2019 Half Year Results
2 August 2019
Ferrexpo plc
("Ferrexpo", the "Group" or the "Company")
2019 Half Year Results
Ferrexpo plc today announces its unaudited financial results for the six months ended 30 June 20191.
Financial Highlights
· Revenue up 28% to US$787 million due to higher iron ore fines prices and an increase in sales volumes
· Underlying EBITDA A up 59% to US$372 million (1H 2018: US$234 million)
· Profit after tax up 78% to US$270 million
· Declared interim ordinary dividend up 100% to 6.6 US cents (1H 2018: 3.3 US cents)
· Net debt A reduced to US$282 million (31 December 2018: US$339 million)
· Capital investment doubled to US$114 million
Steve Lucas, Non-Executive Chairman, said:
"I am pleased to report half-year EBITDA of US$372 million, up almost 60% compared to 1H 2018, and a profit after tax of US$270 million, up 78% compared to 1H 2018. During the period we continued to benefit from strong pricing for our high-grade iron ore pellets, which helped deliver healthy cash flows. This enabled us to allocate capital to further reduce debt, increase organic investment in our assets to drive medium term growth and declare a record interim dividend to shareholders."
Ferrexpo has a diversified sales portfolio selling to world class steel mills under long term contracts using international benchmark pricing. Currently steel demand is muted in some regions reflecting increased raw material costs and weaker end-user demand. The Group, however, has the ability to deploy tonnage to other markets to offset any regional weakness. Overall pricing remains attractive compared to historic levels."
1H 2019 Financial Summary:
|
US$ million (unless otherwise stated) |
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Change % |
Year ended 31.12.18 |
|
Total pellet production (kt) |
5,353 |
5,096 |
5% |
10,607 |
|
Sales volumes (kt) |
4,990 |
4,798 |
4% |
10,227 |
|
Avg PLATTS CFR 62% Fe iron ore fines price (US$/t) |
91.7 |
69.8 |
31% |
71.3 |
|
Avg PLATTS CFR 65% Fe iron ore fines price (US$/t) |
105.4 |
88.1 |
20% |
90.4 |
|
Revenue |
787 |
617 |
28% |
1,274 |
|
Average C1 cash costA (per tonne) |
46.0 |
41.6 |
11% |
43.3 |
|
Underlying EBITDAA |
372 |
234 |
59% |
503 |
|
Underlying EBITDA marginA |
47% |
38% |
9ppt |
39% |
|
Profit after tax for the period |
270 |
152 |
78% |
335 |
|
Diluted EPS (US cents) |
45.8 |
25.8 |
78% |
56.7 |
|
Ordinary interim dividend per share declared (US cents) |
6.6 |
3.3 |
100% |
23.1 |
|
Net cash flow from operating activities |
256 |
156 |
64% |
292 |
|
Capital investmentA |
114 |
56 |
104% |
135 |
|
Net debt2 |
282 |
369 |
-24% |
339 |
|
Cash |
92 |
82 |
12% |
63 |
|
Net debt to last twelve months' EBITDAA |
0.44x |
0.74x |
-41% |
0.67x |
1 These results have not been subject to a review as per the announcement of 3 July 2019
2 Note: net debt as of 30 June 2019 included a US$6 million effect from the first time application of IFRS16 Leases.
Market Environment
· Significant increase in the iron ore fines price
· Supply of pellets remained tight in 1H 2019
· Average realised FOB price increased 28% compared to 1H 2018
Operational Highlights
· 5% increase in pellet production compared to 1H 2018
· Proportion of high quality 65% Fe pellet to 96% of total output (1H 2018: 94%)
· 4% increase in sales volumes compared to 1H 2018
· C1 cash cost US$46 per tonne up US$4.4 per tonne reflecting domestic inflation of 9% and a 5% appreciation of the local currency
· Capital investmentA increased by US$58 million to US$114 million reflecting modernisation of processing facilities and near term organic growth opportunities to increase production by 1.5MT to 12MTPA
Corporate Governance
· The Independent Review into the use of funds donated by Ferrexpo to the Blooming Land Charity remains ongoing, the Independent Review Committee is seeking to conclude its review as soon as possible
· Appointment of Graeme Dacomb, a retired partner from Ernst & Young, as an independent non-executive director and as Chair of the Audit Committee
· In July 2019, appointment of MHA MacIntyre Hudson, the UK member of Baker Tilly International, as the Company's new auditor. Baker Tilly International has significant audit capability in Ukraine having operated there since 1999
· Further appointments to the Board of directors to be announced in due course
Health and Safety
· No work related fatalities (FY 2018: one)
· Group Lost Time Injury Frequency Rate 0.45 per million man hours (FY 2018:1.18, 1H 2018: 0.97)
Alternative Performance Measures
Words with the symbolA are defined in the Alternative Performance Measures section on pages 34 and 35.
There is an analyst and investor meeting at 09.00 BST today at the offices of JPMorgan at 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 before 08.45 BST. The presentation will be hosted by Steve Lucas (Chairman), Kostyantin Zhevago (CEO) and Chris Mawe (CFO).
Webcast link: https://edge.media-server.com/mmc/p/srmiia5u
For further information contact:
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Ferrexpo: |
|
|
Ingrid McMahon |
+44 207 389 8304 |
|
|
|
|
Maitland/AMO: |
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James Isola |
+44 207 379 5151 |
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine. It has been mining, processing and selling high quality iron ore pellets to the global steel industry for 40 years. Ferrexpo's resource base is one of the largest iron ore deposits in the world. In 2018, the Group produced 10.6 million tonnes of pellets, a 2% increase compared to 2017, ranking it as the 3rd largest exporter of pellets to the global steel industry with a market share of approximately 8.5%. Ferrexpo has a diversified customer base supplying steel mills in Austria, Germany, Japan, South Korea, Taiwan, China, Slovakia, the Czech Republic, Turkey and Vietnam. Ferrexpo has a premium listing on the main market of the London Stock Exchange under the ticker FXPO. For further information, please visit www.ferrexpo.com
Introduction
I am very pleased to report there were no work related fatalities at Ferrexpo in 1H 2019 (2018: one). We remain firmly focused on achieving zero fatalities or injuries.
The Group has continued to perform well in 1H 2019. Compared with 1H 2018 pellet production was up 5%, sales volumes increased 4%, revenue increased by 28% while profit after tax increased by 78%. Strong cash flow generation funded capital investment of US$114 million and dividend payments of US$78 million whilst reducing net debt by US$57 million to US$282 million (31 December 2018: US$339 million).
1H 2019 was notable for the large increases in prices for all grades of iron ore. The Benchmark 62% Fe iron ore fines price increased by US$45 per tonne from 1 January 2019 to 30 June 2019. While the 65% Fe iron ore fines price increased by US$41 per tonne from US$88 per tonne as of 1 January 2019 to US$129 per tonne as of 30 June 2019.
During the period, the majority of seaborne iron ore pellet traded under long term contracts moved to a higher grade index as the basis for pricing. This move allowed Ferrexpo to directly capture the price premium currently contained in the 65% Fe price over the 62% Fe price, while pellet premiums were in line with 1H 2018. The average 65% Fe iron ore fines price was US$105 in 1H 2019 compared to an average 62% Fe fines price of US$70 per tonne in 1H 2018. In 2H 2019, Ferrexpo will continue to follow international benchmark pricing for its products. Currently steel demand is muted in some regions reflecting increased raw material costs and weaker end-user demand. The Group has the ability to deploy tonnage to other markets to offset any regional weakness.
Pellets are one of the most productive sources of iron in the steelmaking process while also reducing energy inputs, slag volumes and carbon emissions for a steel mill and helping to improve the quality of the final steel product. As such pellets receive a price premium over other types of iron ore.
The Group is making good progress towards the completion of its US$100 million investment to expand concentrate production. This will allow the Group to increase pellet production by approximately 1.5 million tonnes to 12 million tonnes per annum in 2021 compared to production of 10.6 million tonnes expected in 2019.
Ferrexpo is one of the few pellet producers globally with the capacity to increase production significantly on a brownfield basis within its existing infrastructure. The Group is undertaking engineering studies to expand its pelletising capacity from 12 million tonnes to over 20 million tonnes per annum.
The Group is committed to maintaining low net debt and paying dividends to shareholders (see Dividends). Capital allocated to investment will be for incremental high IRR projects with the goal of sustainably increasing output to approximately 20 million tonnes over the medium term.
Dividends
The Directors have declared an ordinary interim dividend of 6.6 US cents per Ordinary Share (1H 2018: 3.3 US cents per Ordinary Share) for payment on 3 September 2019 to shareholders on the register at the close of business on 16 August 2019. The ex-dividend date will be 15 August 2019. The dividend will be paid in UK Pounds Sterling, with an election to receive in US Dollars.
Independent Review of Blooming Land Charity
As previously disclosed, the Company has established the Independent Review Committee ("IRC") to carry out an independent review into the use of funds donated by Ferrexpo to the Blooming Land Charity (the "Charity"). The work of the IRC and its advisers is being conducted in accordance with the terms of reference approved by the Board (as detailed in the Group's 2018 Annual Report and Accounts) and includes a forensic review conducted by BDO LLP, review of relevant documentation, interviews with Ferrexpo employees and directors, correspondence with the Charity and other third parties, and advice from legal counsel in the UK and Ukraine. Significant work has been undertaken by the IRC and its advisers and this remains ongoing. At present, there are no material changes to the Company's interim conclusions published in the 2018 Annual Report and Accounts. The IRC is seeking to conclude its review as soon as possible.
Board Appointment
The Board of Ferrexpo remains committed to the highest levels of corporate governance and transparency.
During the period, the Group was pleased to announce the appointment of Graeme Dacomb as an independent non-executive director and as the Chair of the Audit Committee. Graeme was a partner at Ernst and Young for 26 years where, for his last twelve years, he was a lead partner in the extractive industry, responsible for coordinating the provision of a full suite of services to multinational mining and oil and gas clients including Xstrata, Fresnillo, and BP across a broad range of countries including emerging markets. In addition to audit services, he provided critical advice for his clients on corporate governance structures, risk management, acquisitions, disposals and financial systems and controls. From 2011 to 2018, Graeme was a member of the Financial Reporting Review Panel.
Ferrexpo's programme to recruit new Board members is ongoing. As part of the selection process a wide range of factors are taken into consideration including requirements for diversity, mining sector experience and emerging market knowledge.
Auditor Appointment
In July 2019, Ferrexpo announced that following the completion of an audit tender led by the Company's Audit Committee, MHA MacIntyre Hudson, the UK member of Baker Tilly International, was appointed as the Company's new auditor. Baker Tilly International operates one of the top ten audit networks in the world and, importantly, has significant audit capability in Ukraine having operated there since 1999.
Iron Ore Market Review
Iron Ore Pricing
During the period the majority of seaborne iron ore pellets traded under long term contracts were priced on a higher grade index. This was a change in precedent for the industry and allowed producers of 65% Fe pellets, such as Ferrexpo, to directly capture the price premium for its higher grade ore.
1H 2019 was notable for the large increase in iron ore pricing for all grades of ore especially when compared to a relatively stable period of pricing in 2018 (the 62% Fe iron ore fines price fell US$2 per tonne from 1 January 2018 to 31 December 2018 to US$73 per tonne). The benchmark 62% Fe iron ore fines price rose by US$45 per tonne from 1 January 2019 to 30 June 2019, a 62% increase, and traded above US$100 per tonne for the first time since 2014.
The 65% Fe iron ore fines price rose US$41 per tonne from US$88 per tonne as of 1 January 2019 to US$129 per tonne as of 30 June 2019. The relative decline in the price difference between 65% Fe ore and 62% Fe ore reflected an adjustment to the product mix by steel mills in favour of lower grade product due to lower steel prices and lower demand outside China. 1H 2019 also saw the return of high grade iron ore concentrate supply from producers in Brazil and Canada which were offline in 1H 2018. This was offset by weather disruptions in Northern Brazil which provided support for the 65% Fe fines price.
The overall price received by Ferrexpo in 1H 2019 benefitted from the substantially higher iron ore fines price as well as a pellet premium in line with 1H 2018.
Iron Ore Supply
The significant increase in the iron ore fines price in 1H 2019 was driven by severe supply disruptions from the major iron ore producing regions which account for over 80% of seaborne supply and a 10% increase in Chinese steel production in 1H 2019 compared with 1H 2018.
In terms of supply side disruptions, all three regions shown in the table below were expecting higher year on year supply, however, due to the tragic tailings dam accident in Minas Gerais in January 2019 and significant weather disruptions in Northern Brazil and Australia (with iron ore shipments from Brazil and Australia in April and May dropping to their lowest since 2015) seaborne supply is now expected to fall in 2019 compared with 2018. The expected reduction in seaborne supply in 2019 is largely due to lower output from traditional sources. At current price levels, however, supply from non-traditional sources could re-enter the market.
|
Shipments of iron ore (MT) |
1H 2019 |
1H 2018 |
% Change |
2019 CRU FY forecast |
2018 FY production |
% Change |
|
Minas Gerais, Brazil |
85 |
95 |
-11% |
164 |
199 |
-18% |
|
Para, Brazil |
78 |
85 |
-8% |
190 |
191 |
- |
|
Australia |
410 |
422 |
-3% |
817 |
845 |
-3% |
In 1H 2019, Chinese port inventories reached a five-year low, however, in June seaborne supply recovered strongly as weather related issues in Australia and Brazil eased.
Freight
The C3 freight rate, which is principally used as a freight reference in the pricing of the Group's sales contracts, was on average US$15 per tonne in 1H 2019 (1H 2018: US$17 per tonne). This reflected lower iron ore shipments from Australia and Brazil. The average C3 rate in July has increased to approximately US$24 per tonne, likely reflecting the recovery in iron ore shipments.
Iron Ore Pellet Supply
In 1H 2019, the supply of pellets to the global export market reduced due to major supply disruptions in Brazil with an estimated 11 million tonnes of pellet capacity closed. In the second half of the year, incremental increases in pellet output are expected from Brazil, Canada and the Middle East.
The restart of further seaborne supply from Brazil, which has been out of the market since 2016, remains uncertain in terms of timing and the volume to be produced, while the high capital intensity associated with developing greenfield pellet supply is unlikely to lead to any significant new capacity in coming years.
Demand Environment
According to the World Steel Association, 1H 2019 global crude steel production was up 5% to approximately 925 million tonnes (1H 2018: 881 million tonnes). Crude steel production in China was at high levels in 1H 2019, increasing approximately 10% vs. 1H 2018 to 492 million tonnes, due to lower than expected winter production restrictions, government stimulus and high expectations of strong steel demand for the rest of the year in order to offset trade war uncertainty.
The World Steel Association, however, forecasts global steel output to increase by approximately 1% in 2019 compared with 2018 to 1,735 million tonnes given an expected reduction in steel output due to contracting steel margins and an overall forecast decline in global GDP growth from 3.6% in 2018 to 3.3% in 2019 (source: IMF). Steel output in Europe has been impacted by higher raw material costs and lower industrial production especially in the automotive sector.
As in the past, Ferrexpo continues to expect underlying demand for pellet to be supported by requirements for iron ore of a higher grade and in a form that reduces energy inputs, slag volumes and air emissions in the steelmaking process while improving the quality of the final product. This is likely to be further supported by rising CO2 prices in Europe and the potential introduction in other markets.
As a pellet exporter with established operations relatively close to major import markets, Ferrexpo stands to benefit from the strong long term expected pellet market dynamics.
In the short term, however, demand may be lower due to reduced steel mill profitability and utilisation rates. Ferrexpo sells its pellets under long term contracts to high quality steel mills throughout the world and can access all major markets, reducing reliance on any one region. Incumbent pellet producers' benefit from high barriers to entry, and the Group maintains a competitive cost of production relative to the majority of its peers.
Financial Review
The Group has continued to perform well in 1H 2019. Compared with 1H 2018 pellet production is up 5%, sales volumes increased 4%, revenue increased by 28% while profit after tax increased by 78%. Strong cash flow generation funded dividend payments of US$78 million and capital investment of US$114 million whilst reducing net debt by US$57 million to US$282 million (31 December 2018: US$339 million).
Revenue
Group revenue increased by 28% to US$787 million in 1H 2019 (1H 2018: US$617 million) principally due to a significant increase in Ferrexpo's realised FOB price and an increase in pellet sales volumes.
Higher realised prices during the period mainly reflected a substantial increase in the iron ore fines price.
Headline pricing 1H 2019 vs. 1H 2018
|
$ per tonne |
1H 2019 |
1H 2018 |
Change |
|
Avg 62% Fe |
92 |
70 |
31% |
|
Avg 65% Fe Price |
105 |
88 |
20% |
During the period the majority of seaborne iron ore pellets traded on a long term contract moved to a higher grade index as the basis for pricing. This further benefitted Ferrexpo's price realisations by capturing the quality premium inherent in 65% Fe ores. The average 65% Fe iron ore fines price was US$105 in 1H 2019 compared to an average 62% Fe fines price of US$70 per tonne in 1H 2018. The difference in price increased revenue by US$155 million. Pellet premiums were in line with 1H 2018.
Lower freight rates during the period increased net revenue by approximately US$9 million. For further information see Iron Ore Pricing (Iron Ore Market Review).
Sales volumes for the period increased 4% to 5.0 million tonnes (1H 2018: 4.8 million tonnes), increasing revenue by US$21 million. For further information see Operational Review - Marketing.
Costs
C1 Cost of Production
The Group's average C1 cash cost of productionA was US$46.0 per tonne in 1H 2019 compared with US$41.6 per tonne in 1H 2018.
Cost inflation moderated in 1H 2019 compared with US$45.0 per tonne in 2H 2018 (FY 2018: US$43.3 per tonne).
The increase in costs was primarily due to domestic cost inflation and a strong local currency against the US Dollar adding US$2.3 per tonne to the C1 cash cost compared to 1H 2018. Ukrainian inflation was 9% in 1H 2019 while the Hryvnia appreciated by 13% in real terms compared to the same period of 2018. Over half of the Group's operating costs are in local currency and are impacted by the Hryvnia exchange rate and inflation. For further information see Currency below.
Higher stripping activities to support product quality and in preparation for mining within the next two years increased the cash cost by US$1.4 per tonne while ongoing repair and maintenance in the processing plant and pelletiser increased the C1 cost by US$0.8 per tonne. Lower gas (-7% 1H 2019 vs. 1H 2018) and diesel fuel (-2% 1H 2019 vs. 1H 2018) prices were offset by higher biofuel and bentonite prices.
In 2H 2019, costs remain subject to local inflation, the Hryvnia exchange rate and commodity prices.
On 1 July 2019, the government of Ukraine announced the liberalisation of the electricity market. This aims to increase competition as per the liberalisation of the gas market in 2015.
The table below contains the split of the Group's C1 cash cost per tonne, which remains broadly in line with the same period last year.
|
US$ per tonne |
% of C1 cost 1H 2019 |
% of C1 cost 1H 2018 |
|
Electricity |
23% |
24% |
|
Gas |
8% |
10% |
|
Fuel |
10% |
10% |
|
Materials |
16% |
14% |
|
Spare parts |
8% |
9% |
|
Personnel |
10% |
9% |
|
Maintenance and repairs |
9% |
8% |
|
Grinding media |
8% |
8% |
|
Royalties |
6% |
6% |
|
Explosives |
2% |
2% |
The Group's C1 cost represents the cash costs of production of iron pellets from own ore (to the mine gate), divided by production volume from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, also the costs of purchased ore, concentrate and gravel.
Selling and Distribution Costs
Total selling and distribution costs were US$132 million (1H 2018: US$122 million). This included an increase in rail tariffs of 15% from April 2019. International freight costs arising from CFR sales of US$49 million (1H 2018: US$45 million) are included in revenue and selling and distribution costs. The increase in international freight reflects higher sales volumes and an increased proportion of sales to North East Asia.
General, Administrative and Other Expenses
General and administrative and other expenses increased to US$45 million compared with US$42 million in 1H 2018. This reflected an increase in local personnel costs due to the appreciation of the local currency against the US Dollar and higher audit and professional fees as a result of the independent review into the Blooming Land Charity. For further information see Independent Review of Blooming Land Charity on page 4 and Notes 17 Commitments and contingencies and 19 Related party disclosure.
Currency
Ferrexpo prepares its accounts in US Dollars. The functional currency of the Ukrainian operations is the Hryvnia and approximately half of the Group's operating costs are in local currency. In 1H 2019, the Hryvnia appreciated from UAH27.688 per Dollar on 1 January to UAH26.166 per Dollar as of 30 June 2019 and resulted in an increase of the Group's productions costs. For further information see C1 Cost of Production above. The total operating forex loss resulting from the conversion of US$ denominated assets in Ukraine remained stable at US$16 million in 1H 2019 and 1H 2018.
Ukrainian Hryvnia vs. US Dollar
|
|
Spot (30.7.19) |
Opening rate 1.1.19 |
Closing rate 30.6.19 |
Average 1H 2019 |
Average 1H 2018 |
|
UAH per US$ |
25.085 |
27.688 |
26.166 |
26.932 |
26.747 |
Source: National Bank of Ukraine
Underlying EBITDAA
Underlying EBITDAA in 1H 2019 increased 59% to US$372 million compared to US$234 million in 1H 2018.
This reflected a 28% increase in the Group's received pellet price of US$157 million compared to 1H 2018 and higher sales volumes of US$9 million. This was partially offset by an increase in costs of US$28 million.
Interest
Interest expense declined 38% to US$15 million compared to US$24 million in 1H 2018 due to a lower outstanding debt balance and final repayment of high cost Eurobonds in April 2019. The average cost of debt for the period ended 30 June 2019 was 7.5% (average 30 June 2018: 8.1%). The decrease was due to the repayment of US$173 million Eurobonds at 10.375%.
Further details on finance expense are disclosed in Note 7 Net finance expense of the accounts.
Tax
The income tax expense for 1H 2019 was US$47 million (1H 2018: US$27 million) based on an expected weighted average tax rate of 15% for the full year, in line with 1H 2018 and an effective full year tax rate of 14.5% in 2018.
Further details on taxation are disclosed in Note 8 Taxation and Note 17 Commitments and contingencies; Legal of the accounts.
Profit for the Period
Profit for the period increased 78% to US$270 million compared with US$152 million in 1H 2018 reflecting higher profit before tax and finance and lower interest expense.
Cash Flows
Net cash flow from operating activities was US$256 million (1H 2018: US$156 million). Working capital reflected a net outflow of US$70 million. This was principally due to an increase in pellet stocks and trade receivables given the higher price environment.
During 1H 2019, there was an outflow of US$78 million related to dividends paid in January 2019 and May 2019 (1H 2018: US$74 million). In July a further dividend of approximately US$39 million was paid following approval at the Group's AGM in May 2019.
Capital InvestmentA
Capital expenditureA in 1H 2019 was US$114 million compared to US$56 million in 1H 2018. During the period, US$19 million was spent on stripping activities for future production growth, US$14 million was invested in the concentrate expansion programme which is on track for completion by the end of 2020 and is expected to increase pellet production by 1.5 million tonnes per annum in 2021. US$6 million was invested in new rail cars, the Group received 200 rail cars during the period and ordered an additional 400 cars which will be paid for and delivered in 2H 2019. The remaining US$67 million was used for sustaining and other capital investment.
Debt
Ferrexpo has a strong balance sheet with low levels of debt. Net debt to EBITDAA for the last 12 months was 0.44x compared with 0.67x as of 31 December 2018. In 1H 2019 gross debt reduced to US$374 million (31 December 2018: US$402 million) and net debt, as of 30 June 2019, was US$282 million reflecting a cash balance of US$92 million (31 December 2018 net debt: US$369 million). Net debt as of 30 June 2019 included an effect of US$6 million as a result of the first time application of IFRS16 Leases.
The Group has a US$400 million 2017 PXF facility, of which US$360 million was drawn as of 30 June 2019. This facility will amortise over twelve quarters commencing in 1Q 2020. The Group has other facilities of US$9 million which mostly relate to export credit agency funding and will amortise monthly over the next 18 months.
Related Party Transactions
Related party transactions are disclosed in Note 19 Related party disclosure to the accounts.
Operational Review
Health and Safety
In 1H 2019, there were no fatalities at the Group's operations (FY 2018: one fatality).
The Group's Lost Time Injury Frequency Rate ("LTIFR") in 1H 2019 at 0.45 per million man hours showed a significant improvement compared to 2018 as can be seen from the table below.
The number of accidents at the Group halved to five in 1H 2019 compared with 10 in 1H 2018. While Ferrexpo is pleased with these improvements it is determined to make further improvements with the belief that only zero harm is acceptable.
|
LTIFR |
1H 2019 |
1H 2018 |
2018 |
|
- FPM |
0.45 |
1.09 |
1.25 |
|
- FYM |
0.00 |
0.00 |
0.66 |
|
- FBM |
0.00 |
0.00 |
0.00 |
|
Ukraine |
0.38 |
0.92 |
1.15 |
|
Barging |
1.80 |
1.86 |
1.83 |
|
Group |
0.45 |
0.97 |
1.18 |
Pellet Production
Total 1H 2019 pellet production increased 5% to 5.4 million tonnes (1H 2018: 5.1 million tonnes). Production during 1H 2018 was impacted by a planned 65 day pellet line refurbishment in 2Q 2018. The fourth and final pellet line refurbishment is scheduled to take place in 3Q 2019. As such, the Group maintains its 2019 full year production guidance of 10.6 million tonnes in line with 2018.
In 1H 2019, the Group continued to focus on improving the quality of its output and increased the proportion of high grade 65% Fe pellets to 96% of total output (1H 2018: 94% of total output). The table below summarises production in 1H 2019 and 1H 2018.
Pellet Production 1H 2019 and 1H 2018 ('000)
|
000' tonnes |
YTD 2019 |
YTD 2018 |
Change |
|
% |
|||
|
Pellet production from own ore |
5,352.5 |
5,081.7 |
5.3 |
|
- 62% Fe pellets |
215.0 |
317.1 |
-32.2 |
|
- 65% Fe pellets |
5,137.5 |
4,764.6 |
7.8 |
|
|
|
|
|
|
Production from third party materials |
0.0 |
14.5 |
-100% |
|
- 62% Fe pellets |
0.0 |
0.0 |
-100% |
|
- 65% Fe pellets |
0.0 |
14.5 |
-100% |
|
|
|
|
|
|
Total Pellets Produced |
5,352.5 |
5,096.2 |
5.0 |
|
- 62% Fe pellets |
215.0 |
317.1 |
-32.2 |
|
- 65% Fe pellets |
5,137.5 |
4,779.1 |
7.5 |
Whilst current production levels are constrained by bottlenecks in the beneficiation plant the Group is making good progress towards de-bottlenecking and expanding the concentrator by 2020 which will allow for the production of 12 million tonnes of pellets per annum.
Capital Investment
A summary of current projects under execution in 1H 2019 is shown in the table below:
|
Project |
|
|
|
|
|
|
|
Projects to reach 12MTPA |
Description |
Status |
Expected completion |
Total cost |
Spend 1H 2019 |
Remaining spend |
|
New grinding section |
Process 6MTPA of crushed ore into pellet feed |
Construction & assembly works underway |
2020 |
US$35M |
US$7M |
US$8M |
|
Concentrate stockyard |
Decoupling of concentrator & pellet plant by providing concentrate storage capacity |
Construction & assembly works underway |
2019 |
US$24M |
US$7M |
US$7M |
|
Phase 2 expansion |
|
|
|
|
|
|
|
Press filtration plant |
Replacement of disc filtration to reduce moisture in balling plant |
First order for equipment placed in 1H 2019 |
Completed in 4 phases of 6MTPA Final phase completed 2024 |
US$115M |
US$8M |
US$107M |
|
Logistics |
|
|
|
|
|
|
|
Rail cars |
Continuation of programme to replace state rail cars. Number of rail cars as of 30 June 20189 2,451
|
200 new cars delivered in 1H 2019 |
400 rail cars ordered in 1H 2019 for delivery 2H 2019 |
- |
US$6M |
US$18M |
Capital Investment for Future Growth
The Group's approved capital projects are in the table above. Ferrexpo is on track to reach 12 million tonnes of pellet output by 2021. Ferrexpo is currently considering a series of projects which will allow expansion of pellet capacity to 20 million tonnes per annum. This includes further development of the Group's beneficiating capacity, expansion of the Group's pelletising capacity and debottlenecking of logistics infrastructure including rail and port. A preliminary estimate of the required capital investment per tonne is approximately US$150-US$200 per tonne of incremental output.
Marketing
Ferrexpo's sales volumes for 1H 2019 increased 4% to 5.0 million tonnes (1H 2018: 4.8 million tonnes).
Ferrexpo benefits from a diversified sales portfolio with leading steel mills throughout the world, while its logistics routes to customers provide a competitive advantage given Ukraine's central geographical location. Ferrexpo's average shipping duration to Asia is 30 days compared to its main pellet-producing competitors in Brazil (40 days shipping time), Canada (55 days) and Norway (50 days).
The table below shows the breakdown of sales by key market regions. Sales to China and South East Asia include sales to Vietnam and Taiwan.
Sales Volume by Market Regions:
|
|
6 months ended 30.06.19 |
6 months ended 30.06.18 |
12 months ended 31.12.18 |
|
Central Europe |
48% |
50% |
47% |
|
North East Asia |
21% |
16% |
17% |
|
Western Europe |
12% |
16% |
16.5% |
|
China and South East Asia |
12% |
12% |
13% |
|
Turkey, Middle East, North Africa, India |
7% |
6% |
6% |
|
North America |
- |
- |
0.5% |
|
Total sales volume (thousand tonnes) |
4,990 |
4,798 |
10,227 |
In 1H 2019, 10-15% of the Group's pricing referenced the average 65% Fe CFR China iron ore fines price for the prior quarter less one month. This has a lagging impact on the Group's received price. In 2H 2019, this is expected to reduce to 8% of Group volumes.
Overall long term customer performance in 1H 2019 was in line with contract agreements and no volumes were sold into the Chinese spot market. The Group has achieved a higher production rate in 1H 2019 and sells to top class steel mills under long term contract throughout the world. Weakness in one region, as is currently being experienced in Europe, can be compensated for by sales into other regions based on international pricing methodology.
For further information on iron ore prices and freight see Iron Ore Market Review and Revenue.
Update on Risks
The Group considers that the risks facing the business, as highlighted on pages 38 to 47 of the 2018 Annual Report and Accounts published in April 2019, remain relevant. An update is provided below on material developments of key risks during the first half of 2019.
Global Steel Demand and Realised Price
The Group's realised price is principally impacted by demand for iron ore which is highly correlated to global demand for steel and steel mill profitability. In 1H 2019, steel profit margins in Europe, China and North East Asia continued to fall from 3Q 2018 levels. To date, in 2019 steel mill margins have been under pressure due to higher raw material costs and weaker end-user demand.
The iron ore forward curve for 62% Fe iron ore fines is currently in backwardation with delivery in December 2019 at $100 per tonne compared to spot on 30 July 2019 of approximately US$121 per tonne (although this remains higher than the 1H 2019 average of US$92 per tonne and the average 2018 price of US$70 per tonne). The expected price fall is due to lower forecast steel demand and non-traditional supply re-entering the market mainly from Chinese domestic producers. For further information see Iron Ore Supply (Iron Ore Market Review).
Lower iron ore fines prices will reduce the Group's realised price and profitability.
Pellet Premiums
Historically, pellet premiums have been correlated to steel mill profitability as they are the most productive source of iron in a blast furnace and thus trade at a price premium to other types of iron ores. When steel producer profitability is under pressure the reduction in usage of higher cost raw materials could lead to lower demand for iron ore pellets and or a fall in pellet premiums.
Lower pellet premiums will reduce the Group's realised price and profitability.
Market Mix
In 1H 2019, pellet premiums in China average US$33 per tonne compared with the average Atlantic pellet premium of US$67 per tonne for 62% Fe pellets. A change in sales mix away from the Atlantic pellet premium could have an impact on the average realised price and the Group profitability.
Freight Rates
Ferrexpo's received price is referenced to transparent freight indices such as the Baltic Exchange C3 freight price2, with higher freight rates reducing the Group's realised price. In 1H 2019, the C3 index decreased by US$2 per tonne to US$15 per tonne compared to 1H 2018. Freight rates are largely influenced by the price of oil and demand for seagoing vessels from bulk commodity producers. As of 31 July, freight rates had risen 53% to US$23 per tonne compared to the average for 1H 2019. An increase in freight rates will reduce the Group's received price and its profitability.
2 Seaborne freight rates, such as C3, are published by the Baltic Exchange and represent the cost for ocean transportation of iron ore from the Brazilian port of Tubarão (where the largest seaborne suppliers of pellets are based) to Qingdao, China (the largest steel producing country in the world). As Ferrexpo sells to international customers, the price it receives includes reference to C3 or other global benchmarks.
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 consolidated financial statements has been prepared in accordance with IAS 34;
· the Interim Management Report includes a fair review of the important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR4.2.7R; and
· the Interim Management Report includes a fair review of disclosure of related party transactions and changes therein, as required by DTR 4.2.8R.
The Directors are also responsible for the maintenance and integrity of the Ferrexpo plc website.
A list of current Directors is maintained on the Ferrexpo plc website which can be found at www.ferrexpo.com.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
For and on behalf of the Board
Steve Lucas
Chairman
Chris Mawe
Chief Financial Officer
1 August 2019
Interim Consolidated Income Statement
|
US$000 |
Notes |
6 months ended 30.06.2019 (unaudited) |
6 months ended 30.06.2018 (unaudited) |
Year-ended 31.12.18 (audited) |
|
Revenue |
3/4 |
787,111 |
616,717 |
1,274,030 |
|
Operating expenses |
5 |
(443,517) |
(402,148) |
(844,470) |
|
Other operating income |
|
1,956 |
1,454 |
3,314 |
|
Operating foreign exchange losses |
6 |
(16,002) |
(15,564) |
(5,295) |
|
Operating profit |
|
329,548 |
200,459 |
427,579 |
|
Share of profit from associates |
|
2,982 |
2,476 |
5,360 |
|
Profit before tax and finance |
|
332,530 |
202,935 |
432,939 |
|
Net finance expense |
7 |
(14,379) |
(24,025) |
(39,332) |
|
Non-operating foreign exchange (losses)/gains |
6 |
(303) |
165 |
(1,585) |
|
Profit before tax |
|
317,848 |
179,075 |
392,022 |
|
Income tax expense |
8 |
(47,497) |
(26,861) |
(56,801) |
|
Profit for the period/year |
|
270,351 |
152,214 |
335,221 |
|
|
|
|
|
|
|
Profit attributable to: |
|
|
|
|
|
Equity shareholders of Ferrexpo plc |
|
269,435 |
151,666 |
333,616 |
|
Non-controlling interests |
|
916 |
548 |
1,605 |
|
Profit for the period/year |
|
270,351 |
152,214 |
335,221 |
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic (US cents) |
9 |
45.9 |
25.9 |
56.9 |
|
Diluted (US cents) |
9 |
45.8 |
25.8 |
56.7 |
Interim Consolidated Statement of Comprehensive Income
|
US$000 |
Notes |
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit for the period/year |
|
270,351 |
152,214 |
335,221 |
|
Items that may subsequently be reclassified to profit or loss: |
|
|
|
|
|
Exchange differences on translating foreign operations |
6 |
80,791 |
79,443 |
12,178 |
|
Income tax effect |
|
(7,065) |
(9,991) |
(2,007) |
|
Net other comprehensive income that may be reclassified to profit or loss in subsequent periods |
|
73,726 |
69,452 |
10,171 |
|
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
|
Remeasurement (losses)/gains on defined benefit pension liability |
|
(1,379) |
143 |
875 |
|
Income tax effect |
|
207 |
(18) |
- |
|
Net other comprehensive (loss)/income not being reclassified to profit or loss in subsequent periods |
|
(1,172) |
125 |
875 |
|
Other comprehensive income for the period/year, net of tax |
|
72,554 |
69,577 |
11,046 |
|
Total comprehensive income for the period/year, net of tax |
|
342,905 |
221,791 |
346,267 |
|
|
|
|
|
|
|
Total comprehensive income attributable to: |
|
|
|
|
|
Equity shareholders of Ferrexpo plc |
|
340,544 |
220,822 |
344,587 |
|
Non-controlling interests |
|
2,361 |
969 |
1,680 |
|
|
|
342,905 |
221,791 |
346,267 |
|
|
|
|
|
|
Interim Consolidated Statement of Financial Position
|
US$000 |
Notes |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Assets |
|
|
|
|
|
Property, plant and equipment |
10 |
821,779 |
701,376 |
689,568 |
|
Right-of-use assets |
11 |
8,066 |
- |
- |
|
Goodwill and other intangible assets |
|
42,419 |
39,609 |
40,613 |
|
Investments in associates |
|
6,167 |
7,037 |
4,386 |
|
Inventories |
13 |
233,432 |
217,688 |
212,806 |
|
Other non-current assets |
|
38,109 |
32,104 |
22,018 |
|
Income taxes recoverable and prepaid |
8 |
- |
- |
5,846 |
|
Deferred tax assets |
|
30,121 |
27,946 |
35,756 |
|
Total non-current assets |
|
1,180,093 |
1,025,760 |
1,010,993 |
|
Inventories |
13 |
185,149 |
144,919 |
125,176 |
|
Trade and other receivables |
|
127,205 |
85,695 |
80,529 |
|
Prepayments and other current assets |
|
33,881 |
27,344 |
25,003 |
|
Income taxes recoverable and prepaid |
8 |
70 |
61 |
11 |
|
Other taxes recoverable and prepaid |
12 |
34,729 |
44,837 |
27,465 |
|
Cash and cash equivalents |
3/14 |
91,937 |
62,996 |
82,250 |
|
Total current assets |
|
472,971 |
365,852 |
340,434 |
|
Total assets |
|
1,653,064 |
1,391,612 |
1,351,427 |
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
Issued capital |
18 |
121,628 |
121,628 |
121,628 |
|
Share premium |
|
185,112 |
185,112 |
185,112 |
|
Other reserves |
18 |
(1,936,915) |
(2,010,080) |
(1,951,422) |
|
Retained earnings |
|
2,721,736 |
2,568,187 |
2,404,848 |
|
Equity attributable to equity shareholders of Ferrexpo plc |
|
1,091,561 |
864,847 |
760,166 |
|
Non-controlling interest |
|
90 |
2,050 |
1,339 |
|
Total equity |
|
1,091,651 |
866,897 |
761,505 |
|
Interest-bearing loans and borrowings |
3/15 |
307,214 |
197,258 |
151,331 |
|
Defined benefit pension liability |
|
24,149 |
21,444 |
22,449 |
|
Provision for site restoration |
|
2,155 |
1,940 |
2,305 |
|
Deferred tax liabilities |
|
650 |
352 |
372 |
|
Total non-current liabilities |
|
334,168 |
220,994 |
176,457 |
|
Interest-bearing loans and borrowings |
3/15 |
66,937 |
204,600 |
299,574 |
|
Trade and other payables |
|
76,279 |
34,292 |
47,720 |
|
Accrued liabilities and contract liabilities |
|
32,519 |
32,693 |
28,529 |
|
Income taxes payable |
8 |
40,367 |
20,571 |
26,944 |
|
Other taxes payable |
|
11,143 |
11,565 |
10,698 |
|
Total current liabilities |
|
227,245 |
303,721 |
413,465 |
|
Total liabilities |
|
561,413 |
524,715 |
589,922 |
|
Total equity and liabilities |
|
1,653,064 |
1,391,612 |
1,351,427 |
The financial statements were approved by the Board of Directors on 1 August 2019.
|
Kostyantin Zhevago |
Christopher Mawe |
|
Chief Executive Officer |
Chief Financial Officer |
Interim Consolidated Statement of Cash Flows
|
US$000 |
Notes |
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit before tax |
|
317,848 |
179,075 |
392,022 |
|
Adjustments for: |
|
|
|
|
|
Depreciation of property, plant and equipment and amortisation of intangible assets |
5 |
39,649 |
27,809 |
62,094 |
|
Finance expense |
7 |
13,727 |
23,269 |
37,834 |
|
Finance income |
7 |
(901) |
(454) |
(892) |
|
Losses on disposal and liquidation of property, plant and equipment |
5 |
(59) |
2,969 |
5,701 |
|
Cash elements included in losses on disposal of property, plant and equipment |
|
(52) |
(73) |
(372) |
|
(Write-backs)/write-offs |
5 |
(337) |
− |
1,489 |
|
Share of profit from associates |
|
(2,982) |
(2,476) |
(5,360) |
|
Movement in allowance for doubtful receivables |
|
133 |
45 |
222 |
|
Movement in site restoration provision |
|
99 |
84 |
(162) |
|
Employee benefits |
|
1,460 |
1,817 |
3,642 |
|
Share-based payments |
|
514 |
411 |
674 |
|
Operating foreign exchange losses |
6 |
16,002 |
15,564 |
5,295 |
|
Non-operating foreign exchange losses/(gains) |
6 |
303 |
(165) |
1,585 |
|
Other adjustments |
|
(3,134) |
(2,750) |
(7,657) |
|
Operating cash flow before working capital changes |
|
382,270 |
245,125 |
496,115 |
|
Changes in working capital: |
|
|
|
|
|
(Increase)/decrease in trade and other receivables |
|
(44,963) |
1,279 |
(12,785) |
|
Increase in inventories |
|
(35,590) |
(45,339) |
(87,999) |
|
(Decrease)/increase in trade and other accounts payable |
|
(1,017) |
8,831 |
1,903 |
|
Decrease/(increase) in other taxes recoverable and payable (incl. VAT) |
|
11,401 |
(65) |
(17,530) |
|
Cash generated from operating activities |
|
312,101 |
209,831 |
379,704 |
|
Interest paid |
|
(19,884) |
(26,296) |
(42,768) |
|
Interest paid on lease liabilities |
15 |
(254) |
− |
− |
|
Income tax paid |
|
(35,536) |
(26,236) |
(43,509) |
|
Post-employment benefits paid |
|
(911) |
(879) |
(1,702) |
|
Net cash flows from operating activities1) |
|
255,516 |
156,420 |
291,725 |
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment and intangible assets |
|
(113,968) |
(55,765) |
(135,113) |
|
Proceeds from disposal of property, plant and equipment and intangible assets |
|
547 |
387 |
800 |
|
Interest received |
|
859 |
449 |
827 |
|
Dividends from associates |
|
1,612 |
1,693 |
4,137 |
|
Net cash flows used in investing activities |
|
(110,950) |
(53,236) |
(129,349) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from borrowings and finance |
15 |
185,000 |
210,866 |
214,317 |
|
Repayment of borrowings and finance |
15 |
(219,848) |
(254,390) |
(308,817) |
|
Principal elements of lease payments |
15 |
(3,224) |
− |
− |
|
Arrangement fees paid |
|
(131) |
− |
(5,817) |
|
Dividends paid to equity shareholders of Ferrexpo plc1) |
9 |
(77,763) |
(73,996) |
(96,559) |
|
Net cash flows used in financing activities |
|
(115,966) |
(117,520) |
(196,876) |
|
Net increase/(decrease) in cash and cash equivalents |
|
28,600 |
(14,336) |
(34,500) |
|
Cash and cash equivalents at the beginning of the period/year |
|
62,996 |
97,742 |
97,742 |
|
Currency translation differences |
|
341 |
(1,156) |
(246) |
|
Cash and cash equivalents at the end of the period/year |
14 |
91,937 |
82,250 |
62,996 |
1) Dividend paid during the comparative period ended 30 June 2018 is net of withholding tax of US$3,187 thousand that is payable subsequent to the period end (30 June 2019: nil; 31 December 2018: nil).
Interim Consolidated Statement of Changes in Equity
|
For the financial year 2018 and the six months ended 30 June 2019 |
Attributable to equity shareholders of Ferrexpo plc |
|
|||||
|
US$000
|
Issued capital |
Share premium |
Other reserves (Note 18) |
Retained Earnings |
Total capital and reserves |
Non-controlling interests |
Total equity |
|
At 31 December 2017 (audited) |
121,628 |
185,112 |
(2,020,864) |
2,329,591 |
615,467 |
370 |
615,837 |
|
Application of new IFRSs1) |
- |
- |
- |
989 |
989 |
- |
989 |
|
At 1 January 2018 - after application of new IFRSs (audited) |
121,628 |
185,112 |
(2,020,864) |
2,330,580 |
616,456 |
370 |
616,826 |
|
Profit for the period |
- |
- |
- |
333,616 |
333,616 |
1,605 |
335,221 |
|
Other comprehensive income |
- |
- |
10,110 |
861 |
10,971 |
75 |
11,046 |
|
Total comprehensive income for the year |
- |
- |
10,110 |
334,477 |
344,587 |
1,680 |
346,267 |
|
Equity dividends paid to shareholders of Ferrexpo plc (Note 9) |
- |
- |
- |
(96,870) |
(96,870) |
- |
(96,870) |
|
Share-based payments |
- |
- |
674 |
- |
674 |
- |
674 |
|
At 31 December 2018 (audited) |
121,628 |
185,112 |
(2,010,080) |
2,568,187 |
864,847 |
2,050 |
866,897 |
|
Profit for the period |
- |
- |
- |
269,435 |
269,435 |
916 |
270,351 |
|
Other comprehensive income |
- |
- |
72,651 |
(1,542) |
71,109 |
1,445 |
72,554 |
|
Total comprehensive income for the period |
- |
- |
72,651 |
267,893 |
340,544 |
2,361 |
342,905 |
|
Equity dividends paid to shareholders of Ferrexpo plc (Note 9) |
- |
- |
- |
(116,394) |
(116,394) |
- |
(116,394) |
|
Effect from increase of shareholding in subsidiary |
- |
- |
- |
2,050 |
2,050 |
(4,321) |
(2,271) |
|
Share-based payments |
- |
- |
514 |
- |
514 |
- |
514 |
|
At 30 June 2019 (unaudited) |
121,628 |
185,112 |
(1,936,915) |
2,721,736 |
1,091,561 |
90 |
1,091,651 |
|
For the six months ended 30 June 2018 |
|
Attributable to equity shareholders of Ferrexpo plc |
|
||||
|
US$000
|
Issued capital |
Share premium |
Other reserves (Note 18) |
Retained earnings |
Total capital and reserves |
Non-controlling interests |
Total equity |
|
At 31 December 2017 (audited) |
121,628 |
185,112 |
(2,020,864) |
2,329,591 |
615,467 |
370 |
615,837 |
|
Application of new IFRSs1) |
- |
- |
- |
989 |
989 |
- |
989 |
|
At 1 January 2018 - after application of new IFRSs (audited) |
121,628 |
185,112 |
(2,020,864) |
2,330,580 |
616,456 |
370 |
616,826 |
|
Profit for the period |
- |
- |
- |
151,666 |
151,666 |
548 |
152,214 |
|
Other comprehensive income |
- |
- |
69,031 |
125 |
69,156 |
421 |
69,577 |
|
Total comprehensive income for the period |
- |
- |
69,031 |
151,791 |
220,822 |
969 |
221,791 |
|
Equity dividends paid to shareholders of Ferrexpo plc (Note 9) |
- |
- |
- |
(77,523) |
(77,523) |
- |
(77,523) |
|
Share-based payments |
- |
- |
411 |
- |
411 |
- |
411 |
|
At 30 June 2018 (unaudited) |
121,628 |
185,112 |
(1,951,422) |
2,404,848 |
760,166 |
1,339 |
761,505 |
1) A detailed description of the impact from the adoption of new accounting standards and interpretations as at the end of the comparative period 31 December 2018 is provided in Note 3 New accounting policies in the 2018 Annual Report & Accounts.
Notes to the Interim Condensed Consolidated Financial Statements
Note 1: Corporate information
Organisation and operation
Ferrexpo plc (the "Company") is incorporated in the United Kingdom, which is considered to be the country of domicile, with its registered office at 55 St James's Street, London, SW1A 1LA, UK. Ferrexpo plc and its subsidiaries (the "Group") operate two mines and a processing plant near Kremenchug in Ukraine, an interest in a port in Odessa and sales and marketing activities around the world including offices in Switzerland, Dubai, Japan, China, Singapore and Ukraine. The Group also owns logistics assets in Austria which operates a fleet of vessels operating on the Rhine and Danube waterways and an ocean going vessel which provides top off services and operates on international sea routes. The Group's operations are vertically integrated from iron ore mining through to iron ore concentrate and pellet production and subsequent logistics. The Group's mineral properties lie within the Kremenchug Magnetic Anomaly and are currently being extracted at the Gorishne-Plavninske and Lavrykivske ("GPL") and Yerystivske deposits.
The majority shareholder of the Group is Fevamotinico S.a.r.l. ("Fevamotinico"), a company incorporated in Luxembourg and ultimately owned by The Minco Trust, of which Kostyantin Zhevago, the Group's Chief Executive Officer, is a beneficiary. At the time this report was published, Fevamotinico held 50.3% (31 December 2018: 50.3%; 30 June 2018: 50.3%) of Ferrexpo plc's issued share capital.
The Group's interests in its subsidiaries are held indirectly by the Company, with the exception of Ferrexpo AG, which is directly held. The Group's consolidated subsidiaries are disclosed in the Additional Disclosures of the 2018 Annual Report & Accounts.
At 30 June 2019, the Group also holds through PJSC Ferrexpo Poltava Mining an interest of 49.9% (31 December 2018: 49.5%; 30 June 2018: 49.4%) in TIS Ruda LLC, a Ukrainian port located on the Black Sea. As this is an associate, it is accounted for using the equity method of accounting. The interest in the associate increased as a result of the increase of the Group's shareholding in PJSC Ferrexpo Poltava Mining from 99.1% to 100.0% in June 2019.
Note 2: Summary of significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six months period ended 30 June 2019 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 2018.
The interim condensed consolidated financial statements have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of interim financial information and do not include all of the information required for full annual financial statements.
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 2018. 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 2018, have been delivered to the Register of Companies. The auditors' report under section 495 of the Companies Act 2006 in relation to those accounts was qualified and contained a statement under section 498(3) of the Companies Act 2006. The auditors' report did not contain a statement under section 498(2) of the Companies Act 2016.
Going concern
The Group has assessed that, taking into account: i) its available cash and cash equivalents available at the date of authorisation of the interim condensed consolidated financial statements; ii) its cash flow projections for the period of management's going concern assessment; and iii) events and conditions beyond the period of management's going concern assessment, it has sufficient liquidity to meet its present obligations and cover working capital needs for the aforementioned period and will remain in compliance with its financial covenants throughout this period. Therefore, the Group continues to adopt the going concern basis of accounting for the preparation of this set of financial statements.
Accounting policies adopted
The accounting policies and methods of computation adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2018 except for the adoption of the new standards that became effective as of 1 January 2019.
New standards and interpretations adopted with an impact on the Group's consolidated financial statements
IFRS 16 Leases
The Group applied IFRS 16 Leases, as issued in January 2016, for the first time as of 1 January 2019. The standard replaces the previous leases standard, IAS 17 Leases, and related interpretations. IFRS 16 establishes the principles for the recognition, measurement, presentation and disclosure of leases for the customer ("lessee") and the supplier ("lessor") and eliminates the classification of leases as either operating or finance for the lessee as is required by IAS 17. Instead, it introduces a single lessee accounting model requiring a lessee to recognise assets and liabilities for all leases unless the underlying asset has a low value or the lease term is 12 months or less.
In accordance with the transition provisions set out in IFRS 16, the Group elected to apply the standard retrospectively, with the cumulative impact of the first-time adoption recognised at the date of initial application. On transition, the Group grandfathered its previous assessment of operating leases under IAS 17 and recognised for these lease contracts rights of use assets and corresponding lease liabilities on the consolidated statement of financial position with no impact on retained earnings. The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at initial application which is the interest rate that the Group would have to pay to borrow over a similar term the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment. The corresponding right-of-use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the consolidated statement of financial position as at the end of the comparative period ended 31 December 2018. The balance of lease liabilities and right-of-use assets relating to leases classified as finance leases as at the end the comparative period ended 31 December 2018 was carried forward to the date of initial application. The new requirements of the standard as to whether a contract contains a lease component or not were applied to the identification of new lease contracts signed subsequent to 1 January 2019.
On transition, the Group elected to apply the following practical expedients and exemptions, as permitted under the transition provisions set out in the standard:
· application of a single discount rate to a portfolio of leases with similar characteristics;
· recognition exemption for low value and short-term leases, which are therefore recognised in the consolidated income statement on a straight line basis;
· account for each lease component and any associated non-lease components as a single lease component instead of separating the non-lease components from the lease ones.
Currently, the Group leases land, buildings and lease equipment. The vast majority of land leases are for land used for the extraction of ore and are not within the scope of IFRS 16 according to the scope exemptions set out in the standard. The new standard primarily resulted in the recognition of right-of-use assets and lease liabilities in respect of long-term rental contracts for several of the Group's office premises with rental periods of five to ten years, land not used for the direct extraction of ore as well as for lease equipment.
The following table provides a reconciliation between the balance of operating lease commitments as at 31 December 2018 and the lease liability recognised on 1 January 2019:
|
US$000 |
|
Balance as at 01.01.2019 (unaudited) |
|
Operating lease commitments as at 31 December 2018 |
|
8,827 |
|
Recognition exemption for mining land |
|
(331) |
|
Land under permanent use 1) |
|
971 |
|
Short-term leases recognition exemption |
|
(348) |
|
Total minimum lease payments |
|
9,119 |
|
Less: amounts representing finance charges |
|
(1,418) |
|
Add: leases previously classified as finance leases |
|
2,074 |
|
Lease liabilities recognised as at 1 January 2019 |
|
9,775 |
|
Thereof non-current portion |
|
4,799 |
|
Thereof current portion |
|
4,976 |
1) Leases of land refer to land not used for the direct extraction of ore in Ukraine, the Group's country of operations. These lease agreements with the Ukrainian government typically have a duration of up to 49 years requiring land lease payments in the form of rental taxes based on annually determined rates by the government. As a consequence, the lease liabilities relating to land not used for the direct extraction of ore (including leases under permanent terms) are recognised over a lease term of 12 months reflecting the period over which substantially fixed lease payments are expected. Beyond this period, payments are subject to non-market driven changes in either the normative value of land and/or in the rental tax rate and therefore cannot be considered in-substance fixed payments or as variable lease payments that depend on an index or a rate.
The lease liability is measured at the net present value of the remaining lease payments, discounted using the interest rate implicit in the lease or, when not available, the incremental borrowing rate computed for a group of leases with similar characteristics as regards to type of asset, lease term, contract currency and economic environment.
The right-of-use asset is recognised at the commencement date of the lease (when the asset is ready for use) and initially measured at cost. The cost includes the balance of the lease liability recognised, initial direct costs and lease payments made at or before the commencement date. In subsequent periods, the value of the right-of-use assets is adjusted for accumulated depreciation, impairment losses and any remeasurement of the lease liability. The right-of-use asset is depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
The following tables provide the details of the cumulative effects from the application of the new standard IFRS 16 Leases on the consolidated statement of financial position as of 1 January 2019 and the consolidated statement of financial position and the consolidated income statement as at 30 June 2019:
|
US$000 |
Notes |
Balance as at 01.01.19 |
Effect from application of IFRS 16 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Consolidated statement of financial position |
|
|
|
|
|
Assets |
|
|
|
|
|
Property, plant and equipment |
10 |
699,495 |
(1,881) |
701,376 |
|
Right-of-use assets |
11 |
9,582 |
9,582 |
− |
|
Liabilities |
|
|
|
|
|
Interest bearing loans and borrowings - non-current |
|
(4,799) |
(4,799) |
− |
|
Interest bearing loans and borrowings - current |
|
(4,976) |
(2,902) |
(2,074) |
|
|
Notes |
As reported as at 30.06.19 |
Effect from application of IFRS 16 |
Balance without effect from new IFRSs |
|
|
|
(unaudited) |
(unaudited) |
(unaudited) |
|
Consolidated income statement |
|
|
|
|
|
Operating expenses |
5 |
(443,517) |
(2) |
(443,515) |
|
Net finance expense |
7 |
(14,379) |
(254) |
(14,125) |
|
Consolidated statement of financial position |
|
|
|
|
|
Assets |
|
|
|
|
|
Property, plant and equipment |
10 |
821,779 |
− |
821,779 |
|
Right-of-use assets |
11 |
8,066 |
8,066 |
− |
|
Liabilities |
|
|
|
|
|
Interest bearing loans and borrowings - non-current |
15 |
(307,214) |
(4,357) |
(302,857) |
|
Interest bearing loans and borrowings - current |
15 |
(66,937) |
(1,974) |
(64,963) |
The adoption of IFRS 16 Leases has not had any material impact on the Underlying EBITDA and on basic and diluted earnings per share.
The impact on the net cash flows from operating activities from payments for short-term and low value leases was US$241 thousand for the six months ended 30 June 2019.
New standards, interpretations and amendments adopted without impact on the Group's consolidated financial statements
· Annual Improvements to IFRS Standards 2015-2017 Cycle contains amendments to IFRS 3 Business Combinations and IFRS 11 Joint arrangements, IAS 12 Income taxes and IAS 23 Borrowing costs.
· Amendments to IAS 19 Plan amendment, curtailment or settlement provide guidance, in the case of plan amendment, curtailment or settlement, on the measurement of the current service cost and the net interest for the period after the re-measurement and clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.
· Amendments to IAS 28 Long-term interests in associates and joint ventures clarifies that other interests in associates and joint ventures, including long-term interests not accounted for using the equity method of accounting and that, in substance, form part of the net investment in those associates and joint ventures fall within the scope of IFRS 9.
· IFRIC 23 Uncertainty over income tax treatments clarifies the accounting treatment for uncertainties in income taxes. The new interpretation is to be applied to the determination of taxable results, tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12 Income Taxes.
· Amendments to IFRS 9 Financial instruments: Prepayment features with negative compensation clarifies the classification of particular pre-payable financial assets and the accounting for financial liabilities following a modification.
New standards, interpretations and amendments not yet adopted
A detailed description of the expected impact from the adoption of new accounting standards and interpretations that are in issue, but are not yet effective is provided in Note 3 New accounting policies included in the 2018 Annual Report & Accounts and outlines the expected impact of the following amendments that will become effective in future periods.
· Amendments to References to the Conceptual Framework in IFRS standards is effective for the financial year beginning on 1 January 2020 and introduces a new chapter on measurement, guidance on reporting financial performance, improved definitions of an asset and a liability and clarifications in areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.
· Amendments to IAS 1 and IAS 8: Definition of material is effective for the financial year beginning on 1 January 2020 and introduces a revised definition of material information. In the new definition, reference is made to the concepts of obscured information and reasonable expectation that the information is going to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements.
Full disclosure of the final assessment of the impact of these amendments will be provided in the Annual Report & Accounts for the year ending 31 December 2019.
The Group does not expect an impact on its consolidated financial statements from all other standards, interpretations and amendments issued at the reporting date, but not yet to be adopted for these financial statements.
Use of critical estimates and judgements
In the course of preparing financial statements, management has to make estimates and judgements that can have a significant impact on the Group's consolidated financial statements. The most critical accounting estimates include the recoverability of capitalised lean and weathered ore and critical judgements relate to taxation in terms of the tax legislation in Ukraine.
The use of inaccurate assumptions in assessments made for any of these estimates and judgements could result in a significant impact on the Group's financial position and/or financial performance. The detailed description of the critical estimates and judgements are disclosed in the Group's 2018 Annual Report & Accounts.
Seasonality
The Group's operations are not affected by seasonality.
Note 3: Segment information
The Group is managed as a single entity, which produces, develops and markets its principal product, iron ore pellets, for sale to the metallurgical industry. While the revenue generated by the Group is monitored at a more detailed level, there are no separate measures of profit reported to the Group's Chief Operating Decision-Maker ("CODM"). In accordance with IFRS 8 Operating Segments, the Group presents its results in a single segment, which are disclosed in the income statement for the Group. Management monitors the operating result of the Group based on a number of measures including Underlying EBITDA, gross profit and the net debt.
Underlying EBITDA and gross profit
The Group presents the Underlying EBITDA as it is a useful measure for evaluating the Group's ability to generate cash and its operating performance. The Group's full definition of Underlying EBITDA is disclosed in the Glossary on page 39.
|
US$000 |
Notes |
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit before tax and finance |
|
332,530 |
202,935 |
432,939 |
|
(Gains)/Losses on disposal and liquidation of property, plant and equipment |
5 |
(59) |
2,995 |
5,701 |
|
Share based payments |
|
514 |
411 |
674 |
|
(Write-backs)/Write-offs |
5 |
(337) |
- |
1,489 |
|
Depreciation and amortisation |
5 |
39,649 |
27,809 |
62,094 |
|
Underlying EBITDA |
|
372,297 |
234,150 |
502,897 |
|
US$000 |
Notes |
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
|
Revenue |
4 |
787,111 |
616,717 |
1,274,030 |
|
|
Cost of sales |
5 |
(266,851) |
(238,359) |
(507,939) |
|
|
Gross profit |
|
520,260 |
378,358 |
766,091 |
|
Net debt
Net debt as defined by the Group comprises cash and cash equivalents less interest bearing loans and borrowings.
|
US$000 |
Notes |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Cash and cash equivalents |
14 |
91,937 |
62,996 |
82,250 |
|
Interest bearing loans and borrowings - current |
15 |
(66,937) |
(204,600) |
(299,574) |
|
Interest bearing loans and borrowings - non-current |
15 |
(307,214) |
(197,258) |
(151,331) |
|
Net debt |
|
(282,214) |
(338,862) |
(368,655) |
The Group's balance of cash and cash equivalents increased by US$28,941 thousand after net debt repayments of US$38,326 thousand during the period ended 30 June 2019 (31 December 2018: US$94,500 thousand; 30 June 2018: US$43,524 thousand). Net debt is an Alternative Performance Measure ("APM"). Further information on the APMs used by the Group, including the definitions, is provided on pages 34 and 35.
Note 4: Revenue
Revenue for the six months period ended 30 June 2019 consisted of the following:
|
US$000 |
|
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Revenue from sales of iron ore pellets and concentrate |
|
725,089 |
544,206 |
1,146,734 |
|
Freight revenue related to sales of iron ore pellets and concentrate |
|
30,933 |
32,567 |
74,929 |
|
Total revenue from sale of iron ore pellets and concentrate |
|
756,022 |
576,773 |
1,221,663 |
|
Revenue from logistics and bunker business |
|
29,807 |
38,424 |
48,778 |
|
Revenue from other sales and services provided |
|
1,282 |
1,520 |
3,589 |
|
Total revenue |
|
787,111 |
616,717 |
1,274,030 |
Total revenue from sales of iron ore pellets and concentrate by geographical destination were as follows:
|
US$'000 |
|
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Central Europe |
|
352,530 |
280,552 |
565,820 |
|
Western Europe |
|
89,495 |
85,403 |
193,540 |
|
North East Asia |
|
165,116 |
103,251 |
221,985 |
|
China and South East Asia |
|
100,089 |
78,425 |
176,135 |
|
Turkey, Middle East and India |
|
39,988 |
29,142 |
64,183 |
|
Other |
|
8,804 |
- |
- |
|
Total revenue from sale of iron ore pellets and concentrate |
|
756,022 |
576,773 |
1,221,663 |
The Group markets its products across various regions. The disclosure of the segmentation reflects how the Group makes its business decisions and monitors its sales. Information about the composition of the regions is provided in the Glossary.
Note 5: Operating expenses
Operating expenses for the six months period ended 30 June 2019 consisted of the following:
|
US$000 |
Notes |
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Cost of sales |
|
266,851 |
238,359 |
507,939 |
|
Selling and distribution expenses |
|
131,714 |
121,915 |
260,422 |
|
General and administrative expenses |
|
32,553 |
22,222 |
45,246 |
|
Other operating expenses |
|
12,399 |
19,652 |
30,863 |
|
Total operating expenses |
|
443,517 |
402,148 |
844,470 |
Operating expenses include:
|
Inventories recognised as an expense upon sale of goods |
|
249,368 |
209,109 |
481,366 |
|
Employee costs |
|
46,771 |
37,596 |
79,471 |
|
Inventory movements |
|
(14,550) |
(24,965) |
(34,801) |
|
Depreciation of property, plant and equipment and right-of-use assets |
3 |
39,281 |
27,484 |
61,377 |
|
Amortisation of intangible assets |
3 |
368 |
325 |
717 |
|
Royalties and levies |
|
14,531 |
14,140 |
29,742 |
|
Costs of logistics and bunker business |
|
26,817 |
38,656 |
50,270 |
|
Audit and non-audit services |
|
2,521 |
810 |
1,691 |
|
Community support donations |
|
3,120 |
11,865 |
15,130 |
|
(Write-backs)/Write-offs |
|
(337) |
- |
1,489 |
|
Losses on disposal and liquidation of property, plant and equipment |
|
(59) |
2,995 |
5,701 |
Audit and non-audit services for the period ended 30 June 2019 include US$1,810 thousand relating to audit services provided by the previous audit firm of the Group for the comparative period ended 31 December 2018.
Note 6: Foreign exchange losses and gains
Foreign exchange losses and gains for the six months period ended 30 June 2019 consisted of the following:
|
US$000 |
|
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Operating foreign exchange losses |
|
|
|
|
|
Revaluation of trade receivables |
|
(16,356) |
(15,967) |
(4,922) |
|
Revaluation of trade payables |
|
352 |
363 |
(358) |
|
Others |
|
2 |
40 |
(15) |
|
Total operating foreign exchange losses |
|
(16,002) |
(15,564) |
(5,295) |
|
Non-operating foreign exchange (losses)/gains |
|
|
|
|
|
Revaluation of interest-bearing loans |
|
4,230 |
1,789 |
95 |
|
Conversion of cash and cash equivalents |
|
(1,324) |
(838) |
(801) |
|
Others |
|
(3,209) |
(786) |
(879) |
|
Total non-operating foreign exchange (losses)/gains |
|
(303) |
165 |
(1,585) |
|
Total foreign exchange losses |
|
(16,305) |
(15,399) |
(6,880) |
Operating foreign exchange gains and losses are those items that are directly related to the production and sale of pellets (e.g. trade receivables, trade payables on operating expenditure). Non-operating gains and losses are those associated with the Group's financing and treasury activities and with local income tax payables.
The translation differences and foreign exchange gains and losses are predominantly depended on the fluctuation of the exchange rate of the Ukrainian Hryvnia against the US Dollar. The table below shows the closing and average rate of the most relevant currencies of the Group compared to the US Dollar.
|
|
Average exchange rate |
Closing exchange rate |
||||
|
Against US$ |
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
UAH |
26.932 |
26.747 |
27.200 |
26.166 |
27.688 |
26.189 |
|
EUR |
0.885 |
0.826 |
0.847 |
0.880 |
0.874 |
0.864 |
Exchange differences arising on translation of non-USD functional currency operations (mainly in Ukrainian Hryvnia) are included in the translation reserve. See Note 18 Share capital and reserves for further details.
Note 7: Net finance expense
Net finance expense for the period ended 30 June 2019 consisted of the following:
|
US$000 |
|
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Finance expense |
|
|
|
|
|
Interest expense on loans and borrowings |
|
(18,629) |
(24,029) |
(43,468) |
|
Less capitalised borrowing costs |
|
6,356 |
2,252 |
8,125 |
|
Interest on defined benefit plans |
|
(1,299) |
(1,210) |
(2,390) |
|
Bank charges |
|
(287) |
(340) |
(778) |
|
Interest expense on lease liabilities |
|
(254) |
- |
- |
|
Other finance costs |
|
(1,167) |
(1,152) |
(1,713) |
|
Total finance expense |
|
(15,280) |
(24,479) |
(40,224) |
|
Finance income |
|
|
|
|
|
Interest income |
|
873 |
454 |
843 |
|
Other finance income |
|
28 |
- |
49 |
|
Total finance income |
|
901 |
454 |
892 |
|
Net finance expense |
|
(14,379) |
(24,025) |
(39,332) |
Note 8: Taxation
The Group pays corporate profit tax in a number of jurisdictions and its tax rate is influenced by the mix of profits primarily between Ukraine, Switzerland, the United Kingdom and Dubai, as well as the level of non-deductible expenses for tax purposes in each of these jurisdictions. For the period ended 30 June 2019, the income tax expense was based on an expected weighted average tax rate of 15.0% for the financial year 2019, compared to an effective tax of 14.5% for the financial year 2018.
During the financial years 2013, 2014 and 2015, current VAT receivable balances in Ukraine were mainly recovered in exchange for prepayments of corporate profit tax resulting in a remaining income tax receivable balance of US$5,846 thousand as at the end of the comparative period 30 June 2018 was classified as non-current due to the uncertainty in respect of the timing of the recovery. This prepaid balance was fully offset against income tax payable as at the end of the comparative period 31 December 2018.
|
US$000 |
|
6 months ended 30.06.19 |
Year ended 31.12.18 |
6 months ended 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Income tax receivable balance - current |
|
70 |
61 |
11 |
|
Income tax receivable balance - non-current |
|
- |
- |
5,846 |
|
Income tax payable balance |
|
(40,367) |
(20,571) |
(26,944) |
|
Net income tax payable |
|
(40,297) |
(20,510) |
(21,087) |
Note 9: 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 30.06.19 (unaudited) |
6 months ended 30.06.18 (unaudited) |
Year ended 31.12.18 (audited) |
|
Earnings for the period/year attributable to equity shareholders - per share in US cents |
|
|
|
|
|
Basic |
|
45.9 |
25.88 |
56.9 |
|
Diluted |
|
45.8 |
25.79 |
56.7 |
|
|
|
|
|
|
|
Profit for the year attributable to equity shareholders - US$000 |
|
|
|
|
|
Basic and diluted earnings |
|
269,435 |
151,666 |
333,616 |
|
|
|
|
|
|
|
Weighted average number of shares - Thousands |
|
|
|
|
|
Basic number of ordinary shares outstanding |
|
586,508 |
585,940 |
586,117 |
|
Effect of dilutive potential ordinary shares |
|
1,770 |
2,107 |
1,948 |
|
Diluted number of ordinary shares outstanding |
|
588,278 |
588,047 |
588,065 |
The basic number of ordinary shares is calculated by subtracting the shares held in treasury from the total number of ordinary shares in issue.
Dividends proposed and paid
Prior to the dividend proposed below and taking into account relevant thin capitalisation rules and dividend-related covenants for the Group's major bank debt facilities, the total available distributable reserves of Ferrexpo plc is US$51,154 thousand as of 30 June 2019 (31 December 2018: US$167,611 thousand; 30 June 2018: US$86,114 thousand) for the remainder of the financial year 2019.
|
US$000 |
|
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Dividends proposed |
|
|
|
|
|
Interim dividend for 2019: 6.6 US cents per Ordinary Share |
|
38,737 |
− |
− |
|
Final ordinary dividend for 2018: 6.6 US cents per Ordinary Share |
|
− |
− |
38,695 |
|
Final special dividend for 2018: 6.6 US cents per Ordinary Share |
|
− |
− |
38,695 |
|
Interim special dividend for 2018: 6.6 US cents per Ordinary Share |
|
− |
− |
38,695 |
|
Interim dividend for 2018: 3.3 US cents per Ordinary Share |
|
− |
19,348 |
− |
|
Total dividends proposed |
|
38,737 |
19,348 |
116,085 |
|
US$000 |
|
6 months ended 30.06.19 |
6 months ended 30.06.18 |
Year ended 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Dividends paid during the period |
|
|
|
|
|
Final special dividend for 2018: 6.6 US cents per Ordinary Share |
|
38,888 |
− |
− |
|
Interim special dividend for 2018: 6.6 US cents per Ordinary Share |
|
38,875 |
− |
− |
|
Interim dividend for 2018: 3.3 US cents per Ordinary Share |
|
− |
− |
19,376 |
|
Final dividend for 2017: 3.3 US cents per Ordinary Share |
|
− |
18,929 |
18,929 |
|
Special dividend for 2017: 6.6 US cents per Ordinary Share |
|
− |
38,615 |
38,615 |
|
Special dividend for 2017: 3.3 US cents per Ordinary Share |
|
− |
19,639 |
19,639 |
|
Total dividends paid during the period |
|
77,763 |
77,183 |
96,559 |
Although accounts are published in US Dollars and dividends are declared in US Dollars, the shares are denominated in UK Pounds sterling and dividends are therefore paid in UK Pounds Sterling.
The final ordinary dividend for 2018 proposed at the year-end 2018 totalling US$38,695 thousand was paid in July 2019.
The final dividend paid for 2017 included withholding tax of US$3,187 thousand that was payable subsequent to the period ended 30 June 2018.
Note 10: Property, plant and equipment
During the six months period ended 30 June 2019, the additions to property, plant and equipment totalled US$123,619 thousand (30 June 2018: US$62,396 thousand; 31 December 2018: US$147,461 thousand) and the net book value of the disposals of property, plant and equipment totalled US$1,187 thousand (30 June 2018: US$3,409 thousand; 31 December 2018: US$5,966 thousand). The total depreciation charge for the period was US$40,116 thousand (30 June 2018: US$30,192 thousand; 31 December 2018: US$66,378 thousand).
The carrying value of property, plant and equipment includes capitalised borrowing costs on qualifying assets of US$33,053 thousand (31 December 2018: US$25,499 thousand; 30 June 2018: US$21,178 thousand).
Note 11: Right-of-use assets
The right-of-use assets recognised as at 30 June 2019 and as at the date of first-time application comprised:
|
US$000 |
Notes |
As at 30.06.19 |
As at 01.01.19 |
|
|
|
(unaudited) |
(unaudited) |
|
Land |
|
986 |
1,907 |
|
Buildings |
|
4,990 |
5,683 |
|
Plant and equipment |
|
2,001 |
1,881 |
|
Vehicles |
|
74 |
94 |
|
Fixtures and fittings |
|
15 |
17 |
|
Total right-of-use assets |
2 |
8,066 |
9,582 |
During the six months period ended 30 June 2019, the additions to right-of-use assets totalled US$2,114 thousand and the total depreciation charge for the period was US$1,795 thousand.
Note 12: Other taxes recoverable and prepaid
As at 30 June 2019, taxes recoverable and prepaid comprised:
|
US$000 |
|
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
VAT receivable |
|
34,491 |
44,730 |
27,205 |
|
Other taxes prepaid |
|
238 |
107 |
260 |
|
Total other taxes recoverable and prepaid |
|
34,729 |
44,837 |
27,465 |
As at 30 June 2019, US$33,131 thousand of the VAT receivable relates to the Group's Ukrainian business operations (31 December 2018: US$42,738 thousand; 30 June 2018: US$26,667 thousand) of which US$653 thousand (31 December 2018: US$13,328 thousand; 30 June 2018: US$726 thousand) was overdue. Management is of the opinion that the overdue balances will be recovered during the next 12 months in full.
The total VAT receivable balance shown in the table above is net of an allowance of US$914 thousand (31 December 2018: US$1,020 thousand; 30 June 2018: US$1,366 thousand) to reflect the uncertainties in terms of the recovery of VAT receivable balances related to one of the Ukrainian subsidiaries with its mine still being developed.
Note 13: Inventories
As at 30 June 2019, inventories comprised:
|
US$000 |
|
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Raw materials and consumables |
|
42,216 |
39,083 |
31,701 |
|
Spare parts |
|
71,676 |
56,873 |
53,882 |
|
Finished ore pellets |
|
64,680 |
43,097 |
34,249 |
|
Work in progress |
|
3,105 |
3,153 |
3,049 |
|
Other |
|
3,472 |
2,713 |
2,295 |
|
Total inventories - current |
|
185,149 |
144,919 |
125,176 |
|
Lean and weathered ore |
|
233,432 |
217,688 |
212,806 |
|
Total inventories - non - current |
|
233,432 |
217,688 |
212,806 |
|
Total inventories |
|
418,581 |
362,607 |
337,982 |
Inventories are held at the lower of cost or net realisable value.
Inventories classified as non-current comprise lean and weathered ore stockpiles that are, based on the Group's current processing plans, not planned to be processed within the next year. It is the Group's intention to process this ore at a later point of time and it is expected that it will take more than one year to process this stockpile, depending on the Group's future mining activities, processing capabilities and anticipated market conditions.
Note 14: Cash and cash equivalents
As at 30 June 2019, cash and cash equivalents comprised:
|
US$000 |
Notes |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Cash at bank and on hand |
|
91,937 |
62,996 |
82,250 |
|
Total cash and cash equivalents |
3 |
91,937 |
62,996 |
82,250 |
The debt repayments net of proceeds during the period ended 30 June 2019 totalled US$38,326 thousand (31 December 2018: US$94,500 thousand; 30 June 2018: US$43,524 thousand) affecting the balance of cash and cash equivalents. Further information on the Group's gross debt is provided in Note 15 Interest bearing loans and borrowings.
The balance of cash and cash equivalents held in Ukraine amounts to US$25,074 thousand as at 30 June 2019 (31 December 2018: US$21,416 thousand; 30 June 2018: US$27,205 thousand).
Note 17 Commitments and contingencies provides details on the Group's balance of restricted cash and deposits which has been fully provided for as currently not available to the Group.
Note 15: Interest bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost and denominated in US Dollars.
|
US$000 |
Notes |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Current |
|
|
|
|
|
Eurobond issued |
|
- |
172,454 |
171,165 |
|
Syndicated bank loans - secured |
|
60,000 |
- |
92,500 |
|
Other bank loans - secured |
|
3,167 |
9,262 |
14,733 |
|
Other bank loans - unsecured |
|
1,494 |
1,494 |
1,494 |
|
Lease liabilities |
|
2,276 |
2,074 |
3,816 |
|
Trade finance facilities |
|
- |
19,316 |
15,866 |
|
Total current interest bearing loans and borrowings |
3 |
66,937 |
204,600 |
299,574 |
|
Non-current |
|
|
|
|
|
Eurobond issued |
|
- |
- |
- |
|
Syndicated bank loans - secured |
|
300,000 |
195,000 |
146,250 |
|
Other bank loans - secured |
|
- |
- |
1,773 |
|
Other bank loans - unsecured |
|
1,511 |
2,258 |
3,005 |
|
Lease liabilities |
|
5,703 |
- |
303 |
|
Total non-current interest bearing loans and borrowings |
3 |
307,214 |
197,258 |
151,331 |
|
Total interest bearing loans and borrowings |
|
374,151 |
401,858 |
450,905 |
At 30 June 2019, the Group has a syndicated revolving US$400,000 thousand pre-export finance facility, of which US$40,000 thousand is available (31 December 2018: US$205,000 thousand; 30 June 2018: nil) and US$360,000 thousand is drawn by the Group (31 December 2018: US$195,000 thousand; 30 June 2018: US$195,000 thousand). The initial facility agreement for a total amount of US$195,000 thousand was signed on 16 November 2017 and fully drawn in March 2018. In August 2018, an amendment to the aforementioned facility agreement was signed, increasing the facility from US$195,000 thousand to US$400,000 thousand and extending the tenor by one year. The effective date of the increase and extension was 6 November 2018. Following a one-year grace period, the facility will be amortised in 12 quarterly instalments, with the first instalment due on 6 February 2020 and the final repayment due on 6 November 2022.
The aforementioned bank debt facility was guaranteed and secured as follows:
· Ferrexpo AG and Ferrexpo Middle East FZE, which are also joint borrowers, assigned the rights to revenue from certain sales contracts;
· PJSC Ferrexpo Poltava Mining assigned all of its rights of certain export contracts for the pellets sales to Ferrexpo AG and Ferrexpo Middle East FZE; and
· the Group pledged bank accounts of Ferrexpo AG and Ferrexpo Middle East FZE into which sales proceeds from certain assigned sales contracts are exclusively received.
In addition to the major bank debt facility listed above, the Group had outstanding unsecured Notes at par value totalling US$173,181 thousand as at the end the comparative periods 31 December 2018 and 30 June 2018. The final payment was made on 7 April 2019. The Notes had a 10.375% interest coupon payable semi-annually.
As at 30 June 2019, the Group has no open trade finance facilities (31 December 2018: US$19,316 thousand; 30 June 2018: US$15,866 thousand). Trade finance facilities are secured against receivables related to these specific trades.
The outstanding unsecured Notes were shown net of associated arrangement fees while for the revolving syndicated pre-export finance facility fees are presented in prepayments and current assets and other non-current assets based on the maturity of the underlying facility and are amortised over the term of the facility.
The table below shows the movements in the interest-bearing loans and borrowings:
|
US$000 |
|
Notes |
6 months ended 30.06.19 |
Year ended 31.12.18 |
6 months ended 30.06.18 |
|
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Opening balance of interest bearing loans and borrowings |
|
|
401,858 |
491,706 |
491,706 |
|
Cash movements |
|
|
|
|
|
|
Repayments of Eurobond issued |
|
|
(173,181) |
(173,181) |
(173,181) |
|
Proceeds from syndicated bank loans - secured |
|
|
185,000 |
195,000 |
195,000 |
|
Repayments of syndicated bank loans - secured |
|
|
(20,000) |
(112,500) |
(68,750) |
|
Repayments of other bank loans - secured |
|
|
(6,546) |
(17,189) |
(9,803) |
|
Repayments of other bank loans - unsecured |
|
|
(805) |
(1,512) |
(820) |
|
Repayments of lease liabilities |
|
|
(3,478) |
(3,753) |
(1,985) |
|
Change of trade finance facilities, net |
|
|
(19,316) |
19,288 |
15,837 |
|
Total cash movements |
|
|
(38,326) |
(93,847) |
(43,702) |
|
Non-cash movements |
|
|
|
|
|
|
Amortisation of fees |
|
|
1,195 |
4,696 |
2,747 |
|
First-time adoption IFRS 16 Leases |
|
2 |
7,701 |
- |
- |
|
Additions to lease liabilities |
|
|
1,331 |
- |
- |
|
Others |
|
|
392 |
(697) |
154 |
|
Total non-cash movements |
|
|
10,619 |
3,999 |
2,901 |
|
Closing balance of interest bearing loans and borrowings |
|
|
374,151 |
401,858 |
450,905 |
Further information on the Group's exposure to interest rate, foreign currency and liquidity risk is provided in Note 26 Financial instruments of the 2018 Annual Report & Accounts.
Note 16: Financial instruments
Fair values
Set out below are the carrying amounts of the Group's financial instruments that are carried in the interim consolidated statement of financial position:
|
US$000 |
|
|
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Financial assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
91,937 |
62,996 |
82,250 |
|
Trade and other receivables |
|
|
127,205 |
85,695 |
80,529 |
|
Other financial assets |
|
|
450 |
456 |
847 |
|
Total financial assets |
|
|
219,592 |
149,147 |
163,626 |
|
Financial liabilities |
|
|
|
|
|
|
Trade and other payables |
|
|
76,279 |
34,292 |
47,720 |
|
Accrued liabilities |
|
|
27,956 |
26,458 |
22,524 |
|
Interest bearing loans and borrowings |
|
|
374,151 |
401,858 |
450,905 |
|
Total financial liabilities |
|
|
478,386 |
462,608 |
521,149 |
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. The fair values of interest-bearing loans and borrowings totalled US$366,850 thousand (31 December 2018: US$401,089 thousand; 30 June 2018: US$456,702 thousand).
Other financial assets
The fair values of cash and cash equivalents, trade and other receivables and payables, restricted cash and deposits, other financial assets and accrued liabilities are approximately equal to their carrying amounts due to their short maturity.
Note 17: Commitments and contingencies
Commitments
|
US$000 |
|
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Future minimum rental payments based on fixed rates |
|
1,473 |
8,827 |
9,050 |
|
Future commitments for contingent rental payments dependent on non-fixed rates |
|
40,826 |
36,428 |
38,627 |
|
Capital commitments on purchase of PPE |
|
93,734 |
67,529 |
51,302 |
Future minimum rental payments primarily relate to the non-cancellable agreements for the use of mining land dependent on annually fixed rates and agreements for the use of office premises, which fall under the recognition exemption for short-term contracts set out in IFRS 16 Leases. Future commitments for contingent rental payments relate to leases of land not used for the direct extraction of ore and accounted for under IFRS 16 and include future cash flows dependent on non-fixed rates. The details on the first-time adoption of IFRS 16 Leases are provided in Note 2 Summary of significant accounting policies.
Contingencies
On 4 February 2019, the Group announced that it had commissioned an independent review (the "Independent Review") into the Group's relationship with Blooming Land and its sub-funds (the "Charity"). The work of the IRC and its advisers is being conducted in accordance with the terms of reference approved by the Board (as detailed in the Group's 2018 Annual Report and Accounts) and has included a forensic review conducted by BDO LLP, review of relevant documentation, interviews with the Group's employees and directors, correspondence with the Charity and other third parties, and advice from legal counsel in the UK and Ukraine. Significant work has been undertaken by the IRC and its advisers since appointment and this remains ongoing. At present, there are no material changes to the Company's interim conclusions published in the 2018 Annual Report and Accounts. The IRC is seeking to conclude its review as soon as possible.
The Group made contributions of US$9,500 thousand during the comparative period ended 30 June 2018 to the Charity. See Note 19 Related party disclosure for further information. The charitable donations were ceased in May 2018. The donations made by the Group to the Charity over the last 6 years up to May 2018 totalled US$110,000 thousand. Detailed information on the Group's Independent Review are provided in Note 33 Related party disclosures and Note 34 Events after the reporting period included in the Group's 2018 Annual Report & Accounts.
A number of critical judgements in terms of the nature of the Group's community support donations and the completeness of its related party disclosures have been made in the Group's consolidated financial statements for the year ended 31 December 2018 in connection with the Group's relationship with the Charity. The critical judgements made are disclosed in Note 7 Operating expenses and Note 33 Related party disclosures included in the Group's 2018 Annual Report & Accounts.
The Group may be exposed to the risk of civil, criminal or regulatory actions and liabilities, including fines and penalties, arising from the Group's relationship with the Charity, including (without limitation) in the following scenarios:
· if any of the critical judgements in terms of the nature of the Group's community support donations and the completeness of its related party disclosures are incorrect, in whole or in part;
· if funds donated to the Charity have been misapplied, including through misappropriation, with or without the knowledge or involvement of the Group's personnel and/or in circumstances where the Charity is considered to be performing services for or on behalf of the Group;
· if the Group or any of its personnel have derived any direct or indirect benefit from the Charity; and
· if the financial statements for the prior periods omitted related party or other disclosures that ought to have been made or the financial statements need to be restated.
At the current time, the existence, timing and quantum of potential future liability, if any, including fines, penalties or damages, which could be material or other consequences arising from the Independent Review cannot be determined and measured reliably and, as a consequence, no associated liabilities have been recognised in relation to these matters in the consolidated statement of financial position as of 30 June 2019.
Legal
In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition or the results of future operations of the Group.
Deposit Guarantee Fund and liquidator of Bank F&C
The Group's transactional bank in Ukraine, Bank F&C ("BFC"), is still going through the liquidation process after having been declared insolvent by the National Bank of Ukraine and put under temporary administration on 18 September 2015. The Group, through its major subsidiaries in Ukraine, is engaged in various court proceedings with the aim to maximise its recovery in the liquidation process of BFC as disclosed below.
Following the commencement of the liquidation process of BFC and in accordance with the applicable local legislation, FPM, LLC Ferrexpo Yeristovo Mining GOK ("FYM") and LLC Ferrexpo Belanovo Mining GOK ("FBM"), collectively referred to as "Ukrainian subsidiaries", submitted on 21 January 2016 their claims for cash and deposit balances held with BFC on the date of introduction of temporary administration totalling UAH4,262 million (US$163,883 thousand as of 30 June 2019).
On 22 April 2016, the liquidator of BFC issued certificates recognising UAH540 million (US$20,637 thousand as of 30 June 2019) of these claims and recognised these claims in the ninth rank. The afore-mentioned Ukrainian subsidiaries are currently involved in legal proceedings in respect of the under-recognition of the claims amounting to UAH3,722 million (US$142,246 thousand as of 30 June 2019) and the ranking of the claims in the liquidation process. The court proceedings commenced in October 2016 and following various hearings during the financial year 2017, the relevant court instance dismissed on 25 October 2017 FPM's claim in full. FPM filed an appeal on 13 November 2017 and several hearings took place following the filing of FPM's appeal without a ruling on the parties' motions by the Kyiv Commercial Court of Appeal. During the hearing on 18 July 2018, the court ruled in favour of FPM and the opposing party subsequently filed its cassation appeal against this decision. On 11 December 2018, the Supreme Court of Ukraine upheld the cassation appeal and the case was directed for new consideration to the Northern Commercial Court of Appeal. On 19 June 2019, the Northern Commercial Court of Appeal satisfied the claim of FPM and the opposing party filed a cassation appeal on 9 July 2019. FYM's claim on the same matter was dismissed by the Kyiv Commercial Court on 6 February 2019 and FYM filed its appeal against this decision on 28 February 2019. On 20 May 2019, the Northern Commercial Court of Appeal dismissed the appellate claim of FYM in full and FYM filed its cassation claim on 18 June 2019. The next hearing is scheduled for 20 May 2019. In relation to the claims of FBM, the Northern Commercial Court of Appeal dismissed FBM's appeal on 11 March 2019 and FBM filed its cassation appeal on 2 April 2019. On 19 June 2019, the Supreme Court of Ukraine dismissed the cassation appeal of FBM.
The outcomes of the aforementioned legal proceedings will not have an adverse impact on the Group's financial result in future periods as a full allowance was recorded for the claimed amounts during the financial year 2015.
Taxation
Tax legislation in Ukraine
The Group prices its sales between its subsidiaries using international benchmark prices for comparable products covering product quality and applicable freight costs. The Group judges these to be on terms, which comply with applicable legislation. In August 2017, the State Fiscal Service of Ukraine ("SFS") commenced a tax audit for the period from 1 September 2013 to 31 December 2015 at the Group's major subsidiary in Ukraine with a focus on cross-border transactions in terms of its pellet sales to another subsidiary of the Group. Following the completion of this audit, the SFS issued its official tax audit report on 27 December 2018, claiming a tax adjustment totalling UAH448 million (US$17,154 thousand as of 30 June 2019) and issued the formal claim on 12 March 2019 after having considered the objections of the Group's subsidiary according to its earlier tax audit report. The Group's subsidiary initiated legal proceedings and filed a claim to the first court instance in Poltava on 22 March 2019. As of the date of the approval of these financial statements, the final hearing has not yet taken place and, as the Group considers that it has complied with applicable legislation for all cross-border transactions undertaken, the Group continues to expect that it can successfully defend its methodology applied to determine the prices between its subsidiaries. Consequently, no provision has been recorded as at 30 June 2019. The SFS may commence new audits on other cross-border transactions within the Group or on other periods and the Group also expects to successfully defend its pricing methodology against any further claims should they arise.
Note 18: Share capital and reserves
The share capital of Ferrexpo plc at 30 June 2019 was 613,967,956 (31 December 2018: 613,967,956; 30 June 2018: 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 (31 December 2018: 25,343,814 shares; 30 June 2018: 25,343,814 shares), which are held in treasury, resulting from a share buyback that was undertaken in September 2008, and 1,702,056 shares held in the employee benefit trust reserve (31 December 2018: 2,326,256 shares; 30 June 2018: 2,336,256 shares).
The translation reserve includes the effect from the exchange differences arising on translation of non-US Dollar functional currency operations (mainly in Ukrainian Hryvnia). The exchange differences arising on translation of the Group's foreign operations are initially recognised in the other comprehensive income. See also the Interim Consolidated Statement of Comprehensive Income on page 15 of these financial statements for further details.
As at 30 June 2019 other reserves attributable to equity shareholders of Ferrexpo plc comprised:
|
For the financial year 2018 and the 6 months ended 30.06.19 |
|
|
|
|
|
|
US$000
|
Uniting of interest reserve |
Treasury share reserve |
Employee Benefit Trust reserve |
Translation reserve |
Total other reserves |
|
At 1 January 2018 |
31,780 |
(77,260) |
(4,522) |
(1,970,862) |
(2,020,864) |
|
Foreign currency translation differences |
- |
- |
- |
12,117 |
12,117 |
|
Tax effect |
- |
- |
- |
(2,007) |
(2,007) |
|
Total comprehensive income for the year |
- |
- |
- |
10,110 |
10,110 |
|
Share based payments |
- |
- |
674 |
- |
674 |
|
At 31 December 2018 (audited) |
31,780 |
(77,260) |
(3,848) |
(1,960,752) |
(2,010,080) |
|
Foreign currency translation differences |
- |
- |
- |
79,716 |
79,716 |
|
Tax effect |
- |
- |
- |
(7,065) |
(7,065) |
|
Total comprehensive income for the period |
- |
- |
- |
72,651 |
72,651 |
|
Share based payments |
- |
- |
514 |
- |
514 |
|
At 30 June 2019 (unaudited) |
31,780 |
(77,260) |
(3,334) |
(1,888,101) |
(1,936,915) |
|
For the 6 months ended 30.06.18 |
|
|
|
|
|
|
US$000
|
Uniting of interest reserve |
Treasury Share reserve |
Employee Benefit Trust reserve |
Translation reserve |
Total other reserves |
|
At 1 January 2018 |
31,780 |
(77,260) |
(4,522) |
(1,970,862) |
(2,020,864) |
|
Foreign currency translation differences |
- |
- |
- |
79,022 |
79,022 |
|
Tax effect |
- |
- |
- |
(9,991) |
(9,991) |
|
Total comprehensive income for the period |
- |
- |
- |
69,031 |
69,031 |
|
Share based payments |
- |
- |
411 |
- |
411 |
|
At 30 June 2018 (unaudited) |
31,780 |
(77,260) |
(4,111) |
(1,901,831) |
(1,951,422) |
Note 19: Related party disclosure
During the periods presented the Group entered into arm's length transactions with entities under the common control of the majority owner of the Group, Kostyantin Zhevago and with associated companies and with other related parties. Management considers that the Group has appropriate procedures in place to identify and properly disclose transactions with the related parties.
Entities under common control are those under the control of Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in which the Group holds an interest of 49.9%. This is the only associated company of the Group. Other related parties are principally those entities controlled by Anatoly Trefilov who re-signed as member of the supervisory board of PJSC Ferrexpo Poltava Mining as of 19 April 2017. In accordance with the Listing Rules, all transactions with the entities controlled by Anatoly Trefilov within one year of his resignation from the supervisory board have been still considered as related party transactions and disclosed as such for the comparative periods ended 31 December 2018 and 30 June 2018. Effective 20 April 2018, the entities controlled by Anatoly Trefilov are no longer considered as related parties.
All related party transactions entered into by the Group during the periods presented are summarised in the tables on the following pages, except for those made to the Non-executive Directors and Executive Directors of Ferrexpo plc. The payments made to the Non-executive Directors and Executive Directors in the comparative period ended 31 December 2018 are disclosed in detail in the Remuneration Report included in the Group's 2018 Annual Report & Accounts.
Revenue, expenses, finance income and finance expenses
|
|
6 months ended 30.06.19 (unaudited) |
6 months ended 30.06.18 (unaudited) |
Year ended 31.12.18 (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 |
448 |
- |
10 |
398 |
- |
107 |
877 |
- |
111 |
|
Total related party transactions within revenue |
448 |
- |
10 |
398 |
- |
107 |
877 |
- |
111 |
|
Materials b |
4,439 |
- |
- |
4,252 |
- |
3 |
8,429 |
- |
3 |
|
Spare parts and consumables c |
1,702 |
- |
- |
1,291 |
- |
- |
2,959 |
- |
- |
|
Total related party transactions within cost of sales |
6,141 |
- |
- |
5,543 |
- |
3 |
11,388 |
- |
3 |
|
Selling and distribution expenses d |
5,381 |
8,915 |
- |
5,373 |
8,311 |
702 |
10,702 |
19,138 |
702 |
|
General and administration expenses e |
623 |
- |
199 |
344 |
- |
212 |
788 |
- |
529 |
|
Finance expenses |
71 |
- |
- |
58 |
- |
- |
119 |
- |
- |
|
Total related party transactions within expenses |
12,216 |
8,915 |
199 |
11,318 |
8,311 |
917 |
22,997 |
19,138 |
1,234 |
|
Total related party transactions |
12,664 |
8,915 |
209 |
11,716 |
8,311 |
1,024 |
23,874 |
19,138 |
1,345 |
The Group entered into various related party transactions. A description of the most material transactions, which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below. All transactions were carried out on an arm's length basis in the normal course of business.
Entities under common control
a Sales of power, steam and water and other materials for US$56 thousand (30 June 2018: US$58 thousand; 31 December 2018: US$109 thousand) and income from premises leased to Kislorod PCC of US$58 thousand (30 June 2018: US$68 thousand; 31 December 2018: US$131 thousand), and
a Sales of diesel to DVD Trans totalling US$198 thousand (30 June 2018: US$155 thousand; 31 December 2018: US$376 thousand).
a Sales of scrap metal to OJSC Uzhgorodsky Turbogas totalling US$131 thousand (30 June 2018: US$111 thousand; 31 December 2018: US$250 thousand).
b Purchases of compressed air, oxygen and metal scrap from Kislorod PCC for US$2,489 thousand (30 June 2018: US$2,199 thousand; 31 December 2018: US$4,536 thousand);
b Purchases of cast iron balls from AutoKraZ Holding Co. for US$229 thousand in the comparative period ended 30 June 2018 and US$274 thousand in the comparative period ended 31 December 2018. No such purchases in the period ended 30 June 2019; and
b Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas for US1,869 thousand (30 June 2018: US$1,762 thousand; 31 December 2018: US$3,536 thousand).
c Purchases of spare parts from CJSC Kyiv Shipbuilding and Ship Repair Plant ("KSRSSZ") in the amount of US$387 thousand (30 June 2018: US$549 thousand; 31 December 2018: US$1,201 thousand);
c Purchases of spare parts from OJSC Uzhgorodsky Turbogas in the amount of US$125 thousand (30 June 2018: US$189 thousand; 31 December 2018: US$533 thousand);
c Purchases of spare parts from Valsa GTV of US$231 thousand (30 June 2018: US$263 thousand; 31 December 2018: US$455 thousand); and
c Purchases of spare parts from OJSC Berdichev Machine-Building Plant Progress of US$936 thousand (30 June 2018: US$274 thousand; 31 December 2018: US$724 thousand).
d Purchases of advertisement, marketing and general public relations services from FC Vorskla of US$5,381 thousand (30 June 2018: US$5,373 thousand; 31 December 2018: US$10,702 thousand).
e Insurance premiums of US$435 thousand (30 June 2018: US$240 thousand; 31 December 2018: US$535 thousand) paid to ASK Omega for workmen's insurance and other insurances.
Associated companies
d Purchases of logistics services in the amount of US$8,915 thousand (30 June 2018: US$8,311 thousand; 31 December 2018: US$19,138 thousand) relating to port operations, including port charges, handling costs, agent commissions and storage costs.
Other related parties
d Purchases of logistics management services from Slavutich Ruda Ltd. relating to customs clearance services and the coordination of rail transit totalling US$702 thousand in the comparative periods ended 30 June 2018 and 31 December 2018. Effective 20 April 2018, Slavutich Ruda Ltd. is no longer considered as a related party. Further information is provided on page 30.
e Legal and administrative services in the amount of US$180 thousand (30 June 2018: US$186 thousand; 31 December 2018: US$375 thousand) provided by Kuoni Attorneys at law Ltd., which is controlled by a former member of the Board of Directors of Ferrexpo plc who resigned in November 2016, but still acts as member of the Board of Directors of one of the subsidiaries of the Group and received Directors' fee of US$50 thousand (30 June 2018: US$48 thousand; 31 December 2018: US$100 thousand).
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature which were undertaken between Group companies and entities under common control, associated companies and other related parties during the periods presented.
|
|
6 months ended 30.06.19 (unaudited) |
6 months ended 30.06.18 (unaudited) |
Year ended 31.12.18 (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 in the ordinary course of business |
3,087 |
- |
- |
688 |
- |
- |
4,678 |
- |
- |
|
Total purchases of property, plant and equipment |
3,087 |
- |
- |
688 |
- |
- |
4,678 |
- |
- |
During the period ended 30 June 2019, the Group purchased equipment and major spare parts from OJSC Berdichev Machine-Building Plant Progress totalling US$2,062 thousand (30 June 2018: nil; 31 December 2018: US$2,821 thousand) in respect of the construction of the concentrate stockyard. The Group also purchased equipment and major spare parts from AutoKraZ Holding Co. in the amount of US$82 thousand (30 June 2018: nil; 31 December 2018: US$398 thousand) for cranes and lifters installed on truck chassis. As of the end of the comparative periods ended 30 June 2018 and 31 December 2018, the Group purchased rubber-lined steel cover sheets for the mills from Valsa GTV totalling US$212 thousand. No such procurements as of the end of the periods ended 30 June 2019.
The Group further procured services relating to the top soil removal and relocation of waste material and gravel in the amount of US$586 thousand (30 June 2018 US$472 thousand; 31 December 2018: US$1,165 thousand) from DVD Trans. The company ceased to be a related party in September 2018; in accordance with the Listing Rules, all transactions with DVD Trans within one year from the cessation are still considered as related party transactions and disclosed as such.
The FPM Charity Fund owns 75% of the Sport & Recreation Centre ("SRC") in Horishni Plavni and made contributions totalling US$85 thousand during the period ended 30 June 2019 (30 June 2018: US$43 thousand; 31 December 2018: US$199 thousand) for the construction and maintenance of the building, including costs related to electricity, gas and water consumption. The remaining stake of 25% is owned by JSC F&C Realty, which is under the control of Kostyantin Zhevago.
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 30.06.19 (unaudited) |
Year ended 31.12.18 (audited) |
6 months ended 30.06.18 (unaudited) |
||||||
|
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 |
|
Prepayments for property, plant and equipment f |
5,584 |
- |
- |
6,121 |
- |
- |
4,893 |
- |
- |
|
Total non-current assets |
5,584 |
- |
- |
6,121 |
- |
- |
4,893 |
- |
- |
|
Trade and other receivables g |
157 |
4,056 |
2 |
214 |
1,302 |
1 |
218 |
3,957 |
- |
|
Prepayments and other current assets h |
1,465 |
- |
- |
1,181 |
- |
- |
1,411 |
- |
- |
|
Total current assets |
1,622 |
4,056 |
2 |
1,395 |
1,302 |
1 |
1,629 |
3,957 |
- |
|
Trade and other payables i |
480 |
1,006 |
7 |
465 |
963 |
- |
801 |
486 |
- |
|
Current liabilities |
480 |
1,006 |
7 |
465 |
963 |
- |
801 |
486 |
- |
A description of the most material balances which are over US$200 thousand in the current or comparative periods is given below.
Entities under common control
f Prepayments for property, plant and equipment totalling US$5,264 thousand (31 December 2018: US$5,980 thousand; 30 June 2018: US$4,599 thousand) were made to OJSC Berdichev Machine-Building Plant Progress and US$320 thousand (31 December 2018: US$68 thousand; 30 June 2018: nil) to CJSC Kyiv Shipbuilding and Ship Repair Plant ("KSRSSZ"). The comparative period ended 30 June 2018 included prepayments for property, plant and equipment of US$293 thousand made to AutoKraZ Holding Co. No such prepayments were made to AutoKraZ Holding Co. as of the periods ended 30 June 2019 and 31 December 2018.
h Prepayments and other current assets totalling US$858 thousand relate to prepayments made to FC Vorskla for advertisement, marketing and general public relations services (31 December 2018: US$858 thousand; 30 June 2018: US$953 thousand) and US$305 thousand to ASK Omega for insurance premiums (31 December 2018: US$124 thousand; 30 June 2018: US$106 thousand).
i Trade and other payables included US$236 thousand (31 December 2018: US$213 thousand; 30 June 2018: US$246 thousand) related to the purchase of compressed air, oxygen and metal scrap from Kislorod PCC and US$24 thousand (31 December 2018: US$126 thousand; 30 June 2018: US$237 thousand) related to the purchase of cast iron balls from OJSC Uzhgorodsky Turbogas.
Associated companies
g Trade and other receivables of US$4,056 thousand (31 December 2018: US$1,302 thousand; 30 June 2018: US$3,957 thousand) related to dividend receivables from TIS Ruda LLC.
i Trade and other payables included US$1,006 thousand (31 December 2018: US$963 thousand; 30 June 2018: US$486 thousand) related to purchases of logistics services from TIS Ruda LLC.
Community support donations paid to Blooming Land and its three sub-funds (the "Charity")
In the comparative periods ended 30 June 2018 and 31 December 2018, the Group made donations of US$9,500 thousand to the Charity (2017: US$24,000 thousand). The Group's funding to Blooming Land during the financial years 2017 and 2018 was provided by one of the Group's operational subsidiaries in Ukraine, Ferrexpo Poltava Mining ("FPM"). Khimreaktiv LLC, a company controlled by Kostyantin Zhevago, the CEO and ultimate majority shareholder of the Group, also independently donated funds to the Charity.
In July 2018, the Group became aware that during the financial year 2017 temporary funding contributions totalling approximately US$16,300 thousand were advanced by Khimreaktiv LLC into one of the Charity's sub-funds. The Charity subsequently repaid Khimreaktiv LLC using monies received from the Group as part of its regular donations. These transactions between Khimreaktiv LLC and the sub-fund were considered related party transactions under IAS 24 Related party disclosures that ought previously to have been disclosed. The transactions between the sub-funds and Khimreaktiv LLC were not considered to be related party transactions of the Group under the UK Listing Rules.
The Charity is considered by the Group to operate independently of the Group's Chief Executive Officer and its executive management, and the Group's Chief Executive Officer and its executive management are not considered to control or exercise significant influence over the Charity. Accordingly, the Charity is not consolidated by the Group. There is no agreement or arrangement between the Group and Khimreaktiv LLC in relation to their contributions to the Charity.
As previously disclosed, the Company has established an Independent Review Committee (IRC) to carry out an independent review into the use of funds donated by the Group to the Blooming Land Charity (the Charity). The work of the IRC and its advisers is being conducted in accordance with the terms of reference approved by the Board (as detailed in the Group's 2018 Annual Report and Accounts) and includes a forensic review conducted by BDO LLP, review of relevant documentation, interviews with the Group's employees and directors, correspondence with the Charity and other third parties, and advice from legal counsel in the UK and Ukraine. Significant work has been undertaken by the IRC and its advisers since appointment and this remains ongoing. At present, there are no material changes to the Company's interim conclusions published in the 2018 Annual Report and Accounts. The IRC is seeking to conclude its review as soon as possible.
Further details on the Independent Review into the Group's relationship with the Charity are provided in the Chairman's Statement, Principal Risks, Responsible Business, Corporate Governance Report, Independent Review Committee Report, and Audit Committee Report included in the Group's 2018 Annual Report & Accounts. See Note 17 Commitments and contingencies for further information.
Note 20: Events after the reporting period
No material adjusting or non-adjusting items have occurred subsequent to the period-end other than the proposed dividend disclosed in Note 9 Earnings per share and dividends paid and proposed.
Alternative Performance Measures ("APM")
When assessing and discussing the Group's reported financial performance, financial position and cash flows, management may make reference to Alternative Performance Measures ("APM") that are not defined or specified under International Financial Reporting Standards ("IFRS").
APMs are not uniformly defined by all companies, including those in the Group's industry. Accordingly, the APMs used by the Group may not be comparable with similarly titled measures and disclosures made by other companies. APMs should be considered in addition to, and not as a substitute for or as superior to, measures of financial performance, financial position or cash flows reported in accordance with IFRS.
Ferrexpo makes reference to the following APMs in the 2018 Half Year Results.
C1 cash cost of production
Definition: Non-financial measure, which represents the cash costs of production of iron pellets from own ore divided by production volume of own production ore. Non-C1 cost components include non-cash costs such as depreciation, inventory movements and costs of purchased ore and concentrate. The Group presents the C1 cash cost of production because it believes it is a useful operational measure of its cost competitiveness compared to its peer group.
|
US$000 |
|
As at 30.06.19 |
As at 30.06.18 |
As at 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
C1 cash costs |
|
246,402 |
211,458 |
454,560 |
|
Non-C1 cost components |
|
2,957 |
1,156 |
26,800 |
|
Cost of sales - pellet production |
|
249,359 |
212,614 |
481,360 |
|
Own ore produced (tonnes) |
|
5,352,500 |
5,081,720 |
10,506,164 |
|
C1 cash cost per tonne (US$) |
|
46.0 |
41.6 |
43.3 |
Underlying EBITDA
Definition: The Group calculates the underlying EBITDA as profit before tax and finance plus depreciation and amortisation and net gains and losses from disposal of investments and property, plant and equipment and share-based payments, write-offs and impairment losses. The underlying EBITDA is presented because it is a useful measure for evaluating the Group's ability to generate cash and its operating performance. See Note 5 Operating expenses for further details.
Closest equivalent IFRS measure: Profit before tax and finance.
Rationale for adjustment: The Group presents the underlying EBITDA as it is a useful measure for evaluating its ability to generate cash and its operating performance. Also it aids comparability across peer groups as it is a measurement that is often used.
Reconciliation to closest IFRS equivalent:
|
US$000 |
Notes |
As at 30.06.19 |
As at 30.06.18 |
As at 31.12.18 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Underlying EBITDA |
|
372,297 |
234,150 |
502,897 |
|
Losses on disposal of property, plant and equipment |
5 |
59 |
(2,995) |
(5,701) |
|
Share-based payments |
|
(514) |
(411) |
(674) |
|
Write-backs/(Write-offs) |
5 |
337 |
- |
(1,489) |
|
Depreciation and amortisation |
5 |
(39,649) |
(27,809) |
(62,094) |
|
Profit before tax and finance |
|
332,530 |
202,935 |
432,939 |
Diluted earnings per share
Definition: Earnings per share calculated using the diluted number of Ordinary Shares outstanding.
Closest equivalent IFRS measure: Diluted earnings per share.
Rationale for adjustment: Excludes the impact of special items that can mask underlying changes in performance.
Reconciliation to closest IFRS equivalent:
|
US$000 |
|
6 months ended 30.06.2019 (unaudited) |
6 months ended 30.06.2018 (unaudited) |
Year ended 31.12.18 (audited) |
|
Earnings/(loss) for the year attributable to equity shareholders per share |
|
|
|
|
|
Basic (US cents) |
|
45.9 |
25.9 |
56.9 |
|
Diluted (US cents) |
|
45.8 |
25.8 |
56.7 |
Net debt to underlying EBITDA
Definition: Net debt divided by the underlying EBITDA (for the last 12 months):
|
US$000 |
|
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Net debt (US$000) |
|
(282,214) |
(338,862) |
(368,655) |
|
Underlying EBITDA (US$000) for the last 12 months |
|
641,327 |
502,897 |
497,917 |
|
Net debt to underlying EBITDA |
|
0.44x |
0.67x |
0.74x |
Rationale for adjustment: The ratio is a measurement of the underlying EBITDA Group's leverage, calculated as a company's interest-bearing liabilities minus cash or cash equivalents, divided by its underlying EBITDA.
Reconciliation to net debt:
|
US$000 |
Notes |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Cash and cash equivalents |
14 |
91,937 |
62,996 |
82,250 |
|
Interest-bearing loans and borrowings - current |
15 |
(66,937) |
(204,600) |
(299,574) |
|
Interest-bearing loans and borrowings - non-current |
15 |
(307,214) |
(197,258) |
(151,331) |
|
Net debt |
|
(282,214) |
(338,862) |
(368,655) |
For a reconciliation of underlying EBITDA to profit before tax and finance see page 34.
Capital investment
Definition: Capital expenditure for the purchase of property, plant and equipment and intangible assets.
Closest equivalent IFRS measure: Purchase of property, plant and equipment and intangible assets (net cash flows used in investing activities).
Rationale for adjustment: The Group presents the capital investment as it is a useful measure for evaluating the degree of capital invested in its business operations.
Reconciliation to closest IFRS equivalent:
|
US$000 |
Notes |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Purchase of property, plant and equipment and intangible assets (net cash flows used in investing activities) |
10 |
113,968 |
135,113 |
55,765 |
Total liquidity
Definition: Sum of cash and cash equivalents and available facilities.
Closest equivalent IFRS measure: Cash and cash equivalents.
Rationale for adjustment: The Group presents total liquidity as it is a useful measure for evaluating its ability to meet short-term business requirements.
Reconciliation to closest IFRS equivalent:
|
US$000 |
Notes |
As at 30.06.19 |
As at 31.12.18 |
As at 30.06.18 |
|
|
|
(unaudited) |
(audited) |
(unaudited) |
|
Cash and cash equivalents |
14 |
91,937 |
62,996 |
82,250 |
|
Available facilities |
|
40,000 |
205,000 |
- |
|
Total liquidity |
|
131,937 |
267,996 |
82,250 |
Glossary
|
Act |
The Companies Act 2006 |
|
AGM |
The Annual General Meeting of the Company |
|
Articles |
Articles of Association of the Company |
|
Audit Committee |
The Audit Committee of the Company's Board |
|
Bank F&C |
Bank Finance & Credit |
|
Belanovo or Bilanivske |
An iron ore deposit located immediately to the north of Yeristovo |
|
Benchmark Price |
International seaborne traded iron ore pricing mechanism understood to be offered to the market by major iron ore producers under long-term contracts |
|
Beneficiation 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 |
|
Blast furnace pellets |
Used in Basic Oxygen Furnace "BOF" steelmaking and constitute about 70% of the traded pellet market |
|
Board |
The Board of Directors of the Company |
|
Bt |
Billion tonnes |
|
C1 costs |
Represents the cash costs of production of iron pellets from own ore, divided by production volume from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, costs of purchased ore, concentrate and production cost of gravel |
|
Capesize |
Capesize vessels are typically above 150,000 tonnes deadweight. Ships in this class include oil tankers, supertankers and bulk carriers transporting coal, ore, and other commodity raw materials. Standard capesize vessels are able to transit through the Suez Canal |
|
Capital Employed |
The aggregate of equity attributable to shareholders, non-controlling interests and borrowings |
|
Central Europe |
This segmentation for the Group's sales includes Austria, Czech Republic, Hungary, Serbia and Slovakia |
|
CFR |
Delivery including cost and freight |
|
Charity |
Donations made to a charity called Blooming Land which operates through three sub-funds |
|
China and South East Asia |
This segmentation for the Group's sales includes China and Vietnam |
|
CIF |
Delivery including cost, insurance and freight |
|
CIS |
The Commonwealth of Independent States |
|
Code |
The UK Corporate Governance Code |
|
CODM |
The Executive Committee is considered to be the Group's Chief Operating Decision-Maker |
|
Company |
Ferrexpo plc, a public company incorporated in England and Wales with limited liability |
|
CPI |
Consumer Price Index |
|
CRU |
The CRU Group provides market analysis and consulting advice in the global mining industry (see www.crugroup.com) |
|
CSR |
Corporate Social Responsibility |
|
CSR Committee |
The Corporate Safety and Social Responsibility Committee of the Board of the Company |
|
DAP |
Delivery at place |
|
DFS |
Detailed feasibility study |
|
Directors |
The Directors of the Company |
|
EBT |
Employee Benefit Trust |
|
EPS |
Earnings per share |
|
Executive Committee |
The Executive Committee of management appointed by the Company's Board |
|
Executive Directors |
The Executive Directors of the Company |
|
FBM |
LLC Ferrexpo Belanovo Mining, a company incorporated under the laws of Ukraine |
|
Fe |
Iron |
|
Ferrexpo |
The Company and its subsidiaries |
|
Ferrexpo AG Group |
Ferrexpo AG and its subsidiaries including FPM |
|
Fevamotinico |
Fevamotinico S.a.r.l., a company incorporated with limited liability in Luxembourg |
|
FOB |
Delivered free on board, which means that the seller's obligation to deliver has been fulfilled when the goods have passed over the ship's rail at the named port of shipment, and all future obligations in terms of costs and risks of loss or damage transfer to the buyer from that point onwards |
|
FPM |
Ferrexpo Poltava Mining, also known as PJSC Ferrexpo Poltava Mining, a company incorporated under the laws of Ukraine |
|
FRMC |
Finance and Risk Management Committee, a sub-committee of the Executive Committee |
|
FTSE 250 |
Financial Times Stock Exchange top 250 companies |
|
FYM |
LLC Ferrexpo Yeristovo Mining, a company incorporated under the laws of Ukraine |
|
GPL |
Gorishne-Plavninske-Lavrykivske, the iron ore deposit being mined by FPM |
|
Group |
The Company and its subsidiaries |
|
HSE |
Health, safety and environment |
|
IAS |
International Accounting Standards |
|
IASB |
International Accounting Standards Board |
|
IFRS |
International Financial Reporting Standards, as adopted by the EU |
|
IPO |
Initial public offering |
|
Iron ore concentrate |
Product of the beneficiation process with enriched iron content |
|
Iron ore pellets |
Balled and fired agglomerate of iron ore concentrate, whose physical properties are well suited for transportation to and reduction within a blast furnace |
|
Iron ore sinter fines |
Fine iron ore screened to -6.3mm |
|
JORC |
Australasian Joint Ore Reserves Committee - the internationally accepted code for ore classification |
|
K22 |
GPL ore has been classified as either K22 or K23 quality, of which K22 ore is of higher quality (richer) |
|
KPI |
Key Performance Indicator |
|
Kt |
Thousand tonnes |
|
LIBOR |
The London Inter Bank Offered Rate |
|
LLC |
Limited Liability Company (in Ukraine) |
|
LTIFR |
Lost-Time Injury Frequency Rate |
|
LTIP |
Long-Term Incentive Plan |
|
m3 |
Cubic metre |
|
Majority Shareholder |
Fevamotinico S.a.r.l., The Minco Trust and Kostyantin Zhevago (together) |
|
Mineral resources |
Concentration or occurrence of material of intrinsic economic interest in or on the earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction |
|
Mm |
Millimetre |
|
Mt |
Million tonnes |
|
Mtpa |
Million tonnes per annum |
|
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 |
|
North East Asia |
This segmentation for the Group's sales includes Japan and Korea |
|
OHSAS 18001 |
International safety standard 'Occupational Health & Safety Management System Specification' |
|
Ordinary Shares |
Ordinary Shares of 10 pence each in the Company |
|
Ore |
A mineral or mineral aggregate containing precious or useful minerals in such quantities, grade and chemical combination as to make extraction economic |
|
Panamax |
Modern panamax ships typically carry a weight of between 65,000 to 90,000 tonnes of cargo and can transit both Panama and Suez canals |
|
PPI |
Ukrainian producer price index |
|
Probable Reserves |
Those measured and/or indicated mineral resources which are not yet 'proved', but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions |
|
Proved Reserves |
Measured mineral resources of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions |
|
Rail car |
Railway wagon used for the transport of iron ore concentrate or pellets |
|
Relationship Agreement |
The relationship agreement entered into among Fevamotinico S.a.r.l., Kostyantin Zhevago, The Minco Trust and the Company |
|
Remuneration Committee |
The Remuneration Committee of the Company's Board |
|
Reserves |
Those parts of mineral resources for which sufficient information is available to enable detailed or conceptual mine planning and for which such planning has been undertaken. Reserves are classified as either proved or probable |
|
Sinter |
A porous aggregate charged directly to the blast furnace which is normally produced by firing fine iron ore and/or iron ore concentrate, other binding materials, and coke breeze as the heat source |
|
Spot price |
The current price of a product for immediate delivery |
|
Sterling/£ |
Pound Sterling, the currency of the United Kingdom |
|
STIP |
Short-Term Incentive Plan |
|
Sub-funds |
Three funds that operate under the Blooming Land charity |
|
Tailings |
The waste material produced from ore after economically recoverable metals or minerals have been extracted. Changes in metal prices and improvements in technology can sometimes make the tailings economic to process at a later date |
|
Tolling |
The process by which a customer supplies concentrate to a smelter and the smelter invoices the customer the smelting charge, and possibly a refining charge, and then returns the metal to the customer |
|
Ton |
A US short ton, equal to 0.9072 metric tonnes |
|
Tonne or t |
Metric tonne |
|
Treasury Shares |
A company's own issued shares that it has purchased but not cancelled |
|
TSF |
Tailings storage facility |
|
TSR |
Total shareholder return. The total return earned on a share over a period of time, measured as the dividend per share plus capital gain, divided by initial share price |
|
UAH |
Ukrainian Hryvnia, the currency of Ukraine |
|
Ukr SEPRO |
The quality certification system in Ukraine, regulated by law to ensure conformity with safety and environmental standards |
|
Underlying EBITDA |
The Group calculates the Underlying EBITDA as profit before tax and finance plus depreciation and amortisation, net gains and losses from disposal of investments and property, plant and equipment, share based payments and write-offs and impairment losses |
|
US$/t |
US Dollars per tonne |
|
Value-in-use |
The implied value of a material to an end user relative to other options, e.g. evaluating, in financial terms, the productivity in the steel making process of a particular quality of iron ore pellets versus the productivity of alternative qualities of iron ore pellets |
|
VAT |
Value Added Tax |
|
WAFV |
Weighted average fair value |
|
Western Europe |
This segmentation for the Group's sales includes Germany and Italy |
|
WMS |
Wet magnetic separation |
|
Yeristovo or Yerystivske |
The deposit being developed by FYM |
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