2015 Interim Results
5 August 2015
FERREXPO plc
("Ferrexpo" or the "Group")
2015 Interim Results
Ferrexpo plc, a top four supplier of iron ore pellets to the global steel industry, today announces interim results for the six months ended 30 June 2015.
Michael Abrahams, Non-Executive Chairman, said:
"We are pleased to report a good set of results and an excellent operational and marketing performance given the challenging circumstances in both the iron ore industry and in Ukraine. We have increased production and sales volumes, improved the quality of our pellet output and benefited from a significantly reduced cost base. Furthermore, we have reduced net debt and extended our debt maturities.
"We remain cautious in the short to medium term, due to the potential for further iron ore price weakness and the fragile state of the Ukrainian economy."
1H 2015 Financial Summary:
|
US$ million (unless otherwise stated)
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Change |
Year ended 31.12.14 |
|
Total pellet production (kt) |
5,817 |
5,369 |
8% |
11,021 |
|
Sales volumes (kt) |
5,680 |
5,498 |
3% |
11,167 |
|
Revenue |
512 |
759 |
(33%) |
1,388 |
|
EBITDA |
176 |
321 |
(45%) |
496 |
|
Profit before tax |
143 |
248 |
(42%) |
254 |
|
Diluted EPS (US cents per share) |
19.57 |
34.65 |
(44%) |
30.39 |
|
Dividend (US cents per share) |
3.3 |
3.3 |
- |
13.2[1] |
|
Working capital (increase) |
(28) |
(59) |
(53%) |
(15) |
|
Net cash flow from operating activities |
88 |
138 |
(36%) |
288 |
|
Capital investment |
25 |
132 |
(81%) |
235 |
|
Net debt |
(653) |
(694) |
(6%) |
(678) |
|
Net debt to EBITDA (last 12 months) |
1.9x |
1.2x |
58% |
1.4x |
[1] This amount includes a special dividend of 6.6 US cents per share.
1H 2015 Summary:
· Production volumes grew 8% to a record 1H level of 5.8 million tonnes while at the same time output of the Group's 65% Fe pellets increased 93% to 5.1 million tonnes
· Customer demand remained strong throughout the period, sales volume growth was impacted by the timing of shipments
· Broadly stable pellet premiums, increased iron content in the Group's pellets and lower freight rates reduced the impact of a 46% decline in the iron ore price index compared to 1H 2014
· The cash cost of production reduced by 30%, or US$14.4 per tonne, to US$33.4 per tonne of pellets (1H 2014: US$47.8 per tonne) as a result of local currency devaluation, lower oil prices and increased operating efficiencies.
· EBITDA US$176 million (1H 2014: US$321 million). This was achieved in the light of significantly lower selling prices and included a non-cash operating foreign exchange gain of US$15 million (1H 2014: US$47 million)
· Ferrexpo received US$42 million for the sale of its 15.51% stake in Ferrous Resources during the period.
· Capital investment significantly reduced to US$25 million (1H 2014: US$132 million) due to the completion of Group's investment programme to increase the quality and quantity of its pellet output to 65% Fe and 12 million tonnes respectively.
· Cash at 30 June 2015 US$471 million (31 December 2014: US$627 million) of which liquidity inside Ukraine was US$165 million (31 December 2014: US$161 million)
· The Group successfully extended its 2016 Eurobond maturity to 2018 and 2019 including a prepayment of US$154 million[2]
· Net debt as of 30 June 2015 was US$653 million (31 December 2014: US$678 million). Net debt to EBITDA of 1.9x as of 30 June 2015 (31 December 2014: 1.4x).
2 US$54 million prepaid as part of February Exchange offer, US$100 million prepaid after period end as part of July Exchange Offer. For more information see Financial Management on page 7.
There will be an analyst and investor meeting at 09.00 (UK time) today at the offices of JP Morgan on 60 Victoria Embankment, London EC4Y 0JP. A live video webcast and slide presentation of this event will be available on www.ferrexpo.com. It is recommended that participants register at 08.45. The presentation will be hosted by Michael Abrahams (Chairman), Kostyantin Zhevago (CEO) and Chris Mawe (CFO).
Webcast link: http://edge.media-server.com/m/p/er65mekt
For further information contact:
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Ferrexpo: |
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Ingrid McMahon |
+44 207 389 8304
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Maitland: |
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Neil Bennett |
+44 207 379 5151 |
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Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine and transport and sales operations throughout the world. It has been mining and processing high quality iron ore pellets for the global steel industry for over 35 years. Ferrexpo's resource base is one of the largest iron ore deposits in the world. The Group is the 4th largest supplier of pellets to the global steel industry and the largest producer and exporter of pellets from the Former Soviet Union. In 2014, it produced 11 million tonnes of pellets, a 2% increase compared to 2013 and a record for the Company. Ferrexpo has a diversified customer base supplying steel mills in Austria, China, Japan, Germany as well as other European and Asian countries. Ferrexpo is listed on the main market of the London Stock Exchange under the ticker FXPO. For further information, please visit www.ferrexpo.com
REVIEW OF 1H 2015
Following the successful completion of the four year investment programme in 1Q 2015, Ferrexpo has been able to reduce the financial impact of a 46% decline in the iron ore price index[3] in the first half of 2015, compared to the first half of 2014. It has achieved this through increasing the volume and quality of pellet output to record levels, enabling an increase in sales volumes and an improvement in price realisations. It has also reduced the cost base by combining the mining plan of the new Yeristovo mine with the Poltava mine while benefiting from production efficiencies as well as a weaker local currency.
As a result, Ferrexpo is able to report an EBITDA margin of 34% in 1H 2015 (1H 2014:42%) despite the average iron ore fines price being US$50 per tonne lower compared to the first half of 2014 (average 1H 2015: US$61 per tonne vs. average 1H 2014: US$111 per tonne). Overall, EBITDA in 1H 2015 was US$176 million compared to US$321 million in 1H 2014.
Ferrexpo also extended US$346 million of the April 2016 Eurobond maturity to April 2018 and April 2019 and disposed of its 15.5% stake in Ferrous Resources for US$42 million, strengthening the balance sheet in the current lower priced environment.
The Group's mining operations are in the Poltava region of central Ukraine, 425 kilometres to the North West of the conflict in the East of the country. To date, operations remain unaffected by the conflict, however, the Directors note that the Ukrainian economy and, in particular, the banking sector remains fragile.
Industry analysts forecast a surplus of iron ore fines in 2H 2015 and 2016 due to the completion of major supply projects, particularly in Brazil and Australia, while growth in steel output, notably in China, is expected to remain weak. This is likely to result in continued industry price weakness in the short to medium term.
In contrast to the increase in iron ore fines, an increase in iron ore pellets should remain relatively limited reflecting the highly capital intensive nature of installing beneficiation and pelletising facilities. Long term demand from steel mills for higher grade product, such as pellets, is expected to continue so that mills can maintain the quality of their final product, partially offsetting the increased supply of lower grade fines material. Furthermore, growing demands for environmentally friendly sources of iron ore, such as pellets, due to concerns regarding the high emissions of sinter fines as well as ambitions to produce higher value-added steel products should underpin demand for pellets in China.
Ferrexpo is the fourth largest iron ore pellet exporter in the world by volume with a long life asset, a competitive cost base and a diversified high quality customer portfolio. As a testament to the confidence in the future of the Group, during the period, Ferrexpo built on its position as a key supplier to premium steel mills around the world, notably to Germany, and it made its first shipment to South Korea.
Financial Results
Revenue
Group revenue was US$512 million in 1H 2015, 33% lower than 1H 2014 (US$759 million) reflecting a weak iron ore price index which fell on average by 46%3 compared to the same period in 2014. The Group's net realised FOB/DAP price outperformed the index price by 11% due to relatively stable pellet premiums, an increase in the average iron content of the Group's pellets and lower freight rates. In addition, Ferrexpo increased its sales volumes by 3% to 5.7 million tonnes (1H 2014: 5.5 million tonnes). For further information see Market environment, iron ore and freight prices on page 8.
3 Platts index price for 62% Fe iron ore fines, CFR China
Costs
C1 Cash Cost of Production
The Group's C1 cash cost of production reduced by US$14.4 per tonne to US$33.4 per tonne compared to US$47.8 per tonne in 1H 2014. Of this 30% cost reduction, approximately US$3.7 per tonne was driven by increased volume output and mining efficiency gains (for further information see Production Costs on page 10), US$3.0 per tonne due to lower oil, and US$9.0 per tonne was due to the Hryvnia devaluation while higher processing costs related to increased production volumes of 65% Fe pellets increased the C1 cost by US$1.3 per tonne.
In 1H 2015, the average exchange rate of the UAH per US dollar was 21.43 compared to 10.28 in 1H 2014. The higher rate in 1H 2015 reduced the C1 cost by 21% as approximately 45% of the Group's cost to produce a pellet is in Hryvnia For further information on the impact of the Hryvnia devaluation see Currency on page 5.
Local C1 cost inflation during the period was primarily driven by wage inflation (+21% vs. average 1H 2014) and electricity price increases (+43% vs. average 1H 2014) following the large devaluation of the Hryvnia in February 2015. These costs, however, are still significantly lower in US dollar terms than the prior period. The table below shows the month on month change in CPI for the first half of the year. Inflation rose strongly in March and April following the devaluation in February and thereafter the rate of increase started to slow. For further information see Update on Risks: Inflation on page 12.
Ukrainian 2015 Month on Month CPI
|
|
January 2015 |
February 2015 |
March 2015 |
April 2015 |
May 2015 |
June 2015 |
|
Ukraine CPI |
103.1 |
105.3 |
110.8 |
114.0 |
102.2 |
100.4 |
Source: www.ukrstat.gov.ua
Selling and Distribution costs
Selling and distribution costs decreased by 32% to US$113 million (1H 2014: US$165 million) as a result of lower international freight rates and devaluation of the local currency.
Costs to transport the Group's pellets to border points for international dispatch were US$57 million or US$10 per tonne (1H 2014: US$68 million or US$12 per tonne). The 24% reduction in rail costs was mainly due to the Hryvnia depreciation against the US dollar as 100% of rail costs are in local currency. Following the devaluation, railway tariff inflation increased on average by 42% compared to 1H 2014 although this rate of inflation is starting to slow due to subdued economic activity within Ukraine and corresponding lower usage of the rail infrastructure.
International freight costs reduced significantly to US$36 million in 1H 2015 compared to US$65 million in 1H 2014. This was driven by lower oil prices and depressed market conditions in the shipping industry. For further information see Market Environment, Iron Ore and Freight Prices on page 8.
Currency
Ferrexpo prepares its accounts in US Dollars. The functional currency of the Ukrainian operations is the Hryvnia. During 1H 2015 the Hryvnia devalued from UAH15.77 per US Dollar as of 1 January 2015 to UAH21.01 per US Dollar as of 30 June 2015. The average rate for the period was UAH21.43 per US Dollar. Balances at 30 June 2015 are converted at the prevailing rate. The devaluation of the currency since 31 December 2014 has resulted in a US$312 million reduction in the net assets of the Group and has been reflected in the translation reserve. Since 30 June 2015, the Hryvnia has remained stable at a level of around UAH21 to UAH23 per US Dollar.
Operating Profit from Continuing Operations before Adjusted Items
Operating profit from continuing operations before adjusted items was US$142 million in 1H 2015 compared to US$273 million in 1H 2014. This includes a non-cash operating foreign exchange gain of US$15 million. (1H 2014: US$47 million).
EBITDA
EBITDA for the period was US$176 million compared to US$321 million in 1H 2014. The decline reflected the fall in iron ore prices during the period offset by an improved sales mix, higher sales volumes and significant cost reduction.
Ferrous Resources
As announced previously, in the 2H of 2014 Ferrexpo fully impaired its 15.5% investment in Ferrous Resources due to uncertainties, at the time, regarding its operational activities as well as the future development of its mining operation, resulting in a non-cash charge of US$82 million. During 1H 2015, Ferrexpo disposed of its entire stake for US$42 million and as a result a gain on disposal has been recognised in the income statement for US$42 million.
Interest
Finance expense was US$37 million (1H 2014: US$33 million). The average cost of debt for the period was 5.32% compared to an average cost of 5.03% in 1H 2014 (FY 2014: 4.85%).The increase reflected the amortisation of the Group's US$420 million pre-export banking facility which commenced in 2H 2014 as well as higher coupon payments on the Eurobond which were partially offset by a lower principal amount outstanding.
As of 30 June 2015 gross debt was US$1.1 billion (31 December 2014: gross debt US$1.3 billion) and net debt stood at US$653 million (31 December 2014: US$678 million).
Tax
The income tax charge for 1H 2015 was US$27 million (1H 2014: US$40 million) based on an expected tax rate of 19% for the financial year 2015 (full year 2014: 28%). The rate reflects lower non tax deductible charges in 2015. As in the prior year, the majority of tax paid by the Group is inside Ukraine.
The requirement in Ukraine for exporters to prepay a certain percentage of VAT refunds in the form of corporate profit tax ('CPT') has remained in place in 1H 2015. During the period, the Group prepaid on average 10% of its VAT refunds as corporate profit tax. CPT paid under this arrangement is in excess of the tax due, resulting in a prepaid CPT balance. As of 30 June 2015, the prepaid corporate profit tax balance was US$54 million (30 June 2014: US$89 million, 31 December 2014: US$74 million). Due to the Hryvnia devaluation against the US dollar in 1H 2015 the balance was reduced by US$18 million which is included in the translation reserve. Further details on pre-paid corporate profit tax are disclosed in note 11 to the accounts.
Cash Flows
Net debt as of 30 June 2015 reduced by US$25 million to US$653 million (31 December 2014: US$678 million) and by US$41 million compared to 30 June 2014 (US$694 million).
Net cash flows from operating activities in 1H 2015 totalled US$88 million compared to US$138 million in 1H 2014 principally reflecting the lower iron ore price environment partly offset by lower costs.
Capital expenditure decreased significantly to US$25 million (1H 2014: US$132 million) reflecting the low iron ore price environment and the completion of the Group's investment programme to increase the quality and volume of its pellets to 65% Fe and 12 million tonnes per annum respectively. For further details see Capital Investment below on page 6.
During the period the Group received US$42 million from the sale of Ferrous Resources and repaid US$180 million of debt primarily reflecting US$111 million of amortisation of its US$420 million pre-export finance facility and the repayment of US$54 million of 2016 Eurobonds as part of the exchange offer. For further details see Financial Management on page 7.
Capital Investment
In 1Q 2015, the Group commissioned the final sections of the new floatation units allowing the production facilities to produce a greater proportion of premium 65% Fe pellets while also increasing overall production volumes. This was the final part of a four year investment programme to modernise and increase the capacity and quality of the Group's output. As such capital expenditure reduced significantly in 1H 2015 to US$25 million (1H 2014: US$132 million).
Following these investments, Ferrexpo significantly reduced its discretionary capital expenditure reflecting the current iron ore price environment. Capital expenditure is expected to be at a level of between US$50 million to US$100 million per annum in the current environment. The actual amount of expenditure will be determined by the iron ore price and the Group's cash generation ability as well as Ferrexpo's aim to balance capital expenditure with dividend payments and net debt reduction. The Group now has a well invested asset base which is efficient and low cost.
Dividends
The Group's policy is to pay a modest but consistent dividend throughout the economic cycle while ensuring adequate liquidity to support the business, reducing net leverage and maintaining returns to shareholders. As part of the extension of the Group's Eurobond in February and July 2015 (see Financial Management below) Ferrexpo agreed to restrict future dividend payments to reflect the higher of either an annual payment of US$60 million or a 10% yield on the market capitalisation of the equity for the year in question until the 2019 bonds have been repaid.
The Directors recommend an interim dividend of 3.3 US cents per Ordinary Share amounting to US$19 million (1H 2014: 3.3 US cents) for payment on 18 September 2015 to shareholders on the register at the close of business on 14 August 2015. The ex-dividend date will be 13 August 2015. The dividend will be paid in UK Pounds Sterling, with an election to receive in US Dollars.
Financial Management
Ferrexpo has maintained financial discipline notwithstanding the prevailing environment. Key elements of its financial strategy include funding capital expenditures out of operating cash flows and maintaining sufficient liquidity to ensure operations are shielded as far as practical from risk.
Net debt to EBITDA for the last 12 months was 1.9x as of 30 June 2015 (30 June 2014: 1.2x; 31 December 2014: 1.4x) which was within the Group's net debt to EBITDA covenant of 3.0x. As of 30 June 2015, Ferrexpo had net debt of US$653 million (31 December 2014: US$678 million) which included cash and cash equivalents of US$471 million (31 December 2014: US$627 million).
Due to the reduced iron ore price outlook for the coming years, the Company is looking to better match the amortisation profile of its debt facilities to the net cash flow generation of the business taking into account operational and other risks. As part of this ongoing process, on 23 February 2015, it extended US$160 million of its US$500 million Eurobond due for repayment in April 2016 equally into April 2018 and April 2019 in exchange for a prepayment of US$54 million of the principal at par and an increase in the coupon from 7.875% to 10.375%.
Following the period end, on 2 July 2015, the Company extended US$186 million of the remaining April 2016 US$500 million Eurobond equally to April 2018 and April 2019 for a prepayment of US$100 million of the liability at par, and as a result extinguished the 2016 debt in full.
The business requires a significant liquidity buffer to ensure that it can continue to operate in a volatile commodity price and country environment. See Update on Risks including Ukrainian Banking Sector and Iron Ore Price on page 11. To ensure liquidity remains strong in view of the current operating environment, management of the Group's bank debt amortisation profile is ongoing.
As a result of the forecast cash flows of the business, the large reserve base and the competitive positioning of the business on the global iron ore and pellet cost curves together with the support already received from its bondholders, the accounts have been drawn up on a going concern basis, however attention is drawn to the risks facing the business on page 11.
Market Environment, Iron Ore and Freight Prices
The World Steel Association has reported that global crude steel production declined 2.0% in 1H 2015 to 813 million tonnes compared to 830 million tonnes in 1H 2014. Of this, Chinese steel production declined 1.2% to 410 million tonnes compared to 415 million tonnes in 1H 2014.
Meanwhile, the global supply of iron ore was 697 million tonnes in line with 1H 2014 reflecting 5% growth from Australia and 7% growth from Brazil, while supply from the rest of the world declined[4].
In 1H 2015, the Platts index price[5] for 62% Fe iron ore fines, CFR China, declined from US$72 per tonne as of 1 January 2015 to a seven year low of US$48 per tonne in April before recovering to US$60 per tonne as of 30 June 2015. The average price during the period was US$61 per tonne compared to an average price of US$111 per tonne in 1H 2014 and average price of US$97 for the full year 2014.
In contrast to the decline in the iron ore fines price, the market premium paid for pellets in 1H 2015 was relatively stable. The long term contract pellet premium in the key markets of Western Europe and North East Asia was set at US$32 to US$33 per tonne compared to US$38 per tonne in 1H 2014. While on the Chinese spot market, pellet premiums were in line with average 1H 2014 levels at US$29 per tonne reflecting a strong 1Q 2015 before premiums softened in 2Q 2015.
In general, the lower pellet premiums compared to 1H 2014 reflected an increase in supply of pellets from the two largest pellet producers in Brazil as they commissioned their pellet expansion projects at the end of 2014. In total these projects will increase pellet supply by approximately 16 million tonnes per annum. Ferrexpo believes that there is unlikely to be any new major pellet supply into the seaborne market in 2H 2015 and 2016.
Ferrexpo's sales to non-traditional markets (47% of total sales in 1H 2015) are in general based on CFR or similar delivered terms with sales to traditional markets (53% of total sales in 1H 2015) priced on a DAP or FOB barge basis. For those long term sales contracts requiring calculation of a DAP or FOB equivalent price, transparent capesize freight indices such as the Baltic Exchange C3 freight price (capesize route from Tubarao, Brazil to Qingdao, China) were deducted from the CFR Platts 62% Fe Index adjusted for the appropriate form and quality premiums. The average C3 freight rate in 1H 2015 was US$11 per tonne which was significantly lower than the average of US$21 per tonne in 1H 2014. This reflected lower oil prices and depressed market conditions in the freight market.
As a result, Ferrexpo's net realised FOB/DAP[6] pellet price for the period declined by 35% compared to 1H 2014, 11% better than the 62% Fe fines price index for the same period. This performance was as a result of broadly stable pellet premiums and increased iron content in the Group's output (both of which demonstrate the benefit of producing a premium iron ore product) and lower freight rates.
4 Source: CRU Iron Ore Market Statistical Review July 2015
5 The Platts index iron ore fines price refers to the 62% Fe iron ore fines price to China, CFR. Ferrexpo's received price for its iron ore pellets is composed of this index price plus a pellet premium, adjusted for Fe content and quality and less freight.
6 Free on Board, i.e. pellets delivered to port for seaborne export. Delivered at point, i.e. pellets deliver to the Western boarder for export to Europe.
Operational Review
Marketing
In 1H 2015, Ferrexpo increased sales volumes by 3% to 5.7 million tonnes of iron ore pellets compared to 5.5 million tonnes in 1H 2014. The table below shows the breakdown of sales by key market regions where sales mix remained broadly stable, however, overall tonnages delivered to Europe increased on higher output and strong demand. The increase in sales volumes were slightly behind production volumes due to the timing of shipments.
Sales volume by market regions:
|
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
|
Central Europe |
53% |
50% |
|
China |
24% |
23% |
|
Western Europe |
9% |
10% |
|
North East Asia |
8% |
10% |
|
Turkey, Middle East, India |
6% |
7% |
|
Total sales volume (million tonnes) |
5,680 |
5,498 |
The Group's long term contracts are all based on a spot index price using various reference periods. The table below shows the breakdown of sales by pricing terms.
Sales volume by pricing terms:
|
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
|
Monthly spot index |
82% |
81% |
|
Current quarter spot index |
5% |
6% |
|
Lagging 3 month spot index |
6% |
6% |
|
Spot sales fixed on day |
7% |
7% |
|
Total sales volume (million tonnes) |
5,680 |
5,498 |
Production
Health and Safety
The Group is pleased to report that there have been no work related fatalities at the Group's operations during the period (1H 2014: one). The lost-time injury frequency rate ('LTIFR') at FPM was 0.63 per million man hours in 1H 2015 (1H 2014: 0.34 per million man hours). This reflected five accidents in 1H 2015 compared to three in 1H 2014. The LTIFR at FYM was zero in line with 1H 2014. Overall, Ferrexpo's total LTIFR in Ukraine (including contractors) for 1H 2015 was 0.54 compared to 0.29 in 1H 2014 (FY 2014: 0.47). Given the rise in the LTIFR, the Group has increased its supervision of critical activities within repairs and maintenance. It is also undertaking an overall risk assessment of the Group's operating environment including management training programmes and the development and implementation of common safety standards for all sites.
LTIFR for the Group's barging operation, DDSG, including leased crews, was 1.91 per million man hours worked (1H 2014: 12.54 per million man hours worked). The number of accidents declined to one in 1H 2015 compared to six in 1H 2014.
|
LTIFR |
1H 2015 |
1H 2014 |
2014 |
|
Mining operations |
0.54 |
0.29 |
0.47 |
|
Barging operations |
1.91 |
12.54 |
9.08 |
|
Total Group |
0.61 |
0.84 |
0.86 |
Production Volumes and Quality
Production of pellets increased to a new record in 1H 2015, growing 8.3% to 5.8 million tonnes of pellets (1H 2014: 5.4 million tonnes of pellets). Concurrently, following the completion of the Group's quality upgrade project in early 1Q 2015, the iron content of the Group's output increased and production of Ferrexpo's premium 65% Fe pellets[7] grew 93% to 5.1 million tonnes or 87% of total production volumes (1H 2014:2.6 million tonnes of 65% Fe pellets or 49% of total volume). The increase in iron content and quality of the Group's pellets is in line with Ferrexpo's strategy to supply premium product to high end steel producers.
The table below summarises production in 1H 2015 compared to 1H 2014.
|
Production in tonnes ̔000 |
1H 2015 |
1H 2014 |
Change % |
|
|
Pellet production from own ore |
5,503.94 |
5,212.88 |
5.6% |
|
|
|
62% Fe |
750.44 |
2,741.90 |
(72.6%) |
|
|
65% Fe |
4,753.49 |
2,470.98 |
92.4% |
|
|
|
|
|
|
|
Pellet production from third party materials |
312.77 |
155.72 |
100.9% |
|
|
|
62% Fe |
5.96 |
0.00 |
- |
|
|
65% Fe |
306.81 |
155.72 |
97.0% |
|
|
|
|
|
|
|
Total pellet production |
|
5,816.70 |
5,368.60 |
8.3% |
|
|
62% Fe |
756.40 |
2,741.90 |
(72.4%) |
|
|
65% Fe |
5,060.30 |
2,626.70 |
92.6% |
7 Ferrexpo Premium Pellets, FPP, contain 65% Fe compared to Ferrexpo Basic Pellet, FBP, which contain 62% Fe.
Production Costs
The Group's average C1 cash cost reduced by 30% to US$33.4 per tonne in 1H 2015 compared to US$47.8 per tonne in 1H 2014 and by 27% when compared to US$45.9 per tonne for FY 2014. The decline was driven by the depreciation of the Hryvnia as well as fixed cost benefits from increased volume output and lower costs due to optimisation of the Group's mining plan (see Costs and Currency on page 5).
Ferrexpo has modified its overall mining plan to reduce costs, taking advantage of lower cost ore from the new Yeristovo mine whilst at the same time optimising repairs and maintenance as well as shift patterns and changeovers. Since implementation in January 2015, this has resulted in a 34% decrease in the amount of waste material moved compared to 1H 2014 and reduced the C1 cash cost by approximately US$3.7 per tonne.
Other actions taken, in conjunction with the Business Improvement Programme, include review of the Group's top twenty supplier contracts as well as implementation of international mining best practice. This includes standardising certain functions across the business especially in drilling and blasting and personal protective equipment. The Group believes these actions should contribute towards a lower cost of production on a per tonne basis.
Overall, Ferrexpo believes that its Business Improvement Programme has reduced the C1 cash cost by US$5 per tonne, at current prices, since its implementation in 2006. In addition, the development of the FYM pit, and the expansion and modernisation of FPM's production facilities since 2011 has reduced the average C1 cash cost by approximately US$4 per tonne on an ongoing basis after accounting for increased processing costs associated with producing a higher proportion of premium 65% Fe pellets.
Ferrexpo is a low cost and efficient pellet producer and is competitively placed on the global benchmark cost curve for 62% Fe iron ore fines after adjusting for the premium it receives relative to the index fines price. This allows the Group to remain profitable even in the current low iron ore price environment.
CSR
Ferrexpo is the largest employer in Komsomolsk, Ukraine employing approximately one fifth of the population or 9,417 people. Due to Ukraine's weak public finances and fragile economy as well as the ongoing conflict in the east of the country, the Group increased its support for local and regional communities during the period. As a result, community support donations increased from US$10 million in 1H 2014 to US$16 million in 1H 2015. The majority of the spend is intended for local and regional public organisations such as hospitals, schools and local infrastructure.
Ukraine
Since the election of the pro-democracy government in Ukraine in 2014 and a new four-year loan of US$17.5 billion from the IMF in March 2015, as part of a broader US$40 billion bailout programme, the new authorities have shown commitment to tackling corruption, increasing transparency and making economic reforms. To date Ukraine has received US$6.7 billion of the US$17.5 billion IMF package.
Ferrexpo's priority within this environment is to continue to export all of its product to its first class customer base, as it has done throughout its 40 year production history. The Group's operations are in the Poltava region of central Ukraine, 425 kilometres to the North West of the conflict in the East of the country.
For further information see Update on Risks: Political below on page 11.
Board Changes
Having considered the criteria set out in paragraph B.1.1 of the UK Corporate Governance Code and having noted that it is three years since Mike Salamon retired from the board of New World Resources plc and ceased to represent Ferrexpo's significant shareholder CERCL holdings Limited (previously known as BXR Group Limited), the Board has decided that Mike Salamon is independent for the purposes of the UK Corporate Governance Code.
In addition the following announcements are made under Listing Rule 9.6.11 (3):
- Mike Salamon will join the Remuneration Committee in November 2015 and will then succeed Oliver Baring (who will remain on the Committee) as Chairman.
- Mary Reilly, who joined the Board on 27 May 2015, has been appointed to the Audit Committee and will succeed Wolfram Kuoni (who will remain on the Committee) as Chairman with effect from November 2015.
Update on Risks
Since the publication of the 2014 annual results in March 2015, the Group assesses that the risks facing the business, as highlighted on pages 26 to 31 of the 2014 Annual Report and Accounts, are still relevant for the Group. An update is provided below on developments of key risks in 1H 2015.
· Political
As part of the IMF US$17.5 billion loan package in March 2015, Ukraine is required to reduce its public debt as a percentage of GDP to more sustainable levels (in 2014 it was approximately 100% of GDP). The government is in discussion with its private creditors to reduce its debt burden by US$15.3 billion. These negotiations are ongoing and if they do not succeed it could result in a sovereign default which would impact the government's ability to borrow additional funds and could also further hinder corporates, including Ferrexpo, in obtaining funding from international capital markets at competitive rates or at all. It may also result in exchange controls, impacting the availability of operational financial assets held in country, and it may result in a slowdown of VAT repayments to local exporters or an increase in local taxes reducing the Group's liquidity position.
· Ukrainian banking sector
The Ukrainian banking sector is currently undergoing a series of stress tests by the National Bank of Ukraine ('NBU'), as the recent Hryvnia devaluation and the non-repayment of loans have severely affected the sector's ability to operate. In March 2015, Ukraine's fourth largest bank, Delta Bank, was declared insolvent, and several other major banks were provided with emergency assistance. The Company's transactional bank within Ukraine, where the vast majority of its expenditures occur, remains Bank Finance and Credit ('Bank F&C'), which is a related party, and is ranked as the tenth largest bank in Ukraine in terms of total assets. On 12 June 2015, Bank F&C received a two year stabilisation loan of UAH 750 million (US$36 million) from the NBU. Following stress tests by the NBU, the bank's principal shareholder has increased its share capital in June 2015 by UAH 1.97 billion (US$93 million). The bank is currently undergoing further recapitalisation by the main shareholder and large private depositors, which if unsuccessful could result in the reclassification and or impairment of the cash balances held with this institution. Should this cash be unavailable, however, the Group believes it holds sufficient liquidity outside Ukraine and on call to meet its operational needs. For further information see Financial Management on page 7 and note 19 (related party transactions) in the accounts.
The Group regularly reviews its banking relationship in Ukraine within the context of the overall banking sector and especially in terms of stability, reliability and confidentiality. Under the Company's treasury policy, it holds the equivalent of up to three months' operating costs and sustaining capital expenditures within Ukraine (up to US$180 million) as a liquidity buffer so that the operations may withstand any unforeseen circumstances and continue to operate in times of financial or operational stress.
· Exchange Rate Risk
The Group receives all of its income in US dollars while approximately half of its total cost base is denominated in Ukrainian Hryvnia. The Hryvnia on average depreciated by 108% against the US dollar in the first half of the year to UAH21.43 per US dollar compared to UAH10.28 per US dollar in the first half of 2014. This has had a significant positive effect on the Group's cost base and ensures that Ferrexpo is highly competitive at a time when iron ore prices are trading near seven year lows.
The devaluation, however, has also resulted in adjustments to the carrying value of certain assets and liabilities of the Group, resulting in unrealized cash and non-cash net losses. See notes 8, 12, 13, and 16 of the accounts for further information.
· Ukrainian Inflation
Following the substantial devaluation of the Hryvnia in February 2015 inflation in 1H 2015 compared to 1H 2014 was 48%. For the full year 2015, the IMF has indicated that they expect an inflation rate of 46% compared to 2014. The areas of inflation that the Group is most exposed to are wages, electricity and rail tariffs. The Group looks to partly offset cost inflation through increases in mining and production efficiencies. For further information see Costs on page 5.
· VAT
During 1H 2015, the Group received six VAT refunds and the balance as of 30 June 2015 was US$55 million compared to US$74 million as of 31 December 2014. At the period end, VAT repayments in respect of November 2014, February 2015 and March 2015 have not been repaid. In total these amounted to UAH490 million or US$23 million which is expected to be refunded in 2H 2015.
The devaluation of the Hryvnia in 1H 2015 reduced the VAT balance in US dollar terms by US$18 million which was reflected in lower cash flow to the Group. The non or late repayment of VAT remains a risk to the liquidity position of the Company. For further information see Political risk update on page 11 and note 14 in the accounts.
· Taxes
During the period, the Group prepaid on average 10% of its VAT refunds as corporate profit tax ('CPT'). The requirement to pre-pay CPT in return for VAT refunds reduces the cash flows of the Group and its liquidity position. As of 30 June 2015, the Group had a prepaid CPT balance, in excess of the corporate profit tax due, of US$54 million compared to US$74 million as of 31 December 2014 (30 June 2014: US$89 million). The devaluation of the Hryvnia during 1H 2015 reduced the carrying value of this Hryvnia denominated asset by US$18 million compared to 31 December 2014. This ongoing requirement to prepay CPT in excess of tax due on the profits of the business represents an ongoing risk to the liquidity of the Group. For further information see note 11 in the accounts.
· Energy supply
Following a brief disruption of electricity supply in December 2014, there have been no further energy supply disruptions to the Group's operations to date. In 1H 2015, Ukraine further diversified its sources of gas imports as well as the supply of electricity within the country. Due to the current political and economic situation, however, there remains a risk that gas and electricity supplies may be disrupted again particularly in the colder winter months when general demand is higher.
· Iron Ore Price
The Group is fully exposed to the iron ore price which has been both volatile and generally weak over the past two years. For the six months ended 30 June 2015, the benchmark iron ore fines price declined by 46% to US$61 per tonne compared to an average of US$111 per tonne in the first half of 2014. This has negatively impacted Ferrexpo's profitability for the period although the Group has been able to partly offset this due to the fixed price premium it receives for the majority of its pellets.
Since 30 June 2015, the benchmark iron ore fines price has continued to decline to a new seven year low of US$44 per tonne on 7 July 2015 before recovering to US$55 per tonne as of 31 July 2015, a 7% decrease compared to 30 June 2015 (US$60 per tonne). Industry consensus as of 1 July 2015[8] for the 62% fines iron ore price China CFR for 2015 is approximately US$54 per tonne which implies an average price of US$47 per tonne in 2H 2015 compared to the average price of US$61 per tonne in 1H 2015. For further information see Market environment, iron ore and freight prices on page 8.
· Pellet Premium
Ferrexpo earns a substantial proportion of its current profits from the pellet premium steel mills pay above the underlying iron ore fines price. Compared to the 62% Fe iron ore fines price index which has declined materially over the past two years, the pellet premium has remained relatively stable. As a result, the pellet premium now represents a historically high proportion of the underlying iron ore fines price. This is due to limited new pellet supply compared to the increase in iron ore fines (especially of low iron content). This may ultimately prove to be unsustainable if steel mill profitability continues to deteriorate due to lower global steel demand. For further information see Market environment, iron ore and freight prices on page 8.
· Global Freight
Ferrexpo is exposed to international freight rates as all of its long term contracts are priced with reference to transparent indices such as the Baltic Exchange C3 freight price (capesize route from Tubarao, Brazil to Qingdao, China). Fronthaul capesize voyage rates are currently trading at three year lows, with the reductions driven by low oil prices and overcapacity. As a result, the shipping industry is experiencing financial hardship which has led to the scrapping and retirement of fleet, and the resulting loss of capacity may lead to increased daily charter rates going forward. An increase in freight rates would directly reduce the Group's received net back price on the proportion of the Group's sales agreed on a DAP/FOB basis. For further information see Market environment, iron ore and freight prices on page 8.
8 Compiled by Deutsche Bank industrials team using 15 sell side analyst Iron Ore price forecasts
Going Concern
The Group continues to generate positive free cash flow under the lower iron ore price environment, but is exposed to various risk factors such as changes in the global iron ore market, local inflation in Ukraine and international freight costs. An update of the Group's key business activities and risk factors likely to affect its future development, performance and position since 31 December 2014 are set out on pages 4 to 13 of this report. The full disclosure of the Group's business activities and risk factors are disclosed in the 2014 Annual Report and Accounts. The financial position of the Company as of 30 June 2015 including its cash flows, liquidity position and debt facilities are described on pages 4 to 7 of this report. Note 30 of the 2014 Annual Report and Accounts, on pages 114 to 123, sets out the Group's objectives, policies and processes for managing its capital, its financial risk management objectives and details of its financial instruments; its exposure to credit risk, liquidity risk as well as currency risk and interest rate risk.
The Group's forecasts and projections, taking into account possible changes in the various risk factors, as disclosed in the update on risks on page 11 of this report and the principal risks included in the Annual Report and Accounts 2014 on page 26, show that Ferrexpo has adequate financial resources to continue in operational existence for the foreseeable future and as such the Directors are of the view that the Group is a going concern and the interim consolidated financial statements have been drawn up on this basis.
Outlook
As a result of the continued instability in Ukraine and the weak iron ore price environment, Ferrexpo remains cautious over the near term outlook. Ferrexpo is a competitive producer of high quality pellets, with a long reserve life, selling to premium steel mills around the world. The volume and quality of its production continues to increase. These factors should ensure that it is able to operate successfully even through low points of the commodities cycles as it has demonstrated in the past.
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.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
For and on behalf of the Board
Michael Abrahams CBE DL
Chairman
Chris Mawe
Chief Financial Officer
Independent Review Report to Ferrexpo PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 which comprises the Interim Consolidated Income Statement, Interim Consolidated Statement of Comprehensive Income, Interim Consolidated Statement of Financial Position, Interim Consolidated Statement of Cash Flows, Interim Consolidated Statement of Changes in Equity and related notes 1 to 22. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
4 August 2015
Interim Consolidated Income Statement
|
US$'000 |
Notes |
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Revenue |
4 |
511,881 |
758,913 |
1,388,285 |
|
Cost of sales |
3/5 |
(235,801) |
(333,102) |
(647,960) |
|
Gross profit |
|
276,080 |
425,811 |
740,325 |
|
Selling and distribution expenses |
|
(112,934) |
(164,761) |
(311,514) |
|
General and administrative expenses |
6 |
(20,495) |
(23,683) |
(48,642) |
|
Other income |
|
3,031 |
4,246 |
9,094 |
|
Other expenses |
7 |
(18,180) |
(15,699) |
(57,014) |
|
Operating foreign exchange gains |
8 |
14,865 |
47,445 |
76,372 |
|
Operating profit from continuing operations before adjusted items |
|
142,367 |
273,359 |
408,621 |
|
Under recovery and write-down of VAT receivable |
14 |
− |
(5,866) |
(6,790) |
|
Write-offs and impairment losses |
9 |
(981) |
(1,362) |
(83,534) |
|
Gain on disposal of available-for-sale investment |
9 / 21 |
41,767 |
− |
− |
|
Share of profit from associates |
|
4,014 |
3,212 |
4,878 |
|
Losses on disposal of property, plant and equipment |
|
(2,698) |
(3,015) |
(4,825) |
|
Profit before tax and finance from continuing operations |
|
184,469 |
266,328 |
318,350 |
|
Finance income |
10/14 |
1,671 |
17,643 |
19,250 |
|
Finance expense |
10 |
(36,587) |
(33,265) |
(68,472) |
|
Non-operating foreign exchange losses |
8 |
(6,181) |
(3,062) |
(14,846) |
|
Profit before tax |
|
143,372 |
247,644 |
254,282 |
|
Income tax expense |
11 |
(27,223) |
(39,623) |
(70,442) |
|
Profit for the period/year from continuing operations |
|
116,149 |
208,021 |
183,840 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity shareholders of Ferrexpo plc |
|
114,832 |
203,256 |
178,316 |
|
Non-controlling interests |
|
1,317 |
4,765 |
5,524 |
|
|
|
116,149 |
208,021 |
183,840 |
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic (US cents) |
12 |
19.61 |
34.72 |
30.46 |
|
Diluted (US cents) |
12 |
19.57 |
34.65 |
30.39 |
Interim Consolidated Statement of Comprehensive Income
|
US$ 000 |
Notes |
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
||
|
|
|
(unaudited) |
(unaudited) |
(audited) |
||
|
Profit for the period/year |
|
116,149 |
208,021 |
183,840 |
||
|
Items that may subsequently be reclassified to profit or loss: |
|
|
|
|
||
|
Exchange differences on translating foreign operations |
|
(335,332) |
(760,526) |
(1,205,667) |
||
|
Income tax effect |
|
23,115 |
47,568 |
80,394 |
||
|
Net gains/(losses) on available-for-sale financial assets |
21 |
41,767 |
(183) |
− |
||
|
Income tax effect |
|
− |
42 |
− |
||
|
Net other comprehensive loss before reclassification of items to profit and loss |
|
(270,450) |
(713,099) |
(1,125,273) |
||
|
Reclassification to profit or loss relating to available-for-sale investments sold or impaired |
21 |
(41,767) |
− |
(712) |
||
|
Net other comprehensive loss to be reclassified to profit or loss in subsequent periods |
|
(312,217) |
(713,099) |
(1,125,985) |
||
|
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
||
|
Remeasurement (losses)/gains on defined benefit pension liability |
|
(249) |
(2,485) |
1,649 |
||
|
Income tax effect |
|
24 |
294 |
(195) |
||
|
Net other comprehensive (loss)/gain not being reclassified to profit or loss in subsequent periods |
|
(225) |
(2,191) |
1,454 |
||
|
Other comprehensive loss for the period/year, net of tax |
|
(312,442) |
(715,290) |
(1,124,531) |
||
|
|
|
|
|
|
||
|
Total comprehensive loss for the period/year, net of tax |
|
(196,293) |
(507,269) |
(940,691) |
||
|
|
|
|
|
|
||
|
Total comprehensive loss attributable to: |
|
|
|
|
||
|
Equity shareholders of Ferrexpo plc |
|
(192,199) |
(499,351) |
(926,422) |
||
|
Non-controlling interests |
|
(4,094) |
(7,918) |
(14,269) |
||
|
|
|
(196,293) |
(507,269) |
(940,691) |
||
|
|
|
|
|
|
||
Interim Consolidated Statement of Financial Position
|
US$'000 |
Notes |
As at 30.06.15 |
As at 30.06.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Assets |
|
|
|
|
|
Property, plant and equipment |
13 |
717,001 |
1,137,167 |
926,433 |
|
Goodwill and other intangible assets |
|
45,524 |
81,118 |
60,468 |
|
Investments in associates |
|
9,392 |
9,278 |
8,569 |
|
Available-for-sale financial assets |
21 |
23 |
82,595 |
46 |
|
Inventories |
15 |
80,369 |
63,810 |
81,987 |
|
Other non-current assets |
|
12,455 |
43,211 |
18,211 |
|
Income taxes recoverable and prepaid |
11 |
53,902 |
55,207 |
73,782 |
|
Other taxes recoverable and prepaid |
14 |
1,182 |
- |
1,519 |
|
Deferred tax assets |
|
36,515 |
32,370 |
32,358 |
|
Total non-current assets |
|
956,363 |
1,504,756 |
1,203,373 |
|
Inventories |
15 |
112,038 |
134,747 |
124,722 |
|
Trade and other receivables |
|
64,846 |
102,539 |
87,226 |
|
Prepayments and other current assets |
|
28,752 |
25,629 |
21,057 |
|
Income taxes recoverable and prepaid |
11 |
− |
33,347 |
− |
|
Other taxes recoverable and prepaid |
14 |
54,181 |
184,700 |
71,982 |
|
Cash and cash equivalents |
3/16 |
470,535 |
359,441 |
626,509 |
|
|
|
730,352 |
840,403 |
931,496 |
|
Assets classified as held for sale |
|
− |
1,003 |
26 |
|
Total current assets |
|
730,352 |
841,406 |
931,522 |
|
Total assets |
|
1,686,715 |
2,346,162 |
2,134,895 |
|
Equity and liabilities |
|
|
|
|
|
Share capital |
17 |
121,628 |
121,628 |
121,628 |
|
Share premium |
|
185,112 |
185,112 |
185,112 |
|
Other reserves |
17 |
(1,759,538) |
(1,047,552) |
(1,452,988) |
|
Retained earnings |
|
1,912,333 |
1,896,283 |
1,855,690 |
|
Equity attributable to equity shareholders of the parent |
|
459,535 |
1,155,471 |
709,442 |
|
Non-controlling interest |
|
4,065 |
14,510 |
8,159 |
|
Total equity |
|
463,600 |
1,169,981 |
717,601 |
|
Interest-bearing loans and borrowings |
3/18 |
597,447 |
840,977 |
1,056,253 |
|
Defined benefit pension liability |
|
24,781 |
40,373 |
28,557 |
|
Provision for site restoration |
|
1,814 |
2,037 |
2,345 |
|
Deferred tax liability |
|
419 |
1,585 |
841 |
|
Total non-current liabilities |
|
624,461 |
884,972 |
1,087,996 |
|
Interest-bearing loans and borrowings |
3/18 |
525,643 |
211,983 |
248,374 |
|
Trade and other payables |
|
25,826 |
32,991 |
32,351 |
|
Accrued liabilities and deferred income |
|
27,974 |
30,429 |
34,191 |
|
Income taxes payable |
|
9,869 |
4,086 |
5,898 |
|
Other taxes payable |
|
9,342 |
11,720 |
8,484 |
|
Total current liabilities |
|
598,654 |
291,209 |
329,298 |
|
Total liabilities |
|
1,223,115 |
1,176,181 |
1,417,294 |
|
Total equity and liabilities |
|
1,686,715 |
2,346,162 |
2,134,895 |
The financial statements were approved by the Board of Directors on the 4 August 2015.
Kostyantin Zhevago Christopher Mawe
Chief Executive Officer Chief Financial Officer
Interim Consolidated Statement of Cash Flows
|
US$'000 |
Notes |
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit before tax |
|
143,372 |
247,644 |
254,282 |
|
Adjustments for: |
|
|
|
|
|
Depreciation of property, plant and equipment and amortisation of intangible assets |
|
29,328 |
44,315 |
82,269 |
|
Interest expense |
|
35,064 |
30,798 |
64,166 |
|
Under recovery and write-down of VAT receivable |
14 |
− |
5,866 |
6,790 |
|
Interest income |
10 |
(1,671) |
(17,643) |
(19,250) |
|
Share of profit from associates |
|
(4,014) |
(3,212) |
(4,878) |
|
Movement in allowance for doubtful receivables |
|
(29) |
(254) |
8,011 |
|
Losses on disposal of property, plant and equipment |
|
2,698 |
3,015 |
4,825 |
|
Gain on disposal of available-for-sale investment |
9 / 21 |
(41,767) |
− |
− |
|
Write-offs and impairment losses |
9 |
981 |
1,362 |
83,534 |
|
Site restoration provision |
|
53 |
142 |
1,180 |
|
Employee benefits |
|
3,754 |
3,632 |
6,531 |
|
Share based payments |
|
256 |
190 |
530 |
|
Operating foreign exchange gains |
2 / 8 |
(14,865) |
(47,445) |
(76,372) |
|
Non-operating foreign exchange losses |
2 / 8 |
6,181 |
3,062 |
14,846 |
|
Operating cash flow before working capital changes |
|
159,341 |
271,472 |
426,464 |
|
Changes in working capital: |
|
|
|
|
|
Decrease/(increase) in trade and other receivables |
|
14,160 |
(10,671) |
5,395 |
|
Increase in inventories |
|
(36,807) |
(33,084) |
(96,554) |
|
Decrease in trade and other accounts payable |
|
(7,771) |
(14,511) |
(11,083) |
|
Decrease/(increase) in VAT and other taxes recoverable and payable 1 |
|
2,184 |
(448) |
86,950 |
|
Cash generated from operating activities |
|
131,107 |
212,758 |
411,172 |
|
Interest paid |
|
(34,017) |
(28,101) |
(61,307) |
|
Income tax paid |
|
(8,131) |
(45,048) |
(58,077) |
|
Post-employment benefits paid |
|
(926) |
(1,911) |
(3,340) |
|
Net cash flows from operating activities |
|
88,033 |
137,698 |
288,448 |
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment |
|
(24,610) |
(130,513) |
(232,809) |
|
Proceeds from disposal of property, plant and equipment |
|
174 |
764 |
5,322 |
|
Purchase of intangible assets |
|
(330) |
(1,121) |
(1,711) |
|
Purchase of available-for-sale investment |
|
− |
(17) |
(17) |
|
Proceeds from sale of available-for-sale investment |
|
41,767 |
− |
− |
|
Interest received |
|
1,602 |
972 |
2,376 |
|
Dividends from associates |
|
− |
2,755 |
2,755 |
|
Net cash flows used in investing activities |
|
18,603 |
(127,160) |
(224,084) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from borrowings and finance |
|
− |
40,015 |
392,515 |
|
Repayment of borrowings and finance |
|
(179,944) |
(15,268) |
(119,009) |
|
Arrangement fees paid |
|
(4,416) |
(3,578) |
(3,580) |
|
Dividends paid to equity shareholders of Ferrexpo plc |
|
(58,184) |
(57,893) |
(76,904) |
|
Net cash flows used in financing activities |
|
(242,544) |
(36,724) |
193,022 |
|
Net (decrease)/increase in cash and cash equivalents |
|
(135,908) |
(26,186) |
257,386 |
|
Cash and cash equivalents at the beginning of the period/year |
|
626,509 |
390,491 |
390,491 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
(20,066) |
(4,864) |
(21,368) |
|
Cash and cash equivalents at the end of the period/year |
16 |
470,535 |
359,441 |
626,509 |
1 The movement in the comparative period ended 31 December 2014 includes the effect of a VAT receivable balance amounting to US$97,067 thousand recovered through VAT
bonds. See also note 14
Interim Consolidated Statement of Changes in Equity
|
For the financial year 2014 and the six months ended 30 June 2015 |
Attributable to equity shareholders of the parent |
|
|
||||||||
|
US$ 000 |
Issued capital |
Share premium |
Uniting of interest reserve (note 17) |
Treasury share reserve (note 17) |
Employee Benefit Trust reserve (note 17) |
Net unreali-sed gains reserve (note 17) |
Translation reserve (note 17) |
Retained earnings |
Total capital and reserves |
Non-controlling interests |
Total equity |
|
At 1 January 2014 |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
1,753,200 |
1,712,614 |
22,428 |
1,735,042 |
|
Profit for the period |
− |
− |
− |
− |
− |
− |
− |
178,316 |
178,316 |
5,524 |
183,840 |
|
Other comprehensive loss |
− |
− |
− |
− |
− |
(712) |
(1,105,480) |
1,454 |
(1,104,738) |
(19,793) |
(1,124,531) |
|
Total comprehensive loss for the period |
− |
− |
− |
− |
− |
(712) |
(1,105,480) |
179,770 |
(926,422) |
(14,269) |
(940,691) |
|
Equity dividends paid to shareholders of Ferrexpo plc |
− |
− |
− |
− |
− |
− |
− |
(77,280) |
(77,280) |
− |
(77,280) |
|
Share-based payments |
− |
− |
− |
− |
530 |
− |
− |
− |
530 |
− |
530 |
|
At 31 December 2014 (audited) |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,012) |
− |
(1,401,496) |
1,855,690 |
709,442 |
8,159 |
717,601 |
|
Profit for the period |
− |
− |
− |
− |
− |
− |
− |
114,832 |
114,832 |
1,317 |
116,149 |
|
Other comprehensive loss |
− |
− |
− |
− |
− |
− |
(306,806) |
(225) |
(307,031) |
(5,411) |
(312,442) |
|
Total comprehensive loss for the period |
− |
− |
− |
− |
− |
− |
(306,806) |
114,607 |
(192,199) |
(4,094) |
(196,293) |
|
Equity dividends paid to shareholders of Ferrexpo plc |
− |
− |
− |
− |
− |
− |
− |
(57,964) |
(57,964) |
− |
(57,964) |
|
Share-based payments |
− |
− |
− |
− |
256 |
− |
− |
− |
256 |
− |
256 |
|
At 30 June 2015 (unaudited) |
121,628 |
185,112 |
31,780 |
(77,260) |
(5,756) |
− |
(1,708,302) |
1,912,333 |
459,535 |
4,065 |
463,600 |
|
For the six months ended 30 June 2014 |
|
Attributable to equity shareholders of the parent |
|
|
||||||||
|
US$ 000 |
Issued capital |
Share premium |
Uniting of interest reserve (note 17) |
Treasury share reserve (note 17) |
Employee Benefit Trust reserve (note 17) |
Net unreali-sed gains reserve (note 17) |
Translation reserve (note 17) |
Retained earnings |
Total capital and reserves |
Non-controlling interests |
Total equity |
|
|
At 1 January 2014 |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
1,753,200 |
1,712,614 |
22,428 |
1,735,042 |
|
|
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
203,256 |
203,256 |
4,765 |
208,021 |
|
|
Other comprehensive loss |
- |
- |
- |
- |
- |
(141) |
(700,275) |
(2,191) |
(702,607) |
(12,683) |
(715,290) |
|
|
Total comprehensive loss for the period |
- |
- |
- |
- |
- |
(141) |
(700,275) |
201,065 |
(499,351) |
(7,918) |
(507,269) |
|
|
Equity dividends paid to shareholders of Ferrexpo plc |
- |
- |
- |
- |
- |
- |
- |
(57,982) |
(57,982) |
- |
(57,982) |
|
|
Share-based payments |
- |
- |
- |
- |
190 |
- |
- |
- |
190 |
- |
190 |
|
|
At 30 June 2014 (unaudited) |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,352) |
571 |
(996,291) |
1,896,283 |
1,155,471 |
14,510 |
1,169,981 |
|
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 2-4 King Street, London, SW1Y 6QL, UK. Ferrexpo plc and its subsidiaries (the "Group") operate two mines and a processing plant near Kremenchug in Ukraine, an interest in a port in Odessa and sales and marketing activities around the world including offices in Switzerland, Dubai, Japan, China, Singapore and Ukraine. The Group also owns logistics assets in Austria which operates a fleet of vessels operating on the Rhine and Danube waterways and an ocean going vessel which provides top off services and operates on international sea routes. The Group's operations are vertically integrated from iron ore mining through to iron ore concentrate and pellet production and subsequent logistics. The Group's mineral properties lie within the Kremenchug Magnetic Anomaly and are currently being extracted at the Gorishne-Plavninskoye and Lavrikovskoye ("GPL ") and Yeristovskoye deposits.
The majority shareholder of the Group is Fevamotinico S.a.r.l. ("Fevamotinico"), a company incorporated in Luxembourg and ultimately owned by The Minco Trust, of which Kostyantin Zhevago, the Group's Chief Executive Officer, is a beneficiary. At the time this report was published, Fevamotinico held 50.3% (30 June 2014: 50.3%; 31 December 2014: 50.3%) of Ferrexpo plc's issued share capital.
The Group comprises of Ferrexpo plc and its consolidated subsidiaries as set out below:
|
|
Equity interest owned |
||||
|
Name |
Country of incorporation |
Principal activity |
30.06.15 % |
30.06.14 % |
31.12.14 % |
|
OJSC Ferrexpo Poltava Mining |
Ukraine |
Iron ore mining |
97.3 |
97.3 |
97.3 |
|
Ferrexpo AG |
Switzerland |
Sale of iron ore pellets |
100.0 |
100.0 |
100.0 |
|
DP Ferrotrans |
Ukraine |
Trade, transportation services |
97.3 |
97.3 |
97.3 |
|
United Energy Company LLC |
Ukraine |
Holding company |
97.3 |
97.3 |
97.3 |
|
Ferrexpo Finance plc |
England |
Finance |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Services Limited |
Ukraine |
Management services & procurement |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Hong Kong Limited |
China |
Marketing services |
100.0 |
100.0 |
100.0 |
|
LLC Ferrexpo Yeristovo GOK |
Ukraine |
Iron ore mining |
100.0 |
100.0 |
100.0 |
|
LLC Ferrexpo Belanovo GOK |
Ukraine |
Iron ore mining |
100.0 |
100.0 |
100.0 |
|
Nova Logistics Limited |
Ukraine |
Service company (dormant) |
51.0 |
51.0 |
51.0 |
|
Ferrexpo Middle East FZE |
U.A.E. |
Sale of iron ore pellets |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Singapore PTE Ltd |
Singapore |
Marketing services |
100.0 |
100.0 |
100.0 |
|
First-DDSG Logistics Holding GmbH |
Austria |
Holding company |
100.0 |
100.0 |
100.0 |
|
EDDSG GmbH |
Austria |
Barging company |
100.0 |
100.0 |
100.0 |
|
DDSG Tankschiffahrt GmbH |
Austria |
Barging company |
100.0 |
100.0 |
100.0 |
|
DDSG Services GmbH 1 |
Austria |
Barging company |
100.0 |
100.0 |
100.0 |
|
DDSG Mahart Kft. |
Hungary |
Barging company |
100.0 |
100.0 |
100.0 |
|
Pancar Kft. |
Hungary |
Barging company |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Port Services GmbH |
Austria |
Port services |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Shipping International Ltd. |
Marshall Islands |
Holding company |
100.0 |
100.0 |
100.0 |
|
Iron Destiny Ltd. |
Marshall Islands |
Holding company |
100.0 |
100.0 |
100.0 |
|
Transcanal SRL |
Romania |
Port services |
77.6 |
77.6 |
77.6 |
|
Helogistics Asset Leasing Kft. |
Hungary |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
Universal Services Group Ltd. |
Ukraine |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Ukraine Holding |
Ukraine |
Holding company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Invest |
Ukraine |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Ukraine Shipping Management |
Ukraine |
Barging company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Ukraine Shipping |
Ukraine |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
Arlington Ltd. 2 |
Guernsey |
Holding company |
100.0 |
100.0 |
100.0 |
1 Formerly Helogistics Transport GmbH
2 The entity was acquired in February 2014
The Group's interests in the entities listed above are held indirectly by the Company.
At 30 June 2015, the Group also holds through OJSC Ferrexpo Poltava Mining an interest of 48.6% (30 June 2014: 48.6%; 31 December 2014: 48.6%) in TIS Ruda, a Ukrainian port located on the Black Sea. As this is an associate, it is accounted for using the equity method of accounting.
Note 2: Summary of significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six month period ended 30 June 2015 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 2014.
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 2014. 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 2014, have been delivered to the Register of Companies before the required filing deadline. The auditors' report under section 495 of the Companies Act 2006 in relation to those accounts was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
During the period ended 30 June 2015, the Ukrainian Hryvnia has devalued by approximately 33% compared to the US Dollar; from 15.769 as at 31 December 2014 to 21.015 as at the end of this reporting period. As a result of this devaluation, the total equity decreased by US$312,217 thousand as of 30 June 2015 due the exchange differences on translating foreign operations, which is reflected in the translation reserve. Further details are provided in note 8 and note 17.
Accounting policies adopted
The accounting policies and methods of computation adopted in the preparation of the interim condensed consolidated financial statements are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014.
The following new standards and interpretations have been applied from 1 January 2015, with no effect on reported results, financial position or disclosure in the interim financial statements:
Annual Improvements to IFRSs - 2010-2012 Cycle
Annual Improvements to IFRSs - 2011-2013 Cycle
IFRIC 21 Levies
Seasonality
The Group's operations are not affected by seasonality.
Note 3: Segment information
The Group is managed as a single entity, which produces, develops and markets its principal product, iron ore pellets, for sale to the metallurgical industry. While the revenue generated by the Group is monitored at a more detailed level, there are no separate measures of profit reported to the Group's Chief Operating Decision-Maker ('CODM'). In accordance with IFRS 8 Operating Segments, the Group presents its results in a single segment, which are disclosed in the income statement for the Group. The management monitors the operating result of the Group based on a number of measures including EBITDA, C1 costs and the net financial indebtedness.
EBITDA
The Group presents EBITDA because it believes that EBITDA is a useful measure for evaluating its ability to generate cash and its operating performance. The Group's full definition of EBITDA is disclosed in the Glossary on page 40.
|
US$ 000 |
Notes |
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit before tax and finance |
|
184,469 |
266,328 |
318,350 |
|
Under recovery and write-down of VAT receivable |
14 |
− |
5,866 |
6,790 |
|
Write-offs and impairment losses |
9 |
981 |
1,362 |
83,534 |
|
Gain on disposal of available-for-sale investment |
9 / 21 |
(41,767) |
− |
− |
|
Share based payments |
|
256 |
190 |
530 |
|
Losses on disposal of PPE |
|
2,698 |
3,015 |
4,825 |
|
Depreciation and amortisation |
|
29,328 |
44,315 |
82,269 |
|
EBITDA |
|
175,965 |
321,076 |
496,298 |
Note 3: Segment information continued
C1 costs
C1 costs represent the cash costs of production of iron ore pellets from own ore divided by production volume of own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, costs of purchased ore and concentrate and production cost of gravel.
|
US$'000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Cost of sales - pellet production |
5 |
215,679 |
307,878 |
586,653 |
|
Depreciation and amortisation |
5 |
(22,249) |
(34,753) |
(64,137) |
|
Purchased concentrate and other items for resale |
5 |
(15,571) |
(16,139) |
(27,110) |
|
Inventory movements |
5 |
12,546 |
2,345 |
10,127 |
|
Other |
|
(6,463) |
(10,073) |
(15,546) |
|
C1 cost |
|
183,942 |
249,258 |
489,987 |
|
Own ore produced (tonnes) |
|
5,503,932 |
5,212,877 |
10,670,445 |
|
C1 cash cost per tonne US$ |
|
33.4 |
47.8 |
45.9 |
Net financial indebtedness
Net financial indebtedness as defined by the Group comprises cash and cash equivalents, short-term deposits less interest bearing loans and borrowings.
|
US$ 000 |
Notes |
As at 30.06.15 |
As at 30.06.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Cash and cash equivalents |
16 |
470,535 |
359,441 |
626,509 |
|
Interest bearing loans and borrowings - current |
18 |
(525,643) |
(211,983) |
(248,374) |
|
Interest bearing loans and borrowings - non-current |
18 |
(597,447) |
(840,977) |
(1,056,253) |
|
Net financial indebtedness |
|
(652,555) |
(693,519) |
(678,118) |
Note 4: Revenue
Revenue for the six month period ended 30 June 2015 consisted of the following:
|
US$ 000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Revenue from sales of ore pellets: |
|
|
|
|
|
Export |
|
477,081 |
715,951 |
1,290,695 |
|
Total revenue from sale of iron ore pellets and concentrate |
|
477,081 |
715,951 |
1,290,695 |
|
Revenue from logistics and bunker business |
|
32,766 |
39,763 |
90,661 |
|
Revenue from other sales and services provided |
|
2,034 |
3,199 |
6,929 |
|
Total revenue |
|
511,881 |
758,913 |
1,388,285 |
No sales were made in Ukraine during the periods presented. Export sales of iron ore pellets and concentrate by geographical destination were as follows:
|
US$'000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Traditional Market |
|
246,808 |
351,550 |
594,045 |
|
Growth Market |
|
160,152 |
255,983 |
493,964 |
|
Natural Market |
|
70,121 |
108,418 |
202,686 |
|
Total export revenue |
|
477,081 |
715,951 |
1,290,695 |
Information about the composition of the markets is provided in the Glossary.
Note 5: Cost of sales
Cost of sales for the six month period ended 30 June 2015 consisted of the following:
|
US$ 000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Energy |
|
98,331 |
135,457 |
262,936 |
|
Personnel |
|
17,399 |
27,277 |
50,851 |
|
Materials |
|
35,255 |
41,604 |
85,043 |
|
Repairs and maintenance |
|
18,562 |
30,307 |
59,780 |
|
Depreciation and amortisation |
|
22,249 |
34,753 |
64,137 |
|
Royalties and levies |
|
9,797 |
11,848 |
22,801 |
|
Purchased concentrate and other items for resale |
|
15,571 |
16,139 |
27,110 |
|
Inventory movements |
|
(12,546) |
(2,345) |
(10,127) |
|
Logistics and bunker business |
|
20,122 |
25,224 |
61,307 |
|
Other |
|
11,061 |
12,838 |
24,122 |
|
Total cost of sales |
|
235,801 |
333,102 |
647,960 |
|
Thereof for pellet production |
|
215,679 |
307,878 |
586,653 |
|
Thereof for logistics and bunker business |
|
20,122 |
25,224 |
61,307 |
Note 6: General and administrative expenses
General and administrative expenses for the six month period ended 30 June 2015 consisted of the following:
|
US$ 000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Personnel |
|
10,967 |
14,707 |
28,406 |
|
Office, maintenance and security |
|
2,422 |
3,159 |
6,780 |
|
Professional fees |
|
4,392 |
2,963 |
6,990 |
|
Audit fees |
|
785 |
822 |
1,593 |
|
Non-audit fees |
|
9 |
74 |
418 |
|
Depreciation and amortisation |
|
825 |
997 |
2,084 |
|
Other |
|
1,095 |
961 |
2,371 |
|
Total general and administrative expenses |
|
20,495 |
23,683 |
48,642 |
Non-audit services totalling US$430 thousand in relation to assurance services provided for liability management activities of the Group has been capitalised as prepaid arrangement fees for the six month period ended 30 June 2015 and are not included in the table above.
Note 7: Other expenses
Other expenses for the period ended 30 June 2015 consisted of the following:
|
US$ 000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Community support donations |
|
15,527 |
10,441 |
39,077 |
|
Movements in allowance for doubtful receivables and prepayments made |
|
(29) |
(254) |
8,011 |
|
Other personnel costs |
|
652 |
882 |
1,601 |
|
Other |
|
2,030 |
4,630 |
8,325 |
|
Total other expenses |
|
18,180 |
15,699 |
57,014 |
Information on the Group's community support donations is provided in the Corporate Social Responsibility paragraph on page 10 of this report as well as in the Corporate Social Responsibility section of the Annual Report and Accounts 2014 on page 32.
The vast majority of the movements in allowance for doubtful receivables and prepayments for the period ended 31 December 2014 is related to an allowance recorded for prepayments made for 300 rail cars ordered, but not yet fully delivered due to the ongoing conflict in the eastern part of Ukraine. See also note 19 of this report.
Note 8: Foreign exchange gains and losses
Foreign exchange gains and losses for the six month period ended 30 June 2015 consisted of the following:
|
US$ 000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Operating foreign exchange gains |
|
|
|
|
|
Revaluation of trade receivables |
|
14,685 |
48,388 |
78,827 |
|
Revaluation of trade payables |
|
150 |
(985) |
(2,265) |
|
Others |
|
30 |
42 |
(190) |
|
Total operating foreign exchange gains |
|
14,865 |
47,445 |
76,372 |
|
Non-operating foreign exchange losses |
|
|
|
|
|
Revaluation of interest-bearing loans |
|
(27,160) |
(33,598) |
(76,517) |
|
Revaluation of cash and cash equivalents |
|
17,667 |
49,018 |
81,192 |
|
Others |
|
3,312 |
(18,482) |
(19,521) |
|
Total non-operating foreign exchange losses |
|
(6,181) |
(3,062) |
(14,846) |
|
Total foreign exchange gains |
|
8,684 |
44,383 |
61,526 |
Operating foreign exchange gains and losses are those items that are directly related to the production and sale of pellets (e.g. trade receivables, trade payables on operating expenditure). Non-operating gains and losses are those associated with the Group's financing and treasury activities and with local income tax payables.
During the period ended 30 June 2015, the Ukrainian Hryvnia has devalued by approximately 33% compared to the US Dollar; from 15.769 as at 31 December 2014 to 21.015 as at the end of this reporting period resulting in translation differences of balances denominated in Hryvnia, such as property plant and equipment (note 13), income taxes recoverable and prepaid and other taxes recoverable and prepaid (note 14), with the effects recognised in the translation reserve (see note 17).
Note 9: Write-offs and impairment losses
Impairment losses relate to adjustments made to the carrying value of assets where this is higher than the recoverable amount. Write-offs and impairment losses for the six month period ended 30 June 2015 consisted of the following:
|
US$ 000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Write-off of VAT receivables |
|
- |
1,351 |
1,351 |
|
Write-off of inventories |
|
1 |
- |
48 |
|
Write-off of property, plant and equipment |
|
969 |
11 |
47 |
|
Impairment of available-for-sale investments, net of amounts reclassified from other comprehensive income |
|
- |
- |
(294) |
|
Impairment of available-for-sale investments |
|
11 |
- |
82,382 |
|
Total write-offs and impairment losses |
|
981 |
1,362 |
83,534 |
The impairment loss on available-for-sale financial assets shown for the comparative period ended 31 December 2014 is related to the 15.5% equity investment in Ferrous Resources. As of 9 June 2015, this investment was disposed for a cash consideration totalling US$41,767 thousand resulting in a gain in this amount realised in the period ended 30 June 2015. Further information is provided in note 21.
Note 10: Finance income and expense
Finance income and expense for the six month period ended 30 June 2015 consisted of the following:
|
US$000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Finance income |
|
|
|
|
|
Interest income |
|
1,099 |
949 |
2,299 |
|
Other finance income |
|
572 |
16,694 |
16,951 |
|
Total finance income |
|
1,671 |
17,643 |
19,250 |
|
Finance expense |
|
|
|
|
|
Interest expense on financial liabilities measured at amortised cost |
|
(32,055) |
(26,925) |
(58,371) |
|
Effect from capitalised borrowing costs |
|
2,546 |
4,991 |
8,748 |
|
Interest on defined benefit plans |
|
(1,523) |
(2,480) |
(4,306) |
|
Bank charges |
|
(5,465) |
(7,476) |
(13,490) |
|
Other finance costs |
|
(90) |
(1,375) |
(1,053) |
|
Total finance expense |
|
(36,587) |
(33,265) |
(68,472) |
|
Net finance expense |
|
(34,916) |
(15,622) |
(49,222) |
Other finance income for the comparative periods ended 30 June 2014 and 31 December 2014 includes a US$16,497 thousand release of a discount recorded in the prior years to reflect changes in the estimated timing of receipts for VAT receivable balances in dispute that were previously expected to be recovered over a protracted period of time. Further information is provided in note 14.
The discount was built up in periods prior to those presented in these interim consolidated financial statements and was recorded as finance cost as reflecting the time value of money of these VAT receivable balances at the respective end of the reporting periods.
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 2015, the income tax expense was based on an expected tax rate of 19% for the financial year 2015, which is below the effective tax rate of 27.7% for the financial year 2014.
The lower expected tax rate for the period ended 30 June 2015 compared to the effective tax rate for the financial year 2014 is mainly a result of lower non-deductible expenses expected during the financial year 2015. The effective tax rate for the financial year 2014 included significant non-deductible expenses in Ukraine and Switzerland including the discount recorded on the VAT bonds sold prior to their maturity and the impairment loss recorded on an equity investment (see note 21 for further details).
During the last three financial years, current VAT receivable balances in Ukraine were mainly recovered in exchange for prepayments of corporate profit tax resulting in a substantial balance of outstanding prepaid corporate profit tax. This balance decreased to US$73,782 thousand during the financial year 2014 as a result of the Ukrainian Hryvnia devaluation compared to the US Dollar (30 June 2014: US$88,554 thousand) and a reduction of the percentage of the corporate profit tax to be prepaid in respect of VAT refunds. During the six month period ended 30 June 2015, the Hryvnia further devalued from 15.769 at the beginning of the year to 21.015 as at the end of this reporting period resulting in a further decrease of the outstanding balance to US$53,902 thousand.
It is management's view that the balance of prepaid corporate profit tax will be either offset with future profits or recovered through an issuance of bonds by the Ministry of Finance, which are expected to trade with a discount to face value, as happened during the financial year 2014 for overdue VAT receivable balances (see note 14). As at the date of the preparation of these consolidated interim financial statements, there is an uncertainty as to the timing of the recovery of this balance. In light of this uncertainty, it was considered most appropriate to classify the entire balance as non-current in the consolidated statement of financial position.
Note 12: Earnings per share and dividends paid and proposed
Basic EPS is calculated by dividing the net profit for the period attributable to ordinary equity shareholders of Ferrexpo plc by the weighted average number of Ordinary Shares.
Diluted earnings per share are calculated by adjusting the weighted average number of Ordinary Shares in issue on the assumption of conversion of all potentially dilutive Ordinary Shares. All share awards are potentially dilutive and have been considered in the calculation of diluted earnings per share.
|
|
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit for the period / year attributable to equity shareholders: |
|
|
|
|
|
Basic earnings per share (US cents) |
|
19.61 |
34.72 |
30.46 |
|
Diluted earnings per share (US cents) |
|
19.57 |
34.65 |
30.39 |
Note 12: Earnings per share and dividends paid and proposed continued
The calculation of the basic and diluted earnings per share is based on the following data:
|
Thousands |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Weighted average number of shares |
|
|
|
|
|
Basic number of ordinary shares outstanding |
|
585,462 |
585,383 |
585,413 |
|
Effect of dilutive potential ordinary shares |
|
1,347 |
1,225 |
1,258 |
|
Diluted number of ordinary shares outstanding |
|
586,809 |
586,608 |
586,671 |
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
|
US$000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Dividend proposed |
|
|
|
|
|
Interim dividend for 2015: 3.3 US cents |
|
19,320 |
− |
− |
|
Final dividend for 2014: 3.3 US cents |
|
− |
− |
19,320 |
|
Special dividend for 2014: 6.6 US cents |
|
− |
− |
38,640 |
|
Interim dividend for 2014: 3.3 US cents |
|
− |
19,319 |
− |
|
Total dividends proposed |
|
19,320 |
19,319 |
57,960 |
|
US$000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Paid per ordinary share |
|
|
|
|
|
Final dividend for 2014: 3.3 US cents |
|
19,517 |
|
|
|
Special dividend for 2014: 6.6 US cents |
|
38,667 |
− |
− |
|
Interim dividend for 2014: 3.3 US cents |
|
− |
− |
19,011 |
|
Final dividend for 2013: 3.3 US cents |
|
− |
19,279 |
19,279 |
|
Special dividend for 2013: 6.6 US cents |
|
− |
38,614 |
38,614 |
|
Total dividends paid during the period |
|
58,184 |
57,893 |
76,904 |
Note 13: Property, plant and equipment
During the six month period ended 30 June 2015, the Group acquired property, plant and equipment with a cost of US$36,233 thousand (30 June 2014: US$130,090 thousand; 31 December 2014: US$262,252 thousand) and disposed of property, plant and equipment with original costs of US$8,944 thousand (30 June 2014: US$11,244 thousand; 31 December 2014: US$30,683 thousand). The total depreciation charge for the period was US$29,693 thousand (30 June 2014: US$44,315 thousand; 31 December 2014: US$97,901 thousand).
During the reporting period, the Ukrainian Hryvnia has devalued compared to the US Dollar from 15.769 as of 31 December 2014 to 21.015 as of 30 June 2015 reducing property, plant and equipment by US$207,029 thousand. This effect is reflected in the translation reserve included in shareholder's equity. See also note 17.
The carrying value of property, plant and equipment includes capitalised borrowing costs on qualifying assets of US$11,996 thousand (30 June 2014: US$12,515 thousand; 31 December 2014: US$13,162 thousand).
Note 14: Other taxes recoverable and prepaid
As at 30 June 2015 taxes recoverable and prepaid comprised:
|
US$000 |
|
As at 30.06.15 |
As at 30.06.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
VAT receivable |
|
54,073 |
184,585 |
71,859 |
|
Other taxes prepaid |
|
108 |
115 |
123 |
|
Total other taxes recoverable and prepaid - current |
|
54,181 |
184,700 |
71,982 |
|
VAT receivable |
|
1,182 |
- |
1,519 |
|
Total other taxes recoverable and prepaid - non-current |
|
1,182 |
- |
1,519 |
|
Total other taxes recoverable and prepaid |
|
55,363 |
184,700 |
73,501 |
Note 14: Other taxes recoverable and prepaid continued
As at 30 June 2015, US$53,286 thousand of the VAT receivable relates to the Group's Ukrainian business operations (30 June 2014: US$181,361 thousand; 31 December 2014: US$71,127 thousand). The table below provides a reconciliation of the VAT receivable balances in Ukraine:
|
US$000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Opening balance |
|
72,837 |
318,213 |
318,213 |
|
Net VAT incurred |
|
46,700 |
77,986 |
153,345 |
|
VAT received in cash |
|
(45,975) |
(81,066) |
(141,126) |
|
VAT recovered through sale of VAT bonds |
|
- |
- |
(97,067) |
|
Discount on sale of VAT bonds |
|
- |
- |
(29,333) |
|
VAT write-off through the income statement |
|
- |
(1,351) |
(1,351) |
|
VAT write-off capitalised |
|
- |
(3,430) |
(3,430) |
|
Translation difference |
|
(18,566) |
(98,501) |
(126,414) |
|
Closing balance, gross |
|
54,996 |
211,851 |
72,837 |
|
Discount |
|
(1,710) |
(30,490) |
(1,710) |
|
Closing balance, net |
|
53,286 |
181,361 |
71,127 |
The Ukrainian Hryvnia devalued compared to the US Dollar from 15.769 as at 31 December 2014 to 21.015 as at 30 June 2015 reducing the outstanding VAT balances expressed in US Dollar by US$18,566 thousand, which is reflected in the translation reserve. See also note 17.
During the second half of the financial year 2014, bonds were received by the Group with a face value of UAH1,607,101 thousand (US$135,573 thousand at the exchange rate at the date of issuance) in settlement for VAT due of the same amount. The bonds were issued by the Ministry of Finance to settle certain accumulated VAT liabilities and the Group had sold all VAT bonds prior to the end of the financial year 2014 with an average discount of 21.8% resulting in net proceeds totalling UAH1,256,800 thousand (US$97,067 thousand at the exchange rate at the date of sale).
During the financial year 2014, management expected certain overdue receivable balances to be recovered through the issuance of bonds trading at a discount to face value (see above) and a discount was recorded. The adjustment of the recorded discount at the end of the comparative periods ended 30 June 2014 and 31 December 2014 resulted in charges of US$5,866 thousand and US$6,790 thousand, respectively.
Note 15: Inventories
Inventories are held at the lower of cost or net realisable value. As at 30 June 2015 ore stockpiles amounting to US$80,369 thousand (30 June 2014: US$63,810 thousand; 31 December 2014: US$81,987 thousand) were classified as non-current as this ore is not planned to be processed within one year.
Note 16: Cash and cash equivalents
As at 30 June 2015 the Group held cash and cash equivalents of US$470,535 thousand (30 June 2014: US$359,441 thousand; 31 December 2014: US$626,509 thousand).
Subsequent to the end of the period ended 30 June 2015, the Group repaid US$100,005 thousand to the bondholders in respect of a bond exchange and consent solicitation completed. See note 18 for further information.
The Group's exposure to liquidity, counterparty and interest rate risk as well as a sensitivity analysis for financial assets and liabilities are disclosed in note 30 of the Annual Report and Accounts 2014. See also note 19 of these interim condensed consolidated financial statements for further information in respect of related party transactional banking arrangements.
Note 17: Share capital and reserves
The share capital of Ferrexpo plc at 30 June 2015 was 613,967,956 (30 June 2014: 613,967,956; 31 December 2014: 613,967,956) Ordinary Shares at par value of £0.10 paid for cash, resulting in share capital of US$121,628 thousand, which is unchanged since the Group's Initial Public Offering in June 2007. This balance includes 25,343,814 shares (30 June 2014: 25,343,814 shares; 31 December 2014: 25,343,814 shares), which are held in treasury, resulting from a share buyback that was undertaken in September 2008, and 3,162,399 shares held in the employee benefit trust reserve (30 June 2014: 3,193,201 shares; 31 December 2014: 3,162,399 shares).
The translation reserve includes the effect from the exchange differences arising on translation of non-US Dollar functional currency operations (mainly in Ukrainian Hryvnia). During the period ended 30 June 2015, the Ukrainian Hryvnia devalued from 15.769 as at the beginning of the year to 21.015 as at 30 June 2015 and the exchange differences arising on translation of the Group's foreign operations are initially recognised in other comprehensive income. See also the Interim Consolidated Statement of Comprehensive Income on page 18 of these interim condensed financial statements for further details.
Note 17: Share capital and reserves continued
As at 30 June 2015 other reserves attributable to equity shareholders of Ferrexpo plc comprised.
|
For the financial year 2014 and the six months ended 30 June 2015 |
|
|
|
|
|
|
|
US$ 000 |
Uniting of interest reserve |
Treasury share reserve |
Employee Benefit Trust reserve |
Net unreali-sed gains reserve |
Translation reserve |
Total other reserves |
|
At 1 January 2014 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
(347,326) |
|
Foreign currency translation differences |
− |
− |
− |
− |
(1,185,874) |
(1,185,874) |
|
Transfer to profit and loss |
− |
− |
− |
(712) |
− |
(712) |
|
Tax effect |
− |
− |
− |
− |
80,394 |
80,394 |
|
Total comprehensive loss for the period |
− |
− |
− |
(712) |
(1,105,480) |
(1,106,192) |
|
Share based payments |
− |
− |
530 |
− |
− |
530 |
|
At 31 December 2014 (audited) |
31,780 |
(77,260) |
(6,012) |
− |
(1,401,496) |
(1,452,988) |
|
Foreign currency translation differences |
− |
− |
− |
− |
(329,921) |
(329,921) |
|
Tax effect |
− |
− |
− |
− |
23,115 |
23,115 |
|
Total comprehensive loss for the period |
− |
− |
− |
− |
(306,806) |
(306,806) |
|
Share based payments |
− |
− |
256 |
− |
− |
256 |
|
At 30 June 2015 (unaudited) |
31,780 |
(77,260) |
(5,756) |
− |
(1,708,302) |
(1,759,538) |
|
For the six months ended 30 June 2014 |
|
|
|
|
|
|
|
US$ 000 |
Uniting of interest reserve |
Treasury share reserve |
Employee Benefit Trust reserve |
Net unreali-sed gains reserve |
Translation reserve |
Total other reserves |
|
At 1 January 2014 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
(347,326) |
|
Foreign currency translation differences |
− |
− |
− |
− |
(747,843) |
(747,843) |
|
Gain on available-for-sale financial assets |
− |
− |
− |
(183) |
− |
(183) |
|
Tax effect |
− |
− |
− |
42 |
47,568 |
47,610 |
|
Total comprehensive loss for the period |
− |
− |
− |
(141) |
(700,275) |
(700,416) |
|
Share based payments |
− |
− |
190 |
− |
− |
190 |
|
At 30 June 2014 (unaudited) |
31,780 |
(77,260) |
(6,352) |
571 |
(996,291) |
(1,047,552) |
Note 18: Interest bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost and denominated in US Dollars.
|
US$ 000 |
|
As at 30.06.15 |
As at 30.06.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Current |
|
|
|
|
|
Eurobond issued |
|
284,411 |
− |
− |
|
Syndicated bank loans - secured |
|
204,000 |
175,000 |
210,000 |
|
Other bank loans - secured |
|
21,193 |
22,761 |
22,906 |
|
Other bank loans - unsecured |
|
1,499 |
− |
− |
|
Obligations under finance leases |
|
3,912 |
4,515 |
4,644 |
|
Interest accrued |
|
10,628 |
9,707 |
10,824 |
|
Total current interest bearing loans and borrowings |
3 |
525,643 |
211,983 |
248,374 |
|
Non-current |
|
|
|
|
|
Eurobond issued |
|
156,074 |
495,074 |
496,392 |
|
Syndicated bank loans - secured |
|
367,500 |
245,000 |
472,500 |
|
Other bank loans - secured |
|
54,946 |
85,564 |
73,736 |
|
Other bank loans - unsecured |
|
7,487 |
− |
− |
|
Obligations under finance leases |
|
11,440 |
15,339 |
13,625 |
|
Total non-current interest bearing loans and borrowings |
3 |
597,447 |
840,977 |
1,056,253 |
|
Total interest bearing loans and borrowings |
|
1,123,090 |
1,052,960 |
1,304,627 |
As at 30 June 2015, the Group has a syndicated US$420,000 thousand pre-export finance facility, of which US$198,500 thousand was amortised resulting in a remaining available and drawn balance of US$221,500 thousand for this facility, and a fully drawn syndicated US$350,000 thousand pre-export finance facility. Both are revolving facilities with amortisation over the final 24 months to the final maturity dates of 31 July 2016 and 8 August 2018 respectively.
Note 18: Interest bearing loans and borrowings continued
As at 30 June 2015, the major bank debt facilities were guaranteed and secured as follows:
· Ferrexpo AG and Ferrexpo Middle East FZE assigned the rights to revenue from certain sales contracts;
· OJSC Ferrexpo Poltava Mining assigned all of its rights of certain export contracts for the pellets sales to Ferrexpo AG and Ferrexpo Middle East FZE; and
· the Group pledged bank accounts of Ferrexpo AG and Ferrexpo Middle East FZE into which all proceeds from the sale of certain iron ore pellet contracts are received.
In addition to the Group's major bank debt facilities listed above, an unsecured US$500,000 thousand Eurobond was issued on 7 April 2011, of which the Group exchanged and cancelled US$214,331 thousand and issued new notes with a par value totalling US$160,724 thousand and repaid US$53,607 thousand in cash on 24 February 2015.
Subsequent to the reporting period ended 30 June 2015, the Group exchanged the remaining US$285,669 thousand of its US$500 million Eurobond against 35% cash repayment totalling US$100,005 thousand and issued new notes in the amount of US$185,664 thousand. As a result of the two exchanges completed in February and July 2015, the tenor of the notes outstanding was extended from April 2016 to April 2019 with two equal instalments of US$173,194 thousand falling due on 7 April 2018 and 2019, respectively. The new notes have a 10.375% interest coupon payable semi-annually, compared to 7.875% for the initially issued notes in April 2011.
Further information on the Group's exposure to interest rate, foreign currency and liquidity risk is provided in note 30 of the Annual Report and Accounts 2014.
Note 19: Related party disclosure
During the periods presented the Group entered into arm's length transactions with entities under the common control of the majority owner of the Group, Kostyantin Zhevago and with associated companies and with other related parties. Management considers that the Group has appropriate procedures in place to identify and properly disclose transactions with the related parties.
Entities under common control are those under the control of Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in which the Group holds an interest of 48.6%. This is the only associated company of the Group. Other related parties are principally those entities controlled by Anatoly Trefilov who is a member of the supervisory board of OJSC Ferrexpo Poltava Mining. Related party transactions entered into by the Group during the periods presented are summarised in the tables on the following pages.
During the period ended 30 June 2015, the Ukrainian Hryvnia has devalued by approximately 33% compared to the US Dollar; from 15.769 as at 31 December 2014 to 21.015 as at the end of this reporting period. This devaluation had an effect on the totals of the transactions and the balances denominated in Hryvnia when translating into US Dollar.
Note 19: Related party disclosure continued
Revenue, expenses, finance income and finance expenses
|
|
6 months ended 30.06.15 (unaudited) |
6 months ended 30.06.14 (unaudited) |
Year ended 31.12.14 (audited) |
||||||
|
US$ 000 |
Entities under common control |
Asso-ciated compa- nies |
Other related parties |
Entities under common control |
Asso- ciated compa- nies |
Other related parties |
Entities under common control |
Asso- ciated compa- nies |
Other related parties |
|
Other sales a |
168 |
- |
377 |
318 |
- |
289 |
696 |
- |
524 |
|
Total related party transactions within revenue |
168 |
- |
377 |
318 |
- |
289 |
696 |
- |
524 |
|
Materials b |
3,269 |
- |
6 |
6,570 |
- |
95 |
12,334 |
- |
26 |
|
Purchased concentrate and other items for resale c |
277 |
- |
- |
- |
- |
- |
769 |
- |
- |
|
Spare parts and consumables d |
513 |
- |
2 |
1,292 |
- |
1 |
2,423 |
- |
2 |
|
Gas e |
21,750 |
- |
- |
19,102 |
- |
- |
39,259 |
- |
- |
|
Total related parties transactions within cost of sales |
25,809 |
- |
8 |
26,964 |
- |
96 |
54,785 |
- |
28 |
|
Selling and distribution expenses f |
5,456 |
11,024 |
3,796 |
5,539 |
11,850 |
3,512 |
11,201 |
24,130 |
5,984 |
|
General and administration |
397 |
- |
320 |
666 |
- |
- |
1,267 |
- |
- |
|
Total related parties transactions within expenses |
31,662 |
11,024 |
4,124 |
33,169 |
11,850 |
3,608 |
67,253 |
24,130 |
6,012 |
|
Finance income h |
1,343 |
- |
- |
847 |
- |
- |
1,804 |
- |
- |
|
Finance expenses h |
(30) |
- |
- |
(27) |
- |
- |
(99) |
- |
- |
|
Net finance income |
1,313 |
- |
- |
820 |
- |
- |
1,705 |
- |
- |
Entities under common control
The Group entered into various related party transactions with entities under common control. A description of the most material transactions, which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below. All transactions were carried out on an arm's length basis in the normal course of business.
a Sales of power, steam and water and other materials for US$43 thousand (30 June 2014: US$80 thousand; 31 December 2014: US$160 thousand) and income from premises leased to Kislorod PCC of US$75 thousand (30 June 2014: US$134 thousand; 31 December 2014: US$258 thousand).
b Purchases of compressed air, oxygen and metal scrap from Kislorod PCC for US$1,906 thousand (30 June 2014: US$2,753 thousand; 31 December 2014: US$5,347 thousand); and
b Purchases of cast iron balls from AutoKraZ Holding Co. for US$659 thousand (30 June 2014: US$3,262 thousand; 31 December 2014: US$5,530 thousand).
b Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas for US$652 thousand (30 June 2014: US$406 thousand; 31 December 2014: US$1,209 thousand).
c Purchases of concentrate and other items for resale from Vostok Ruda Ltd for US$277 thousand (30 June 2014: nil; 31 December 2014: US$769 thousand).
d Purchases of spare parts from CJSC Kiev Shipbuilding and Ship Repair Plant ('KSRSSZ') in the amount of US$107 thousand (30 June 2014: US$355 thousand; 31 December 2014: US$821 thousand);
d Purchases of spare parts from Valsa GTV of US$52 thousand (30 June 2014: US$511 thousand; 31 December 2014: US$749 thousand);
d Purchases of ferromanganese from Raw & Refined Commodities AG for US$209 thousand (30 June 2014: US$284 thousand; 31 December 2014: US$512 thousand).
e Procurement of gas from OJSC Ukrzakordongeologia for US$21,750 thousand (30 June 2014: US$19,102 thousand; 31 December 2014: US$39,259 thousand).
f Purchases of advertisement, marketing and general public relations services from FC Vorskla for US$5,436 thousand (30 June 2014: US$5,503 thousand; 31 December 2014: US$11,137 thousand).
g Insurance premiums paid to ASK Omega for workmen's insurance and general cover of US$213 thousand (30 June 2014: US$328 thousand; 31 December 2014: US$574 thousand);
g Fees paid to Bank Finance & Credit (Bank F&C) for bank services of US$147 thousand (30 June 2014: US$209 thousand; 31 December 2014: US$ 439 thousand).
h Transactional banking services are provided to certain subsidiaries of the Group by Bank Finance & Credit (Bank F&C) Finance income and expenses relate to these transactional banking services. Further information is provided under transactional banking arrangements on page 35.
Note 19: Related party disclosure continued
Associated companies
The Group entered into related party transactions with its associated company TIS Ruda LLC, which were carried out on an arm's length basis in the normal course of business for the members of the Group (see note 1). A description of the most material transactions which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below:
f Purchases of logistics services in the amount of US$11,024 thousand (30 June 2014: US$11,850 thousand; 31 December 2014: US$24,130 thousand) relating to port operations, including port charges, handling costs, agent commissions and storage costs.
Other related parties
The Group entered into various transactions with other related parties. A description of the most material transactions which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below:
a Sales of material and services to Slavutich Ruda Ltd. for US$364 thousand (30 June 2014: US$281 thousand; 31 December 2014: US$508 thousand).
f Purchases of logistics management services from Slavutich Ruda Ltd. relating to customs clearance services and the coordination of rail transit. Total billings amounted to US$3,796 thousand (30 June 2014: US$3,512 thousand; 31 December 2014: US$5,984 thousand). Slavutich Ruda Ltd. earned commission income of US$226 thousand on these services (30 June 2014: US$324 thousand; 31 December 2014: US$1,350 thousand).
g Consulting fees paid to Nage Capital Management AG of US$320 thousand (30 June 2014: nil; 31 December 2014: nil) controlled by a former member of the board of directors of Ferrexpo plc who resigned in August 2014. The Group entered into this transaction within one year of his resignation and therefore considered it to be a transaction with a related party.
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature which were undertaken between Group companies and entities under common control, associated companies and other related parties during the periods presented.
|
|
6 months ended 30.06.15 (unaudited) |
6 months ended 30.06.14 (unaudited) |
Year ended 31.12.14 (audited) |
||||||
|
US$ 000 |
Entities under common control |
Asso-ciated compa-nies |
Other related parties |
Entities under common control |
Asso- ciated compa- nies |
Other related parties |
Entities under common control |
Asso- ciated compa- nies |
Other related parties |
|
Purchases with independent confirmation |
- |
- |
- |
- |
- |
- |
458 |
- |
- |
|
Purchases with shareholder approval |
842 |
- |
- |
- |
- |
- |
887 |
- |
- |
|
Purchases in the ordinary course of business |
1,195 |
- |
- |
1,742 |
- |
4 |
2,724 |
- |
5 |
|
Total purchases of property, plant and equipment i |
2,037 |
- |
- |
1,742 |
- |
4 |
4,069 |
- |
5 |
Entities under common control
Individual transactions of a capital nature which exceeded US$200 thousand are described below.
Current period
i During the first six month period ended 30 June 2015, the Group entered in various transactions of a capital nature with related parties totalling US$1,195 thousand. These transactions were in the ordinary course of business. Individual transactions of a capital nature which exceeded US$200 thousand are listed below.
• The Group procured a filter in the amount of US$958 thousand from OJSC Berdichev Machine-Building Plant Progress for the quality upgrade of the pelletising
plant at Ferrexpo Poltava Mining and design documentation services from OJSC DIOS totalling US$231 thousand.
In April 2015 the Group received an additional 27 rail cars totalling US$1,431 thousand (US$842 thousand at the prevailing exchange rate at delivery), which were ordered in February 2014 under the authority of a shareholder approval obtained on 24 May 2012. See below for further information.
Prior periods:
i During the financial year 2014, the Group entered into various transactions of a capital nature with related parties totalling to US$2,724 thousand, which were in the ordinary course of business.
• The Group procured goods and services totalling US$1,807 thousand from OJSC Berdichev Machine-Building Plant Progress for various ongoing projects and
design documentation services from OJSC DIOS totalling US$597 thousand.
In August 2014, the Group acquired in two separate transactions a railway line and an associated power line from LLC Vorskla Steel totalling US$458 thousand. The transaction was not considered to be in the ordinary course of business and an independent confirmation was obtained and an announcement made in accordance with the UK Listing Rules.
Note 19: Related party disclosure continued
In February 2014, the Group ordered 300 rail cars from PJSC Stakhanov Railcar Company, of which 233 rail cars amounting to US$12,349 thousand were under the authority of the shareholder approval obtained on 24 May 2012 obtained under the listing rules applicable at that time and an additional 67 rail cars amounting to US$3,551 thousand were ordered in the ordinary course of business. A total prepayment of US$11,925 thousand (US$4,920 thousand at current exchange rate) was made in relation to these rail cars. The rail cars were scheduled for delivery in the second half of the financial year 2014. As a consequence of the ongoing conflict in the eastern part of Ukraine, 25 rail cars totalling US$1,325 thousand (US$887 thousand at the prevailing exchange rate at delivery) were delivered during the financial year 2014. See footnote (l) below for further information.
Balances with related parties
The outstanding balances, as a result of transactions with related parties, for the periods presented are shown in the table below:
|
|
6 months ended 30.06.15 (unaudited) |
6 months ended 30.06.14 (unaudited) |
Year ended 31.12.14 (audited) |
||||||
|
US$ 000 |
Entities under common control |
Asso-ciated compa-nies |
Other related parties |
Entities under common control |
Asso- ciated compa- nies |
Other related parties |
Entities under common control |
Asso- ciated compa- nies |
Other related parties |
|
Available-for-sale financial assets j |
23 |
- |
- |
213 |
- |
- |
46 |
- |
- |
|
Other non-current assets k |
3,546 |
- |
- |
5,797 |
- |
- |
4,726 |
- |
- |
|
Prepayments for property, plant and equipment l |
44 |
- |
- |
9,161 |
- |
- |
604 |
- |
- |
|
Total non-current assets |
3,613 |
- |
- |
15,171 |
- |
- |
5,376 |
- |
- |
|
Trade and other receivables m |
685 |
- |
52 |
806 |
- |
15 |
712 |
- |
91 |
|
Prepayments and other current assets n |
2,501 |
- |
30 |
1,118 |
1,283 |
- |
164 |
- |
595 |
|
Cash and cash equivalents o |
165,381 |
- |
- |
155,416 |
- |
- |
161,473 |
- |
- |
|
Total current assets |
168,567 |
- |
82 |
157,340 |
1,283 |
15 |
162,349 |
- |
686 |
|
Trade and other payables p |
1,246 |
578 |
66 |
961 |
- |
42 |
1,429 |
151 |
490 |
|
Current liabilities |
1,246 |
578 |
66 |
961 |
- |
42 |
1,429 |
151 |
490 |
A description of the most material balances which are over US$200 thousand in the current or comparative periods is given below:
Entities under common control
j The balance of the available-for-sale financial assets comprised shareholdings in PJSC Stakhanov Railcar Company (1.1%) and Vostok Ruda Ltd. (1.1%). The ultimate beneficial owner of these companies is Kostyantin Zhevago. PJSC Stakhanov Railcar Company is further listed on the Ukrainian stock exchange. The changes in value in the table above relate to fair value adjustments recorded during the respective reporting periods. The shareholdings for all available-for-sale financial assets remained unchanged during the periods disclosed above. The balance of US$23 thousand as at 30 June 2015 related to the investment in PJSC Stakhanov Railcar Company (30 June 2014: US$213 thousand; 31 December 2014: US$46 thousand). The investment in Vostok Ruda Ltd. was fully impaired in a previous period.
k As at 30 June 2015, other non-current assets related to a deposit of US$3,546 thousand with bank F&C (30 June 2014: US$5,797 thousand; 31 December 2014: US$4,726 thousand) as a security in respect of loans made to employees under the Group's social loyalty programme. Further information is provided under transactional banking arrangements below.
l As at 30 June 2015, a prepayment of US$4,063 thousand (at current exchange rate) remained in connection with an advance payment made in February 2014 for 300 rail cars ordered from PJSC Stakhanov Railcar Company (30 June 2014: US$8,743 thousand; 31 December 2014: US$6,007 thousand). As at 30 June 2015, the Group received 52 rail cars of the total 300 rail cars ordered in February 2014. Due to continued uncertainty surrounding the delivery of the remaining number of rail cars or recovery of the prepayment, the Group recorded an allowance for the full outstanding amount as at 30 June 2015 and 31 December 2014 (see section Purchases of property, plant, equipment and investments above for further details). No prepayments were made to OJSC Berdichev Machine-Building Plant Progress as at 30 June 2015 (30 June 2014: US$242 thousand; 31 December 2014: US$527 thousand).
m As at 30 June 2015, trade and other receivables included outstanding amounts of US$200 thousand due from Vorskla Steel Ltd. (30 June 2014: US$295 thousand; 31 December 2014: US$244 thousand) in relation to other sales and US$385 thousand (30 June 2014: US$333 thousand; 31 December 2014: US$317 thousand) from Kislorod PCC for the sale of power, steam and water.
n Prepayments and other current assets include US$1,748 thousand (30 June 2014: US$895 thousand; 31 December 2014: nil) made to OJSC Ukrzakordongeologia for gas as well as US$659 thousand (30 June 2014: nil; 31 December 2014: nil) for concentrate made to Vostok Ruda.
o As at 30 June 2015, cash and cash equivalents with Bank F&C were US$165,381 thousand (30 June 2014: US$155,416 thousand; 31 December 2014: US$161,473 thousand). Further information is provided under Transactional banking arrangements below.
Note 19: Related party disclosure continued
p Trade and other payables amounting to US$494 thousand for compressed air and oxygen purchased from Kislorod PCC (30 June 2014: US$507 thousand; 31 December 2014: US$483 thousand) and US$289 thousand due to Nage Capital Management AG (30 June 2014: nil; 31 December 2014: nil). The balance as at the end of the period ended 30 June 2014 included an amount of US$200 thousand (31 December 2014: US$92 thousand) due to Valsa GTV. The balance as at the end of the period ended 31 December 2014 included an amount of US$397 thousand payable to PJSC Stakhanov Railcar Company, no amounts were due as at 30 June 2015 and 30 June 2014.
Associated companies
n The balance as at the end of the comparative period ended 30 June 2014 includes Prepayments and other current assets of US$1,283 thousand made to TIS Ruda LLC for transhipment services. No amounts were prepaid as at 30 June 2015 and 31 December 2014.
Other related parties
n Prepayments and other current assets relate to prepayments of US$30 thousand for distribution services made to Slavutich Ruda Ltd. (30 June 2014: nil; 31 December 2014: US$595 thousand).
p Trade and other payables amounting to US$66 thousand as at 30 June 2015 are in respect of distribution services provided by Slavutich Ruda Ltd. (30 June 2014: US$42 thousand; 31 December 2014: US$490 thousand).
Transactional banking arrangements
The Group has transactional banking arrangements with Bank Finance & Credit ('Bank F&C') in Ukraine which is under common control of the majority shareholder of Ferrexpo plc. Finance income and expenses are disclosed in the table on page 32.
On 25 May 2013, the Group entered into a new uncommitted multicurrency revolving loan facility agreement and a documentary credit facility agreement with Bank F&C which will expire on 29 May 2016. The aggregate maximum limit of these facilities amounts to UAH80 million (30 June 2015: US$3,807 thousand; 30 June 2014: US$6,766 thousand; 31 December 2014: US$5,073 thousand) and, as required under Ukrainian legislation, fixed assets are pledged. The total value of pledges under the terms of the loan facility agreements is US$2,864 thousand as at 30 June 2015. The terms and conditions of both facilities were the subject of an independent confirmation. No amounts are drawn and no letters of credit are outstanding under this facility as at 30 June 2015 (30 June 2014: nil; 31 December 2014: nil).
Bank F&C provides mortgages and loans to employees of the Group for the acquisition, construction and renovation of apartments in Ukraine. This is part of a social loyalty programme started by the Group in December 2011 allowing certain employees of the Group to borrow at preferential interest rates. OJSC Ferrexpo Poltava Mining and LLC Ferrexpo Yeristovo GOK act as guarantors for the bank's loans to the employees of the Group and have deposited US$3,546 thousand at Bank F&C as security (30 June 2014: US$5,797 thousand; 31 December 2014: US$4,726 thousand). The interest rate margin earned by Bank F&C covers the costs of administrating the mortgages and loans. Detailed information on the social loyalty programme is provided in the Corporate Social Responsibility Review section of the Annual Report and Accounts 2014.
Cash and cash equivalent balances held with Bank F&C are in the normal course of business in Ukraine and are held on call or from time to time on overnight deposit. Interest is paid on balances held. The interest rates received by the Group were in line with relevant comparable market rates throughout the periods presented.
Note 20: Commitments and contingencies
Commitments
|
US$ 000 |
|
As at 30.06.15 |
As at 30.06.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Operating lease commitments |
|
30,371 |
59,065 |
40,738 |
|
Capital commitments on purchase of PPE |
|
91,015 |
113,168 |
108,763 |
Legal
In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition or the results of future operations of the Group.
The Group is currently involved in a share dispute which commenced in 2005 and has been disclosed in its various public documents since IPO in 2007. The main chronology of the dispute is below:
On 21 April 2010, the Higher Commercial Court of Ukraine invalidated the share sale and purchase agreement ('SPA') pursuant to which a 40.19% stake in OJSC Ferrexpo Poltava Mining ('FPM') was sold on 18 November 2002 to nominee companies that were previously ultimately controlled by Kostyantin Zhevago, which ultimately sold the shares to Ferrexpo AG.
On 2 December 2014, the Supreme Court of Ukraine set aside the judgement of the Higher Commercial Court of Ukraine delivered in April 2010 and remitted the case for review to the Higher Commercial Court of Ukraine. On 16 February 2015, the Higher Commercial Court of Ukraine confirmed the decisions of the lower courts which dismissed the claim for invalidation of the SPA. As at the date of the publication of these interim financial statements for the period ended 30 June 2015, the original SPA of 18 November 2002 is valid.
In October 2011, the claimants commenced further proceedings for the restoration of their shareholding in FPM. On 20 October 2014, the Kyiv City Commercial Court dismissed the claim in full. This judgment was confirmed by the Kyiv Appeal Commercial Court and the Higher Commercial Court of Ukraine on 28 January 2015 and 14 April 2015, respectively.
Note 20: Commitments and contingencies continued
After having taken legal advice, the management of the Group believes that risks related to further court proceedings in respect of this case are remote. In light of the risks surrounding the operation and independence of Ukrainian courts, including those associated with the Ukrainian legal system in general, however the claimants may ultimately prevail in this dispute and the Group's ownership of the relevant interest in FPM may be successfully challenged.
Tax and other regulatory compliance
Ukrainian legislation and regulations regarding taxation and customs continue to evolve. Legislation and regulations are not always clearly written and are subject to varying interpretations and inconsistent enforcement by local, regional and national authorities, and other governmental bodies. Instances of inconsistent interpretations are not unusual. The uncertainty of application and the evolution of Ukrainian tax laws, including those affecting cross-border transactions, create a risk of additional tax payments having to be made by the Group, which could have a material effect on the Group's financial position and results of operations. This includes also a transfer pricing law which significantly increased the power of the tax authorities. The Group does not believe that these risks are any more significant than those of similar enterprises in Ukraine.
Recoverable VAT amounting to US$2,491 thousand (30 June 2014: US$13,365 thousand; 31 December 2014: US$3,587 thousand) outstanding at 30 June 2015 and US$3,886 thousand already refunded by the tax authorities during the financial year 2014 are currently in the process of being considered by the Ukrainian court system in several different cases. As the VAT is fully recoverable under the relevant Ukrainian legislation, the Group expects to receive positive court decisions for these ongoing court proceedings and expect these amounts to be recovered in a further issuance of bonds. Consequently, the VAT is recorded at its full amount in the financial statements, net of an estimated discount to reflect the expected difference to the bonds. See also disclosure made in note 14. No provision has been made for any related penalties and fines, which would in the case of a final negative ruling become payable.
Note 21: Financial instruments
Fair values
Set out below are the carrying amounts and fair values of the Group's financial instruments that are carried in the interim consolidated statement of financial position:
|
|
Carrying amount |
Fair Value |
||||
|
US$ 000
|
As at 30.06.15 (unaudited) |
As at 30.06.14 (unaudited) |
As at 31.12.14 (audited) |
As at 30.06.15 (unaudited) |
As at 30.06.14 (unaudited) |
As at 31.12.14 (audited) |
|
Financial assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
470,535 |
359,441 |
626,509 |
470,535 |
359,441 |
626,509 |
|
Trade and other receivables |
64,846 |
102,539 |
87,226 |
64,846 |
102,539 |
87,226 |
|
Available-for-sale financial assets |
23 |
82,595 |
46 |
23 |
82,595 |
46 |
|
Other financial assets |
12,278 |
12,033 |
8,944 |
12,278 |
12,033 |
8,944 |
|
Total financial assets |
547,682 |
556,608 |
722,725 |
547,682 |
556,608 |
722,725 |
|
Financial liabilities |
|
|
|
|
|
|
|
Trade and other payables |
25,826 |
32,991 |
32,351 |
25,826 |
32,991 |
32,351 |
|
Accrued liabilities |
24,826 |
27,756 |
30,497 |
24,826 |
27,756 |
30,497 |
|
Interest bearing loans and borrowings |
1,123,090 |
1,052,960 |
1,304,627 |
1,079,801 |
1,055,118 |
1,204,836 |
|
Total financial liabilities |
1,173,742 |
1,113,707 |
1,367,475 |
1,130,453 |
1,115,865 |
1,267,684 |
Other financial assets
The fair values of cash and cash equivalents, trade and other receivables and payables are approximately equal to their carrying amounts due to their short maturity.
Interest bearing loans and borrowings
The fair values of interest-bearing loans and borrowings are based on the discounted cash flows using market interest rates except for the fair value of the Eurobond issued, which is based on the market price quotation at the reporting date.
Available-for-sale financial assets
As at 9 June 2015, the Group disposed its 15.5% available-for-sale equity investment in Ferrous Resources Limited ("Ferrous") for a total cash consideration of US$41,767 thousand resulting in a gain in this amount realised in the period ended 30 June 2015. This investment was acquired during the financial year 2013 with total transaction costs of US$82,382 thousand and fully impaired as at 30 September 2014 due to uncertainties in respect of the operational activity and the future development of the mining operation at this point of time. In the period ended 31 March 2015, the investment was revalued to US$41,800 thousand based on an irrevocable tender and support agreement signed on 29 April 2015 for the disposal of the stake in Ferrous for a cash consideration of US$41,800 thousand, which was considered to be the fair value of the investment at the end of this reporting period and the gain from this revaluation was recognised in the statement of other comprehensive income. This gain was reclassified to profit or loss at the point of time of the completion of the disposal.
Note 21: Financial instruments continued
The available-for-sale equity investment in PJSC Stakhanov Railcar Company in the amount of US$23 thousand (30 June 2014: US$213 thousand; 31 December 2014: US$46 thousand) is measured at its fair value based on the quoted market price for its shares on the Ukrainian Stock exchange ('PFTS').
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
US$ 000 |
|
As at 30.06.15 (unaudited) |
|
||
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
|
|
|
|
|
Available-for-sale financial assets |
|
23 |
- |
- |
23 |
|
Total financial assets |
|
23 |
- |
- |
23 |
|
US$ 000 |
|
As at 30.06.14 (unaudited) |
|
||
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
|
|
|
|
|
Available-for-sale financial assets |
|
213 |
- |
82,382 |
82,595 |
|
Total financial assets |
|
213 |
- |
82,382 |
82,595 |
|
US$ 000 |
|
As at 31.12.14 (audited) |
|
||
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
|
|
|
|
|
Available-for-sale financial assets |
|
46 |
- |
- |
46 |
|
Total financial assets |
|
46 |
- |
- |
46 |
There were no transfers between the different levels during the reporting period.
As of 30 June 2015, the fair value of the available-for-sale financial assets in Level 1 decreased by US$23 thousand including a translation and impairment loss (30 June 2014: decrease of US$183 thousand; 31 December 2014: decrease of US$350 thousand). The loss at the end of the comparative period ended 30 June 2014 was initially included in other comprehensive income. As at 31 December 2014, the investment was considered to be impaired and the total effect included in other comprehensive income was reclassified to the income statement.
Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy is shown in the table below:
|
US$ 000 |
|
6 months ended 30.06.15 |
6 months ended 30.06.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Opening balance |
|
- |
82,382 |
82,382 |
|
Total gains or losses: |
|
|
|
|
|
- in profit or loss |
|
41,767 |
- |
(82,382) |
|
- in other comprehensive income |
|
- |
- |
- |
|
Disposal |
|
(41,767) |
- |
- |
|
Transfer out of Level 3 |
|
- |
- |
- |
|
Closing balance |
|
- |
82,382 |
- |
Further information on the Group's exposure to interest rate, foreign currency and liquidity risk is provided in note 30 of the Annual Report and Accounts 2014.
Note 22: Events after the reporting period
On 6 July 2015, the Group exchanged the remaining US$285,669 thousand of its US$500 million Eurobond against 35% cash repayment totalling US$100,005 thousand and issued new notes in the amount of US$185,664 thousand in order to extend the tenor to April 2018 and April 2019. See note 18 for further details.
Other than disclosed above, no material adjusting or non-adjusting events occurred.
Glossary
|
Act |
The Companies Act 2006 |
|
AGM |
The Annual General Meeting of the Company |
|
Articles |
Articles of Association of the Company |
|
Audit Committee |
The Audit Committee of the Company's Board |
|
Belanovo or Belanovskoye |
An iron ore deposit located immediately to the north of Yeristovo |
|
Benchmark Price |
Platts 62% Fe iron ore fines price CFR China |
|
Beneficiation Process |
A number of processes whereby the mineral is extracted from the crude ore |
|
BIP |
Business Improvement Programme, a programme of projects to increase production output and efficiency at FPM |
|
Board |
The Board of Directors of the Company |
|
Bt |
Billion tonnes |
|
Capesize |
Capesize vessels are typically above 150,000 tonnes deadweight. Ships in this class include oil tankers, supertankers and bulk carriers transporting coal, ore, and other commodity raw materials. Standard capesize vessels are able to transit through the Suez Canal |
|
Capital Employed |
The aggregate of equity attributable to shareholders, non-controlling interests and borrowings |
|
CFR |
Delivery including cost and freight |
|
C1 Costs |
Represent the cash costs of production of iron pellets from own ore, divided by production volume, from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, costs of purchased ore, concentrate and production cost of gravel |
|
CIF |
Delivery including cost, insurance and freight |
|
CIS |
The Commonwealth of Independent States |
|
Code |
The UK Corporate Governance Code published in 2012 |
|
Company |
Ferrexpo plc, a public company incorporated in England and Wales with limited liability |
|
CPI |
Consumer Price Index |
|
CSR |
Corporate Safety and Social Responsibility |
|
CSR Committee |
The Corporate Safety and Social Responsibility Committee of the Board of the Company |
|
DAP |
Delivery at place |
|
DFS |
Detailed feasibility study |
|
Directors |
The Directors of the Company |
|
Dragline Excavators |
Heavy machinery used to excavate material. A dragline consists of a large bucket which is suspended from a boom |
|
EBITDA |
The Group calculates EBITDA as profit from continuing operations before tax and finance plus depreciation and amortisation and non-recurring exceptional items included in other income and other expenses, share based payment expenses and the net of gains and losses from disposal of investments and property, plant and equipment |
|
EBT |
Employee Benefit Trust |
|
EPS |
Earnings per share |
|
Executive Committee |
The Executive Committee of management appointed by the Company's Board |
|
Executive Directors |
The Executive Directors of the Company |
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FBM |
Ferrexpo Belanovo Mining, also known as BGOK, a company incorporated under the laws of Ukraine |
|
Fe |
Iron |
|
Ferrexpo |
The Company and its subsidiaries |
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Ferrexpo AG Group |
Ferrexpo AG and its subsidiaries including FPM |
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Fevamotinico S.a.r.l. |
A company incorporated with limited liability in Luxembourg |
|
FOB |
Delivered free on board, which means that the seller's obligation to deliver has been fulfilled when the goods have passed over the ship's rail at the named port of shipment, and all future obligations in terms of costs and risks of loss or damage transfer to the buyer from that point onwards |
|
FPM |
Ferrexpo Poltava Mining, also known as Ferrexpo Poltava GOK Corporation or PGOK, a company incorporated under the laws of Ukraine |
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FRMC |
Financial Risk Management Committee, a sub-committee of the Executive Committee |
|
FTSE 250 |
Financial Times Stock Exchange top 250 companies |
|
FYM |
Ferrexpo Yeristovo Mining, also known as YGOK, a company incorporated under the laws of Ukraine |
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Group |
The Company and its subsidiaries |
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Growth Markets |
These are predominantly in Asia and have the potential to deliver new and significant sales volumes to the Group |
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HSE |
Health, safety and environment |
|
IAS |
International Accounting Standards |
|
IASB |
International Accounting Standards Board |
|
IFRS |
International Financial Reporting Standards, as adopted by the EU |
|
IPO |
Initial public offering |
|
Iron ore concentrate |
Product of the benefication process with enriched iron content |
|
Iron ore sinter fines |
Fine iron ore screened to -6.3mm |
|
Iron ore pellets |
Balled and fired agglomerate of iron ore concentrate, whose physical properties are well suited for transportation to and reduction within a blast furnace |
|
JORC |
Australasian Joint Ore Reserves Committee - the internationally accepted code for ore classification |
|
K22 |
GPL ore has been classified as either K22 or K23 quality, of which K22 ore is of higher quality (richer) |
|
KPI |
Key Performance Indicator |
|
Kt |
Thousand tonnes |
|
LIBOR |
The London Inter Bank Offered Rate |
|
LLC |
Limited Liability Company |
|
LTIFR |
Lost-Time Injury Frequency Rate |
|
LTIP |
Long-Term Incentive Plan |
|
m3 |
Cubic metre |
|
Majority Shareholder |
Fevamotinico S.a.r.l., The Minco Trust and Kostyantin Zhevago (together) |
|
Mm |
Millimetre |
|
Mt |
Million tonnes |
|
Mtpa |
Million tonnes per annum |
|
Natural Markets |
These include Turkey, the Middle East and Western Europe and are those markets where Ferrexpo has a competitive advantage over more distant producers, but where market share remains relatively low |
|
Nominations Committee |
The Nominations Committee of the Company's Board |
|
Non-executive Directors |
Non-executive Directors of the Company |
|
NOPAT |
Net operating profit after tax |
|
OHSAS 18001 |
International safety standard 'Occupational Health & Safety Management System Specification' |
|
Ordinary Shares |
Ordinary Shares of 10 pence each in the Company |
|
Ore |
A mineral or mineral aggregate containing precious or useful minerals in such quantities, grade and chemical combination as to make extraction economic |
|
Panamax |
Modern panamax ships typically carry a weight of between 65,000 to 90,000 tonnes of cargo and can transit both Panama and Suez canals |
|
PPI |
Ukrainian producer price index |
|
Probable Reserves |
Those measured and/or indicated mineral resources which are not yet 'proved', but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions |
|
Proved Reserves |
Measured mineral resources of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions |
|
Rail car |
Railway wagon used for the transport of iron ore concentrate or pellets |
|
Relationship Agreement |
The relationship agreement entered into among Fevamotinico S.a.r.l., Kostyantin Zhevago, The Minco Trust and the Company |
|
Remuneration Committee |
The Remuneration Committee of the Company's Board |
|
Reserves |
Those parts of mineral resources for which sufficient information is available to enable detailed or conceptual mine planning and for which such planning has been undertaken. Reserves are classified as either proved or probable |
|
Sinter |
A porous aggregate charged directly to the blast furnace which is normally produced by firing fine iron ore and/or iron ore concentrate, other binding materials, and coke breeze as the heat source |
|
Spot price |
The current price of a product for immediate delivery |
|
Sterling/£ |
Pound Sterling, the currency of the United Kingdom |
|
STIP |
Short-Term Incentive Plan |
|
Tailings |
The waste material produced from ore after economically recoverable metals or minerals have been extracted. Changes in metal prices and improvements in technology can sometimes make the tailings economic to process at a later date |
|
Tolling |
The process by which a customer supplies concentrate to a smelter and the smelter invoices the customer the smelting charge, and possibly a refining charge, and then returns the metal to the customer |
|
Ton |
A US short ton, equal to 0.9072 metric tonnes |
|
Tonne or t |
Metric tonne |
|
Traditional Markets |
These lie within Central and Eastern Europe and include steel plants that were designed to use Ferrexpo pellets. Ferrexpo has been supplying some of these customers for more than 20 years. Ferrexpo has well-established logistics routes and infrastructure to these markets by both river barge and rail. These markets include Austria, Czech Republic, Hungary, Serbia and Slovakia |
|
Treasury Shares |
A company's own issued shares that it has purchased but not cancelled |
|
TSF |
Tailings storage facility |
|
TSR |
Total shareholder return. The total return earned on a share over a period of time, measured as the dividend per share plus capital gain, divided by initial share price |
|
UAH |
Ukrainian Hryvnia, the currency of Ukraine |
|
Ukr SEPRO |
The quality certification system in Ukraine, regulated by law to ensure conformity with safety and environmental standards |
|
US$/t |
US Dollars per tonne |
|
VAT |
Value Added Tax |
|
Value-in-use |
The implied value of a material to an end user relative to other options, e.g. evaluating, in financial terms, the productivity in the steel making process of a particular quality of iron ore pellets versus the productivity of alternative qualities of iron ore pellets. |
|
WAFV |
Weighted average fair value |
|
WMS |
Wet magnetic separation |
|
Yeristovo or Yeristovskoye |
The deposit being developed by FYM |
[1] This amount includes a special dividend of 6.6 US cents per share.
[2] US$54 million prepaid as part of February Exchange offer, US$100 million prepaid after period end as part of July Exchange Offer. For more information see Financial Management on page 7.
[4] Source: CRU Iron Ore Market Statistical Review July 2015
[5] The Platts index iron ore fines price refers to the 62% Fe iron ore fines price to China, CFR. Ferrexpo's received price for its iron ore pellets is composed of this index price plus a pellet premium, adjusted for Fe content and quality and less freight.
[6] Free on Board, i.e. pellets delivered to port for seaborne export. Delivered at point, i.e. pellets deliver to the Western boarder for export to Europe.
[7] Ferrexpo Premium Pellets, FPP, contain 65% Fe compared to Ferrexpo Basic Pellet, FBP, which contain 62% Fe.
[8] Compiled by Deutsche Bank industrials team using 15 sell side analyst Iron Ore price forecasts
This information is provided by RNS
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