% interest coupon payable semi-annually.
As at 30 June 2018, the Group has US$15,866 thousand open trade
finance facilities (31 December 2017: nil; 30 June 2017: US$7,492
thousand). Trade finance facilities are secured against receivables
related to these specific trades.
All facilities are shown net of associated arrangement fees,
except for the revolving syndicated pre-export finance facility,
for which the fees are presented in prepayments and current assets
and other non-current assets based on the maturity of the
underlying facility and are amortised over the term of the
facility.
The table below shows the movements in the interest-bearing
loans and borrowings:
6 months ended Year ended
US$000 30.06.18 6 months ended 31.12.17 30.06.17
(unaudited) (unaudited) (audited)
Opening balance of interest bearing loans and borrowings 491,706 723,154 723,154
Cash movements
Repayments of Eurobond issued (173,181) - -
Proceeds from syndicated bank loans - secured 195,000 - -
Repayments of syndicated bank loans - secured (68,750) (193,750) (137,500)
Repayments of other bank loans - secured (9,803) (20,512) (10,806)
Repayments of other bank loans - unsecured (820) (1,534) (767)
Repayments of obligations under finance leases (1,985) (3,690) (1,812)
Change of trade finance facilities, net 15,837 (19,025) (11,532)
Total cash movements (43,702) (238,511) (162,417)
----------------------------------------------------------- --------------- ------------------------ -----------
Non-cash movements
Amortisation of fees 2,747 7,014 3,532
Others 154 49 34
----------------------------------------------------------- --------------- ------------------------ -----------
Total non-cash movements 2,901 7,063 3,566
----------------------------------------------------------- --------------- ------------------------ -----------
Closing balance of interest bearing loans and borrowings 450,905 491,706 564,303
----------------------------------------------------------- --------------- ------------------------ -----------
Further information on the Group's exposure to interest rate,
foreign currency and liquidity risk is provided in Note 27 of the
Annual Report and Accounts 2017.
Note 16: Financial instruments
Fair values
Set out below are the carrying amounts of the Group's financial
instruments that are carried in the interim consolidated statement
of financial position:
US$000 As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Financial assets
Cash and cash equivalents 82,250 97,742 92,645
Trade and other receivables 80,529 88,327 80,539
Other financial assets 847 620 516
---------------------------------------- --------------- --------------- ---------------
Total financial assets 163,626 186,689 173,700
---------------------------------------- --------------- --------------- ---------------
Financial liabilities
Trade and other payables 47,720 48,428 34,048
Accrued liabilities 22,524 25,315 24,858
Interest bearing loans and borrowings 450,905 491,706 564,303
---------------------------------------- --------------- --------------- ---------------
Total financial liabilities 521,149 565,449 623,209
---------------------------------------- --------------- --------------- ---------------
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. The fair values
of interest-bearing loans and borrowings totalled US$456,702
thousand (31 December 2017: US$514,515 thousand; 30 June 2017:
US$584,689 thousand).
Other financial assets
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.
Note 17: Commitments and contingencies
Commitments
US$000 As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Operating lease commitments 47,676 42,470 47,927
Capital commitments on purchase of PPE 51,302 29,681 32,403
----------------------------------------- --------------- --------------- ---------------
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 transactional bank in Ukraine, Bank F&C ("BFC"),
is still going through the liquidation process after having been
declared insolvent by the National Bank of Ukraine and put under
temporary administration on 18 September 2015. The Group, through
its major subsidiaries in Ukraine, is engaged in various court
proceedings with the aim to maximise its recovery in the
liquidation process of BFC as disclosed below.
Following the commencement of the liquidation process of BFC and
in accordance with the applicable local legislation, FPM, LLC
Ferrexpo Yeristovo Mining GOK ("FYM") and LLC Ferrexpo Belanovo
Mining GOK ("FBM"), collectively referred to as "Ukrainian
subsidiaries", submitted on 21 January 2016 their claims for cash
and deposit balances held with BFC on the date of introduction of
temporary administration totalling UAH4,262 million (US$162,740
thousand as of 30 June 2018).
On 22 April 2016, the liquidator of BFC issued certificates
recognising UAH540 million (US$20,619 thousand as of 30 June 2018)
of these claims and recognised these claims in the ninth rank. The
afore-mentioned Ukrainian subsidiaries are currently involved in
legal proceedings in respect of the under-recognition of the claims
amounting to UAH3,722 million (US$142,121 thousand as of 30 June
2018) and the ranking of the claims in the liquidation process. The
court proceedings commenced in October 2016 and following various
hearings during the financial year 2017, the relevant court
instance dismissed on 25 October 2017 FPM's claim in full. FPM
filed an appeal on 13 November 2017. Several hearings took place
since the filing of the appeal without the court ruling on the
parties' motions. The hearing on 18 July 2018 ruled in favour of
FPM and as at the date of the approval of this set of accounts it
is not known whether the counter party is going to appeal against
this decision. A hearing in respect of FYM's claim on the same
matter took place on 9 July 2018 and was adjourned to 22 August
2018 whereas the claim of FBM is still pending with the relevant
court, but no hearings took place or are scheduled yet.
Taxation
Tax legislation in Ukraine
The Group prices its sales between its subsidiaries using
international benchmark prices for comparable products covering
product quality and applicable freight. The Group judges these to
be on terms which comply with applicable legislation. In August
2017, the State Fiscal Service of Ukraine ("SFS") commenced a tax
audit at the Group's major subsidiary in Ukraine with a focus on
cross-border transactions in terms of its pellet sales to another
subsidiary of the Group. According to the current legislation, the
SFS has to complete this audit within 18 months from the
commencement. No provision has been booked as at 30 June 2018.
Following a tax audit at PJSC Ferrexpo Poltava Mining ("FPM")
claims were made by the Ukrainian tax authorities in relation to
allegedly unpaid withholding tax totalling US$6,491 thousand
(UAH170 million) and associated fines and penalties of US$1,604
thousand (UAH42 million) in respect of interest paid to a
subsidiary of the Group in the United Kingdom in 2013 and 2014.
Following the audits for aforementioned years, the Ukrainian tax
authorities also initiated tax audits for the years 2015 and 2016.
The management of the Group expects to continue to successfully
defend any claims made by the tax authorities in the Ukrainian
courts. Consequently, no provision has been made for the claimed
withholding tax and associated fines and penalties as at 30 June
2018.
Note 18: Share capital and reserves
The share capital of Ferrexpo plc at 30 June 2018 was
613,967,956 (31 December 2017: 613,967,956; 30 June 2017:
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 (31 December 2017:
25,343,814 shares; 30 June 2017: 25,343,814 shares), which are held
in treasury, resulting from a share buyback that was undertaken in
September 2008, and 2,336,256 shares held in the employee benefit
trust reserve (31 December 2017: 2,916,419 shares; 30 June 2017:
2,916,419 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). The exchange
differences arising on translation of the Group's foreign
operations are initially recognised in the other comprehensive
income. See also the Interim Consolidated Statement of
Comprehensive Income on page 18 of these financial statements for
further details.
As at 30 June 2018 other reserves attributable to equity
shareholders of Ferrexpo plc comprised:
For the financial
year 2017 and the
6 months ended
30.06.18
Uniting of Treasury share Employee Benefit Translation Total other
US$000 interest reserve reserve Trust reserve reserve reserves
At 1 January 2017 31,780 (77,260) (5,108) (1,934,170) (1,984,758)
------------------- ------------------- ------------------- ------------------ ------------------- --------------
Foreign currency
translation
differences - - - (41,249) (41,249)
Tax effect - - - 4,557 4,557
------------------- ------------------- ------------------- ------------------ ------------------- --------------
Total
comprehensive
loss for the year - - - (36,692) (36,692)
Share based
payments - - 586 - 586
------------------- ------------------- ------------------- ------------------ ------------------- --------------
At 31 December
2017 (audited) 31,780 (77,260) (4,522) (1,970,862) (2,020,864)
------------------- ------------------- ------------------- ------------------ ------------------- --------------
Foreign currency
translation
differences - - - 79,022 79,022
Tax effect - - - (9,991) (9,991)
------------------- ------------------- ------------------- ------------------ ------------------- --------------
Total
comprehensive
income/(loss) for
the period - - - 69,031 69,031
Share based
payments - - 411 - 411
------------------- ------------------- ------------------- ------------------ ------------------- --------------
At 30 June 2018
(unaudited) 31,780 (77,260) (4,111) (1,901,831) (1,951,422)
------------------- ------------------- ------------------- ------------------ ------------------- --------------
For the 6 months ended
30.06.17
Treasury Total
Uniting of interest Share Employee Benefit Trust Translation other
US$000 reserve reserve reserve reserve reserves
At 1 January 2017 31,780 (77,260) (5,108) (1,934,170) (1,984,758)
------------------------- ------------------------- --------- ------------------------- ------------ ------------
Foreign currency
translation differences - - - 37,974 37,974
Tax effect - - - (6,015) (6,015)
------------------------- ------------------------- --------- ------------------------- ------------ ------------
Total comprehensive loss
for the period - - - 31,959 31,959
Share based payments - - 285 - 285
------------------------- ------------------------- --------- ------------------------- ------------ ------------
At 30 June 2017
(unaudited) 31,780 (77,260) (4,823) (1,902,211) (1,952,514)
------------------------- ------------------------- --------- ------------------------- ------------ ------------
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 49.5%. This is the only
associated company of the Group. Other related parties are
principally those entities controlled by Anatoly Trefilov who
re-signed as member of the supervisory board of PJSC Ferrexpo
Poltava Mining as of 19 April 2017. In accordance with the Listing
Rules, all transactions with the entities controlled by Anatoly
Trefilov within one year of his resignation from the supervisory
board have been still considered as related party transactions and
disclosed as such. Effective 20 April 2018, the entities controlled
by Anatoly Trefilov are no longer considered as related
parties.
All 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 30.06.18 (unaudited) 6 months ended 30.06.17 Year ended 31.12.17
(unaudited) (audited)
----------------------------------------------- ------------------------------------------ ----------------------------------------
Entities Asso-ciated Other related parties Entities Asso- Other related parties Entities Asso- Other related
under compa- nies under ciated under ciated parties
common common compa- common compa-
US$000 control control nies control nies
Other sales (a) 398 - 107 290 - 75 677 - 94
---------------- --------- ------------ ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Total related
party
transactions
within revenue 398 - 107 290 - 75 677 - 94
---------------- --------- ------------ ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Materials (b) 4,252 - 3 3,552 - 4 7,558 - 8
Spare parts and
consumables
(c) 1,291 - - 802 - - 1,382 - -
Total related
parties
transactions
within cost of
sales 5,543 - 3 4,354 - 4 8,940 - 8
---------------- --------- ------------ ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Selling and
distribution
expenses (d) 5,373 8,311 702 5,492 8,943 644 10,867 18,366 827
General and
administration
expenses (e) 344 - 212 284 - 267 594 - 425
Total related
parties
transactions
within
expenses 11,260 8,311 917 10,130 8,943 915 20,401 18,366 1,260
---------------- --------- ------------ ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Finance
expenses 58 - - 17 - - 34 - -
---------------- --------- ------------ ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Total related
party
transactions 11,318 8,311 917 10,147 8,943 915 20,435 18,366 1,260
---------------- --------- ------------ ---------------------- --------- ------- ---------------------- --------- ------- --------------------
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 Sales of power, steam and water and other materials for US$58
thousand (30 June 2017: US$38 thousand; 31 December 2017: US$88
thousand) and income from premises leased to Kislorod PCC of US$68
thousand (30 June 2017: US$68 thousand; 31 December 2017: US$135
thousand), and
a Sales of diesel to DVD Trans totalling US$155 thousand (30
June 2017: US$152 thousand; 31 December 2017: US$313 thousand).
b Purchases of compressed air, oxygen and metal scrap from
Kislorod PCC for US$2,199 thousand (30 June 2017: US$1,836
thousand; 31 December 2017: US$3,911 thousand);
b Purchases of cast iron balls from AutoKraZ Holding Co. for
US$229 thousand (30 June 2017: US$430 thousand; 31 December 2017:
US$851 thousand); and
b Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas
for US1,762 thousand (30 June 2017: US$1,237 thousand; 31 December
2017: US$2,673 thousand).
c Purchases of spare parts from CJSC Kyiv Shipbuilding and Ship
Repair Plant ("KSRSSZ") in the amount of US$549 thousand (30 June
2017: US$96 thousand; 31 December 2017: US$96 thousand);
c Purchases of spare parts from OJSC Uzhgorodsky Turbogas in the
amount of US$189 thousand (30 June 2017: US$137 thousand; 31
December 2017: US$294 thousand);
c Purchases of spare parts from Valsa GTV of US$263 thousand (30
June 2017: US$500 thousand; 31 December 2017: US$756 thousand);
and
c Purchases of spare parts from OJSC Berdichev Machine-Building
Plant Progress of US$274 thousand (30 June 2017: US$65 thousand; 31
December 2017: US$211 thousand).
d Purchases of advertisement, marketing and general public
relations services from FC Vorskla of US$5,373 thousand (30 June
2017: US$5,492 thousand; 31 December 2017: US$10,867 thousand).
e Insurance premiums of US$240 thousand (30 June 2017: US$188
thousand; 31 December 2017: US$403 thousand) paid to ASK Omega for
workmen's insurance and other insurances.
Associated companies
d Purchases of logistics services in the amount of US$8,311
thousand (30 June 2017: US$8,943 thousand; 31 December 2017:
US$18,366 thousand) relating to port operations, including port
charges, handling costs, agent commissions and storage costs.
Other related parties
d Purchases of logistics management services from Slavutich Ruda
Ltd. relating to customs clearance services and the coordination of
rail transit totalling US$702 thousand (30 June 2017: US$644
thousand; 31 December 2017: US$827 thousand). Effective 20 April
2018, Slavutich Ruda Ltd. is no longer considered as a related
party. Further information is provided on page 32.
e Legal and administrative services in the amount of US$186
thousand (30 June 2017: US$216 thousand; 31 December 2017: US$221
thousand) provided by Kuoni Attorneys at law Ltd., which is
controlled by a former member of the Board of Directors of Ferrexpo
plc who resigned in November 2016, but still acts as member of the
Board of Directors of one of the subsidiaries of the Group and
received Directors' fee of US$48 thousand (30 June 2017: US$38
thousand; 31 December 2017: 86 thousand); and
e Consulting services totalling US$26 thousand (30 June 2017:
US$51 thousand; 31 December 2017: US$205 thousand) provided by Nage
Capital Management AG, which is controlled by a former member of
the Board of Directors of Ferrexpo plc who resigned in August 2014,
but still acts as a member of the Board of Directors of one of the
subsidiaries of the Group and received Directors' fee of US$19
thousand (30 June 2017: US$20 thousand; 31 December 2017: US$39
thousand).
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature
which were undertaken between Group companies and entities under
common control, associated companies and other related parties
during the periods presented.
6 months ended 30.06.18 (unaudited) 6 months ended 30.06.17 Year ended 31.12.17 (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
Purchases
in the
ordinary
course of
business 688 - - 373 - - 781 - -
----------- --------- ------------ ------------ --------- -------- ------------ --------- -------- ----------
Total
purchases
of
property,
plant and
equipment 688 - - 373 - - 781 - -
----------- --------- ------------ ------------ --------- -------- ------------ --------- -------- ----------
During the period ended 30 June 2018, the Group purchased major
spare parts and equipment from Valsa GTV totalling US$212 thousand
in respect of the upgrade of two sections at the beneficiation
plant. The Group further procured services relating to the top soil
removal and relocation of waste material and gravel in the amount
of US$472 thousand from DVD Trans.
During the comparative periods ended 30 June 2017 and 31
December 2017, the Group procured services relating to the top soil
removal and relocation of waste material and gravel from DVD Trans
totalling US$310 thousand and US$713 thousand, respectively.
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 30.06.18 (unaudited) Year ended 31.12.17 (audited) 6 months ended 30.06.17
(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
Prepayments
for
property,
plant and
equipment
(f) 4,893 - - 3,022 - - - - -
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
Total
non-current
assets 4,893 - - 3,022 - - - - -
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
Trade and
other
receivables
(g) 218 3,957 - 203 1,082 37 257 3,559 50
Prepayments
and other
current
assets (h) 1,411 - - 1,088 - 171 1,167 - -
Total
current
assets 1,629 3,957 - 1,291 1,082 208 1,424 3,559 50
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
Trade and
other
payables
(i) 801 486 - 344 1,367 64 619 1,081 207
Accrued
liabilities
and deferred
income - - - - - 51 - - -
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
Current
liabilities 801 486 - 344 1,367 115 619 1,081 207
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
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
f Prepayments for property, plant and equipment totalling
US$4,599 thousand (31 December 2017: US$2,722 thousand; 30 June
2017: nil) were made to OJSC Berdichev Machine-Building Plant
Progress and US$293 thousand (31 December 2017: US$256 thousand; 30
June 2017: nil) to AutoKraZ Holding Co.
h Prepayments and other current assets totalling US$953 thousand
relate to prepayments made to FC Vorskla for advertisement,
marketing and general public relations services (31 December 2017:
US$858 thousand; 30 June 2017: US$858 thousand).
i Trade and other payables included US$246 thousand (31 December
2017: US$172 thousand; 30 June 2017: US$166 thousand) related to
the purchase of compressed air, oxygen and metal scrap from
Kislorod PCC and US$237 thousand (31 December 2017: US$23 thousand;
30 June 2017: US$145 thousand) related to the purchase of cast iron
balls from OJSC Uzhgorodsky Turbogas.
Associated companies
g Trade and other receivables of US$3,957 thousand (31 December
2017: US$1,082 thousand; 30 June 2017: US$3,559 thousand) related
to dividend receivables from TIS Ruda LLC.
i Trade and other payables included US$486 thousand (31 December
2017: US$1,367 thousand; 30 June 2017: US$1,081 thousand) related
to purchases of logistics services from TIS Ruda LLC.
Corporate Social Responsibility ("CSR") programme
In order to maintain its social license to operate, the Ferrexpo
Group operates a Corporate Social Responsibility ('CSR') programme
in Ukraine and makes contributions into Blooming Land Charitable
Foundation ("Blooming Land"), which was established with the
primary function of co-ordinating the Group's CSR programme.
Blooming Land focuses on activities related to diabetes awareness
and diagnosis, eyesight diagnosis and preventative care, and
general support and care for the elderly on a national basis.
Funding is provided solely by one of Ferrexpo's subsidiaries in
Ukraine and Khimreaktiv LLC, an entity connected with Rosava which
in turn is controlled by Kostyantin Zhevago, the CEO and ultimate
beneficial owner of Ferrexpo. Blooming Land, and its three
sub-funds, are separately managed and accordingly are not
controlled and consolidated by the Group. There is no agreement or
arrangement between Ferrexpo and Khimreaktiv LLC in relation to
their contributions to Blooming Land and its sub-funds.
In the six months ended 30 June 2018, Ferrexpo made charitable
contributions of US$9,514 thousand to Blooming Land. In the year
ended 31 December 2017, Ferrexpo made charitable payments to
Blooming Land totalling US$24,003 thousand, of which US$12,034
thousand was paid in the six months ended 30 June 2017. Blooming
Land's charitable activities are managed via three related
charitable sub-funds which carry out charitable activities by
subcontracting individual managers for the specific events they
run.
During the period, the Board became aware that in the financial
year 2017, temporary funding contributions totalling US$16,318
thousand were advanced by Khimreaktiv LLC into one of the sub-funds
of Blooming Land. Later during the financial year 2017, those
monies were paid to the event managers to conduct their charitable
activities and the sub-fund repaid Khimreaktiv LLC using monies
subsequently received from Ferrexpo. Based on the advice obtained
from the Group's Sponsor, those repayments to Khimreaktiv LLC are
not considered to be related party transactions for the Ferrexpo
Group under the UK Listing Rules, but are considered related party
transactions under IAS 24 Related Parties, that ought previously to
have been disclosed. In light of this, the Board has made further
enquiries about the transactions of Blooming Land and its sub-funds
and is satisfied that the related party disclosures are
complete.
Note 20: Events after the reporting period
No material adjusting or non-adjusting events have occurred
subsequent to the period end other than the proposed dividend
disclosed in Note 10.
Alternative Performance Measures ("APM")
When assessing and discussing the Group's reported financial
performance, financial position and cash flows, management may make
reference to Alternative Performance Measures ("APM") that are not
defined or specified under International Financial Reporting
Standards ("IFRS").
APMs are not uniformly defined by all companies, including those
in the Group's industry. Accordingly, the APMs used by the Group
may not be comparable with similarly titled measures and
disclosures made by other companies. APMs should be considered in
addition to, and not as a substitute for or as superior to,
measures of financial performance, financial position or cash flows
reported in accordance with IFRS.
Ferrexpo makes reference to the following APMs in the 2018 Half
Year Results.
C1 cash cost of production
Definition: Non-financial measure, which represents the cash
costs of production of iron pellets from own ore divided by
production volume of own production ore. Non-C1 cost components
include non-cash costs such as depreciation, inventory movements
and costs of purchased ore and concentrate. The Group presents the
C1 cash cost of production because it believes it is a useful
operational measure of its cost competitiveness compared to its
peer group.
US$000 As at 30.06.18 As at 30.06.17 As at 31.12.17
(unaudited) (unaudited) (audited)
C1 cash costs 211,458 162,655 335,451
Non-C1 cost components 1,156 9,917 31,745
------------------------------------ --------------- --------------- ---------------
Cost of sales - pellet production 212,614 172,572 367,196
------------------------------------ --------------- --------------- ---------------
Own ore produced (tonnes) 5,081,720 5,138,600 10,394,440
C1 cash cost per tonne (US$) 41.6 31.7 32.3
------------------------------------ --------------- --------------- ---------------
Underlying EBITDA
Definition: The Group calculates the underlying EBITDA as profit
before tax and finance plus depreciation and amortisation and net
gains and losses from disposal of investments and property, plant
and equipment and share-based payments and operating and
non-operating special items, including write-offs and impairment
losses and other exceptional items. The underlying EBITDA is
presented because it is a useful measure for evaluating the Group's
ability to generate cash and its operating performance. See Note 5
for further details.
Closest equivalent IFRS measure: Profit before tax and
finance.
Rationale for adjustment: The Group presents the underlying
EBITDA as it is a useful measure for evaluating its ability to
generate cash and its operating performance. It excludes the impact
of special items that can mask underlying changes in performance.
Also it aids comparability across peer groups as it is a
measurement that is often used.
Reconciliation to closest IFRS equivalent:
US$000 Notes As at 30.06.18 As at 30.06.17 As at 31.12.17
(unaudited) (unaudited) (audited)
Underlying EBITDA 234,150 286,938 550,705
Losses on disposal of property, plant and equipment (2,995) (2,103) (7,754)
Share-based payments (411) (285) (586)
Operating special items 7 - (79) (407)
Depreciation and amortisation (27,809) (22,295) (46,392)
----------------------------------------------------- ------ --------------- --------------- ---------------
Profit before tax and finance 202,935 262,176 495,566
----------------------------------------------------- ------ --------------- --------------- ---------------
Underlying diluted earnings per share before special items
Definition: Earnings per share excluding special items and
calculated using the diluted number of Ordinary Shares
outstanding.
Closest equivalent IFRS measure: Diluted earnings per share.
Rationale for adjustment: Excludes the impact of special items
that can mask underlying changes in performance.
Reconciliation to closest IFRS equivalent:
Year-ended 31.12.17
6 months ended 30.06.2018 (unaudited) 6 months ended 30.06.2017 (unaudited) (audited)
Before
Before special Before special special Special
US$000 items Special items Total items Special items Total items items Total
Earnings/(loss)
for the year
attributable to
equity
shareholders per
share
Basic (US cents) 25.88 - 25.88 36.11 0.61 36.72 66.53 0.56 67.09
Diluted (US
cents) 25.79 - 25.79 35.99 0.61 36.60 66.30 0.55 66.85
----------------- --------------- --------------- -------- --------------- --------------- -------- -------- -------- ------
Net debt to underlying EBITDA
Definition: Net debt divided by the underlying EBITDA (for the
last 12 months):
US$000 As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Net debt (US$000) (368,655) (393,964) (471,658)
Underlying EBITDA (US$000) 497,917 550,705 502,262
-------------------------------- --------------- --------------- ---------------
Net debt to underlying EBITDA 0.74x 0.72x 0.94x
-------------------------------- --------------- --------------- ---------------
Rationale for adjustment: The ratio is a measurement of the
underlying EBITDA Group's leverage, calculated as a company's
interest-bearing liabilities minus cash or cash equivalents,
divided by its underlying EBITDA.
Reconciliation to net debt:
US$000 Notes As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Cash and cash equivalents 14 82,250 97,742 92,645
Interest-bearing loans and borrowings - current 15 (299,574) (305,412) (335,450)
Interest-bearing loans and borrowings - non-current 15 (151,331) (186,294) (228,853)
----------------------------------------------------- ------ --------------- --------------- ---------------
Net debt (368,655) (393,964) (471,658)
----------------------------------------------------- ------ --------------- --------------- ---------------
For a reconciliation of underlying EBITDA to profit before tax
and finance see page 24.
Underlying EBITDA margin
Definition: Underlying EBITDA divided by revenue:
US$000 Notes As at 30.06.18 As at 30.06.17 As at 31.12.17
(unaudited) (unaudited) (audited)
Underlying EBITDA (US$000) 234,150 286,938 550,705
Revenues (US$000) 4 616,717 591,049 1,197,494
---------------------------- ------ --------------- --------------- ---------------
Underlying EBITDA margin 38% 49% 46%
---------------------------- ------ --------------- --------------- ---------------
Rationale for adjustment: The Group presents the Underlying
EBITDA margin as it is a useful measure for evaluating its
operating performance as a percentage of total revenue. It excludes
the impact of special items that can mask underlying changes in
performance. Also it aids comparability across peer groups as it is
a measurement that is often used.
Reconciliation to closest IFRS equivalent:
US$000 Notes As at 30.06.18 As at 30.06.17 As at 31.12.17
(unaudited) (unaudited) (audited)
Revenue 4 616,717 591,049 1,197,494
--------- ------ --------------- --------------- ---------------
For a reconciliation of Underlying EBITDA to profit before tax
and finance see page 24.
Capital investment
Definition: Capital expenditure for the purchase of property,
plant and equipment and intangible assets.
Closest equivalent IFRS measure: Purchase of property, plant and
equipment and intangible assets (net cash flows used in investing
activities).
Rationale for adjustment: The Group presents the capital
investment as it is a useful measure for evaluating the degree of
capital invested in its business operations.
Reconciliation to closest IFRS equivalent:
US$000 Notes As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Purchase of property, plant and equipment and intangible
assets
(net cash flows used in investing activities) 11 55,765 102,953 (45,284)
---------------------------------------------------------- ------- --------------- --------------- ---------------
Total liquidity
Definition: Sum of cash and cash equivalents and available
facilities.
Closest equivalent IFRS measure: Cash and cash equivalents.
Rationale for adjustment: The Group presents total liquidity as
it is a useful measure for evaluating its ability to meet
short-term business requirements.
Reconciliation to closest IFRS equivalent:
US$000 Notes As at 30.06.18 As at 31.12.17 As at 30.06.17
(unaudited) (audited) (unaudited)
Cash and cash equivalents 14 82,250 97,742 92,645
Available facilities - 213,750 50,000
--------------------------- ------ --------------- --------------- ---------------
Total liquidity 82,250 311,492 142,645
--------------------------- ------ --------------- --------------- ---------------
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
Bank F&C Bank Finance & Credit
Belanovo or Bilanivske An iron ore deposit located immediately
to the north of Yeristovo
Benchmark Price International seaborne traded iron ore
pricing mechanism understood to be offered
to the market by major iron
ore producers under long-term contracts
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
Blast furnace Used in Basic Oxygen Furnace "BOF" steelmaking
pellets and constitute about 70% of the traded
pellet market
Board The Board of Directors of the Company
Bt Billion tonnes
C1 costs Represents 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
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,
Serbia and Slovakia
CFR Delivery including cost and freight
China and South This segmentation for the Group's sales
East Asia includes China and Vietnam
CIF Delivery including cost, insurance and
freight
CIS The Commonwealth of Independent States
Code The UK Corporate Governance Code
CODM The Executive Committee is considered
to be the Group's Chief Operating Decision-Maker
Company Ferrexpo plc, a public company incorporated
in England and Wales with limited liability
CPI Consumer Price Index
CRU The CRU Group provides market analysis
and consulting advice in the global
mining industry
(see www.crugroup.com)
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
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 LLC Ferrexpo Belanovo Mining, 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 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 PJSC Ferrexpo Poltava Mining, a company
incorporated under the laws of Ukraine
FRMC Financial Risk Management Committee,
a sub-committee of the Executive Committee
FTSE 250 Financial Times Stock Exchange top 250
companies
FYM LLC Ferrexpo Yeristovo Mining, a company
incorporated under the laws of Ukraine
GPL Gorishne-Plavninske-Lavrykivske, the
iron ore deposit being mined by FPM
Group The Company and its subsidiaries
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 beneficiation process
with enriched iron content
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
Iron ore sinter Fine iron ore screened to -6.3mm
fines
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 (in Ukraine)
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
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
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
Underlying EBITDA The Group calculates the Underlying
EBITDA as profit before tax and finance
plus depreciation and amortisation and
net gains and losses from disposal of
investments and property, plant and
equipment and share based payments and
operating and non-operating special
items, including write-offs and impairment
losses and other exceptional items
Underlying EBITDA Underlying EBITDA (see definition above)
margin as a percentage of revenue
US$/t US Dollars per tonne
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.
VAT Value Added Tax
WAFV Weighted average fair value
Western Europe This segmentation for the Group's sales
includes Germany and Italy
WMS Wet magnetic separation
Yeristovo or Yerystivske The deposit being developed by FYM
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LIFSSTEIFIIT
(END) Dow Jones Newswires
August 02, 2018 02:02 ET (06:02 GMT)
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