Unaudited First Quarter Results to 31 March 2015
28 May 2015
Ferrexpo plc
("Ferrexpo", the "Group" or the "Company")
Unaudited First Quarter Results to 31 March 2015
Ferrexpo is today releasing its unaudited financial statements as of and for the three months ended 31 March 2015 in connection with the announcement today by Ferrexpo Finance Plc of an exchange offer and consent solicitation in respect of the remaining US$285,669,000 of its US$500,000,000 7.875 per cent. Guaranteed Notes due 2016 and the commencement of the exchange offer period.
Summary of the unaudited three months financial results for the period ended 31 March 2015:
Financial
§ Turnover of US$258 million (1Q 2014: US$413 million)
§ Profit before tax of US$72 million (1Q 2014: US$145 million)
§ EBITDA of US$112 million (1Q 2014: US$190 million)
§ Group consolidated shareholder equity as of 31 March 2015 of US$363 million (31 December 2014 : US$709million)
§ Net financial indebtedness as of 31 March 2015: US$695 million (31 December 2014: US$678 million)
§ Cash and cash equivalents of US$494 million as of 31 March 2015 (31 December 2014: US$627 million)
§ US$23 million non-cash increase in EBITDA from the revaluation of US dollar receivables at the Group's Ukrainian subsidiaries
Sales and Marketing
§ Average Platts China CFR 62% Fe iron ore price was US$63 per tonne for 1Q 2015 (1Q 2014: US$120 per tonne)
§ Sales volumes were 2,793 thousand tonnes of pellets (1Q 2014: 2,844 thousand tonnes of pellets)
Operations
§ 1Q 2015 total pellet production 2,885 thousand tonnes (1Q 2014: 2,816 thousand tonnes)
§ Production of 65% Fe pellets increased 81% to 2.5 million tonnes (1Q 2014: 1.4 million tonnes)
§ 1Q 2015 average C1 pellet cost US$33.2 per tonne (1Q 2014: US$50.5 per tonne)
Capital Investment
§ 1Q 2015 capital investment US$12 million (1Q 2014: US$78 million)
Key financial information for the three months ended 31 March 2015 is summarised in the table below
|
US$ million (unless otherwise stated) |
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Change |
Year ended 31.12.14 |
|
Total pellet production (kt) |
2,885 |
2,816 |
2% |
11,021 |
|
Sales volumes (kt) |
2,793 |
2,844 |
(2%) |
11,167 |
|
Revenue |
258 |
413 |
(38%) |
1,388 |
|
EBITDA |
112 |
190 |
(41%) |
496 |
|
Profit before tax |
72 |
145 |
(50%) |
254 |
|
Diluted EPS (US cents per share) |
9.76 |
20.46 |
(52%) |
30.39 |
|
Dividend (US cents per share) |
− |
− |
− |
13.2 |
|
Net cash flow from operating activities |
46 |
82 |
(44%) |
288 |
|
Capital investment |
12 |
78 |
(85%) |
235 |
|
Net debt |
(695) |
(679) |
2% |
(678) |
|
Net debt to LTM(1) EBITDA |
1.7x |
1.2x |
42% |
1.4x |
(1) Last twelve months
For further information contact:
|
Ferrexpo: |
|
|
Ingrid McMahon |
+44 207 389 8304
|
|
Maitland: |
|
|
Peter Ogden |
+44 207 379 5151 |
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine and transport and sales operations throughout the world. It has been mining and processing high quality iron ore pellets for the global steel industry for over 35 years. Ferrexpo's resource base is one of the largest iron ore deposits in the world. The Group is the 4th largest supplier of pellets to the global steel industry and the largest producer and exporter of pellets from the Former Soviet Union. In 2014, it produced 11 million tonnes of pellets, a 2% increase compared to 2013 and a record for the Company. Ferrexpo has a diversified customer base supplying steel mills in Austria, China, Japan, Germany as well as other European and Asian countries. Ferrexpo is listed on the main market of the London Stock Exchange under the ticker FXPO. For further information, please visit www.ferrexpo.com
Interim Consolidated Income Statement
|
US$'000 |
Notes |
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Revenue |
4 |
257,597 |
413,499 |
1,388,285 |
|
Cost of sales |
3/5 |
(109,946) |
(179,742) |
(647,960) |
|
Gross profit |
|
147,651 |
233,757 |
740,325 |
|
Selling and distribution expenses |
|
(57,145) |
(91,003) |
(311,514) |
|
General and administrative expenses |
6 |
(9,693) |
(10,951) |
(48,642) |
|
Other income |
|
906 |
2,643 |
9,094 |
|
Other expenses |
|
(9,599) |
(5,421) |
(57,014) |
|
Operating foreign exchange gains |
7 |
23,039 |
36,313 |
76,372 |
|
Operating profit from continuing operations before adjusted items |
|
95,159 |
165,338 |
408,621 |
|
Under recovery and write-down of VAT receivable |
13 |
− |
(2,063) |
(6,790) |
|
Write-offs and impairment losses |
8 |
(3) |
(76) |
(83,534) |
|
Share of profit from associates |
|
936 |
1,713 |
4,878 |
|
Losses on disposal of property, plant and equipment |
|
(1,054) |
(2,109) |
(4,825) |
|
Profit before tax and finance |
|
95,038 |
162,803 |
318,350 |
|
Finance income |
9/13 |
798 |
2,674 |
19,250 |
|
Finance expense |
9 |
(18,929) |
(16,622) |
(68,472) |
|
Non-operating foreign exchange losses |
7 |
(4,776) |
(3,867) |
(14,846) |
|
Profit before tax |
|
72,131 |
144,988 |
254,282 |
|
Income tax expense |
10 |
(13,703) |
(21,741) |
(70,442) |
|
Profit for the period/year |
|
58,428 |
123,247 |
183,840 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity shareholders of Ferrexpo plc |
|
57,274 |
120,035 |
178,316 |
|
Non-controlling interests |
|
1,154 |
3,212 |
5,524 |
|
|
|
58,428 |
123,247 |
183,840 |
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic (US cents) |
11 |
9.78 |
20.51 |
30.46 |
|
Diluted (US cents) |
11 |
9.76 |
20.46 |
30.39 |
Interim Consolidated Statement of Comprehensive Income
|
US$ 000 |
Notes |
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
||
|
|
|
(unaudited) |
(unaudited) |
(audited) |
||
|
Profit for the period/year |
|
58,428 |
123,247 |
183,840 |
||
|
Items that may subsequently be reclassified to profit or loss: |
|
|
|
|
||
|
Exchange differences on translating foreign operations |
|
(449,905) |
(627,624) |
(1,205,667) |
||
|
Income tax effect |
|
36,372 |
38,677 |
80,394 |
||
|
Net gains on available-for-sale financial assets |
20 |
41,800 |
(41) |
− |
||
|
Income tax effect |
|
− |
7 |
− |
||
|
Net other comprehensive income to be reclassified to profit or loss in subsequent periods |
|
(371,733) |
(588,981) |
(1,125,273) |
||
|
Reclassification to profit or loss relating to available-for-sale investments impaired |
|
− |
− |
(712) |
||
|
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
||
|
Remeasurement (losses)/gains on defined benefit pension liability |
|
(449) |
(32) |
1,649 |
||
|
Income tax effect |
|
43 |
3 |
(195) |
||
|
Net other comprehensive income not being reclassified to profit or loss in subsequent periods |
|
(406) |
(29) |
1,454 |
||
|
Other comprehensive income for the period/year, net of tax |
|
(372,139) |
(589,010) |
(1,124,531) |
||
|
|
|
|
|
|
||
|
Total comprehensive income for the period/year, net of tax |
|
(313,711) |
(465,763) |
(940,691) |
||
|
|
|
|
|
|
||
|
Total comprehensive income attributable to: |
|
|
|
|
||
|
Equity shareholders of Ferrexpo plc |
|
(307,635) |
(458,537) |
(926,422) |
||
|
Non-controlling interests |
|
(6,076) |
(7,226) |
(14,269) |
||
|
|
|
(313,711) |
(465,763) |
(940,691) |
||
|
|
|
|
|
|
||
Interim Consolidated Statement of Financial Position
|
US$'000 |
Notes |
As at 31.03.15 |
As at 31.03.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Assets |
|
|
|
|
|
Property, plant and equipment |
12 |
644,181 |
1,177,792 |
926,433 |
|
Goodwill and other intangible assets |
|
40,851 |
86,791 |
60,468 |
|
Investments in associates |
|
6,601 |
11,333 |
8,569 |
|
Available-for-sale financial assets |
20 |
41,828 |
82,658 |
46 |
|
Inventories |
14 |
61,581 |
54,161 |
81,987 |
|
Other non-current assets |
|
13,029 |
40,275 |
18,211 |
|
Income taxes recoverable and prepaid |
10 |
54,449 |
61,163 |
73,782 |
|
Other taxes recoverable and prepaid |
13 |
1,038 |
45,060 |
1,519 |
|
Deferred tax assets |
|
44,808 |
32,588 |
32,358 |
|
Total non-current assets |
|
908,366 |
1,591,821 |
1,203,373 |
|
Inventories |
14 |
96,454 |
127,886 |
124,722 |
|
Trade and other receivables |
|
84,137 |
115,006 |
87,226 |
|
Prepayments and other current assets |
|
15,349 |
28,277 |
21,057 |
|
Income taxes recoverable and prepaid |
10 |
− |
33,233 |
− |
|
Other taxes recoverable and prepaid |
13 |
45,032 |
140,329 |
71,982 |
|
Cash and cash equivalents |
3/15 |
493,902 |
366,364 |
626,509 |
|
|
|
734,874 |
811,095 |
931,496 |
|
Assets classified as held for sale |
|
23 |
106 |
26 |
|
Total current assets |
|
734,897 |
811,201 |
931,522 |
|
Total assets |
|
1,643,263 |
2,403,022 |
2,134,895 |
|
Equity and liabilities |
|
|
|
|
|
Share capital |
16 |
121,628 |
121,628 |
121,628 |
|
Share premium |
|
185,112 |
185,112 |
185,112 |
|
Other reserves |
16 |
(1,817,393) |
(925,717) |
(1,452,988) |
|
Retained earnings |
|
1,873,917 |
1,834,543 |
1,855,690 |
|
Equity attributable to equity shareholders of the parent |
|
363,264 |
1,215,566 |
709,442 |
|
Non-controlling interest |
|
2,083 |
15,202 |
8,159 |
|
Total equity |
|
365,347 |
1,230,768 |
717,601 |
|
Interest-bearing loans and borrowings |
3/17 |
939,451 |
880,423 |
1,056,253 |
|
Defined benefit pension liability |
|
21,319 |
39,807 |
28,557 |
|
Provision for site restoration |
|
1,602 |
2,147 |
2,345 |
|
Deferred tax liability |
|
326 |
2,031 |
841 |
|
Total non-current liabilities |
|
962,698 |
924,408 |
1,087,996 |
|
Interest-bearing loans and borrowings |
3/17 |
249,253 |
165,282 |
248,374 |
|
Trade and other payables |
|
24,341 |
30,263 |
32,351 |
|
Accrued liabilities and deferred income |
|
24,509 |
31,625 |
34,191 |
|
Income taxes payable |
|
4,605 |
2,300 |
5,898 |
|
Other taxes payable |
|
12,510 |
18,376 |
8,484 |
|
Total current liabilities |
|
315,218 |
247,846 |
329,298 |
|
Total liabilities |
|
1,277,916 |
1,172,254 |
1,417,294 |
|
Total equity and liabilities |
|
1,643,263 |
2,403,022 |
2,134,895 |
The financial statements were approved by the Board of Directors on the 27 May 2015.
|
Kostyantin Zhevago |
Christopher Mawe |
|
Chief Executive Officer |
Chief Financial Officer |
Interim Consolidated Statement of Cash Flows
|
US$'000 |
Notes |
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit before tax |
|
72,131 |
144,988 |
254,282 |
|
Adjustments for: |
|
|
|
|
|
Depreciation of property, plant and equipment and amortisation of intangible assets |
|
15,416 |
22,558 |
82,269 |
|
Interest expense |
|
18,174 |
15,381 |
64,166 |
|
Under recovery and write-down of VAT receivable |
13 |
− |
2,063 |
6,790 |
|
Interest income |
9 |
(798) |
(2,674) |
(19,250) |
|
Share of profit from associates |
|
(936) |
(1,713) |
(4,878) |
|
Movement in allowance for doubtful receivables |
|
316 |
181 |
8,011 |
|
Losses on disposal of property, plant and equipment |
|
1,054 |
2,109 |
4,825 |
|
Write-offs and impairment losses |
8 |
3 |
76 |
83,534 |
|
Site restoration provision |
|
27 |
77 |
1,180 |
|
Employee benefits |
|
1,866 |
2,010 |
6,531 |
|
Share based payments |
|
98 |
152 |
530 |
|
Operating foreign exchange gains |
2/7 |
(23,039) |
(36,313) |
(76,372) |
|
Non-operating foreign exchange losses |
2/7 |
4,776 |
3,867 |
14,846 |
|
Operating cash flow before working capital changes |
|
89,088 |
152,762 |
426,464 |
|
Changes in working capital: |
|
|
|
|
|
Decrease/(increase) in trade and other receivables |
|
3,419 |
(22,198) |
5,395 |
|
Increase in inventories |
|
(20,467) |
(7,682) |
(96,554) |
|
Decrease in trade and other accounts payable |
|
(9,963) |
(11,366) |
(11,083) |
|
Decrease/(increase) in VAT recoverable and other taxes recoverable and payable 1 |
|
3,164 |
12,195 |
86,950 |
|
Cash generated from operating activities |
|
65,241 |
123,711 |
411,172 |
|
Interest paid |
|
(13,234) |
(4,931) |
(61,307) |
|
Income tax paid |
|
(5,405) |
(35,450) |
(58,077) |
|
Post-employment benefits paid |
|
(481) |
(1,091) |
(3,340) |
|
Net cash flows from operating activities |
|
46,121 |
82,239 |
288,448 |
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment |
|
(12,135) |
(77,945) |
(232,809) |
|
Proceeds from disposal of property, plant and equipment |
|
− |
14 |
5,322 |
|
Purchase of intangible assets |
|
(199) |
(256) |
(1,711) |
|
Purchase of available-for-sale investment |
|
− |
(17) |
(17) |
|
Interest received |
|
787 |
497 |
2,376 |
|
Dividends from associates |
|
− |
− |
2,755 |
|
Net cash flows used in investing activities |
|
(11,547) |
(77,707) |
(224,084) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from borrowings and finance |
|
− |
14,091 |
392,515 |
|
Repayment of borrowings and finance |
|
(116,415) |
(7,210) |
(119,009) |
|
Arrangement fees paid |
|
(3,135) |
(1,473) |
(3,580) |
|
Dividends paid to equity shareholders of Ferrexpo plc 2 |
|
(31,863) |
(31,930) |
(76,904) |
|
Net cash flows used in financing activities |
|
(151,413) |
(26,522) |
193,022 |
|
Net (decrease)/increase in cash and cash equivalents |
|
(116,839) |
(21,990) |
257,386 |
|
Cash and cash equivalents at the beginning of the period/year |
|
626,509 |
390,491 |
390,491 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
(15,768) |
(2,137) |
(21,368) |
|
Cash and cash equivalents at the end of the period/year |
15 |
493,902 |
366,364 |
626,509 |
1 The movement in the comparative period ended 31 December 2014 includes the effect of a VAT receivable balance amounting to US$97,067 thousand recovered through VAT
bonds. See also note 13
2 Net of withholding taxes paid subsequent to the end of the periods ended 31 March 2015 and 2014. See note 11 for further details.
Interim Consolidated Statement of Changes in Equity
|
For the financial year 2014 and the three months ended 31 March 2015 |
Attributable to equity shareholders of the parent |
|
|
||||||||
|
US$ 000 |
Issued capital |
Share premium |
Uniting of interest reserve (note 16) |
Treasury share reserve (note 16) |
Employee Benefit Trust reserve (note 16) |
Net unreali-sed gains reserve (note 16) |
Translation reserve (note 16) |
Retained earnings |
Total capital and reserves |
Non-controlling interests |
Total equity |
|
At 1 January 2014 |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
1,753,200 |
1,712,614 |
22,428 |
1,735,042 |
|
Profit for the period |
− |
− |
− |
− |
− |
− |
− |
178,316 |
178,316 |
5,524 |
183,840 |
|
Other comprehensive income |
− |
− |
− |
− |
− |
(712) |
(1,105,480) |
1,454 |
(1,104,738) |
(19,793) |
(1,124,531) |
|
Total comprehensive income for the period |
− |
− |
− |
− |
− |
(712) |
(1,105,480) |
179,770 |
(926,422) |
(14,269) |
(940,691) |
|
Equity dividends paid to shareholders of Ferrexpo plc |
− |
− |
− |
− |
− |
− |
− |
(77,280) |
(77,280) |
− |
(77,280) |
|
Share-based payments |
− |
− |
− |
− |
530 |
− |
− |
− |
530 |
− |
530 |
|
At 31 December 2014 (audited) |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,012) |
− |
(1,401,496) |
1,855,690 |
709,442 |
8,159 |
717,601 |
|
Profit for the period |
− |
− |
− |
− |
− |
− |
− |
57,274 |
57,274 |
1,154 |
58,428 |
|
Other comprehensive income |
− |
− |
− |
− |
− |
41,800 |
(406,303) |
(406) |
(364,909) |
(7,230) |
(372,139) |
|
Total comprehensive income for the period |
− |
− |
− |
− |
− |
41,800 |
(406,303) |
56,868 |
(307,635) |
(6,076) |
(313,711) |
|
Equity dividends paid to shareholders of Ferrexpo plc |
− |
− |
− |
− |
− |
− |
− |
(38,641) |
(38,641) |
− |
(38,641) |
|
Share-based payments |
− |
− |
− |
− |
98 |
− |
− |
− |
98 |
− |
98 |
|
At 31 March 2015 (unaudited) |
121,628 |
185,112 |
31,780 |
(77,260) |
(5,914) |
41,800 |
(1,807,799) |
1,873,917 |
363,264 |
2,083 |
365,347 |
|
For the three months ended 31 March 2014 |
|
Attributable to equity shareholders of the parent |
|
|
||||||||
|
US$ 000 |
Issued capital |
Share premium |
Uniting of interest reserve (note 16) |
Treasury share reserve (note 16) |
Employee Benefit Trust reserve (note 16) |
Net unreali-sed gains reserve (note16) |
Translation reserve (note16) |
Retained earnings |
Total capital and reserves |
Non-controlling interests |
Total equity |
|
|
At 1 January 2014 |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
1,753,200 |
1,712,614 |
22,428 |
1,735,042 |
|
|
Profit for the period |
− |
− |
− |
− |
− |
− |
− |
120,035 |
120,035 |
3,212 |
123,247 |
|
|
Other comprehensive income |
− |
− |
− |
− |
− |
(34) |
(578,509) |
(29) |
(578,572) |
(10,438) |
(589,010) |
|
|
Total comprehensive income for the period |
− |
− |
− |
− |
− |
(34) |
(578,509) |
120,006 |
(458,537) |
(7,226) |
(465,763) |
|
|
Equity dividends paid to shareholders of Ferrexpo plc |
− |
− |
− |
− |
− |
− |
− |
(38,663) |
(38,663) |
− |
(38,663) |
|
|
Share-based payments |
− |
− |
− |
− |
152 |
− |
− |
− |
152 |
− |
152 |
|
|
At 31 March 2014 (unaudited) |
121,628 |
185,112 |
31,780 |
(77,260) |
(6,390) |
678 |
(874,525) |
1,834,543 |
1,215,566 |
15,202 |
1,230,768 |
|
Notes to the Interim Condensed Consolidated Financial Statements
Note 1: Corporate information
Organisation and operation
Ferrexpo plc (the "Company") is incorporated in the United Kingdom, which is considered to be the country of domicile, with its registered office at 2-4 King Street, London, SW1Y 6QL, UK. Ferrexpo plc and its subsidiaries (the "Group") operate two mines and a processing plant near Kremenchug in Ukraine, an interest in a port in Odessa and sales and marketing activities around the world including offices in Switzerland, Dubai, Japan, China, Singapore and Ukraine. The Group also owns logistics assets in Austria which operates a fleet of vessels operating on the Rhine and Danube waterways and an ocean going vessel which provides top off services and operates on international sea routes. The Group's operations are vertically integrated from iron ore mining through to iron ore concentrate and pellet production and subsequent logistics. The Group's mineral properties lie within the Kremenchug Magnetic Anomaly and are currently being extracted at the Gorishne-Plavninskoye and Lavrikovskoye ("GPL ") and Yeristovskoye deposits.
The majority shareholder of the Group is Fevamotinico S.a.r.l. ("Fevamotinico"), a company incorporated in Luxembourg and ultimately owned by The Minco Trust, of which Kostyantin Zhevago, the Group's Chief Executive Officer, is a beneficiary. At the time this report was published, Fevamotinico held 50.3% (2014: 50.3%) of Ferrexpo plc's issued share capital.
The Group comprises of Ferrexpo plc and its consolidated subsidiaries as set out below:
|
|
Equity interest owned |
||||
|
Name |
Country of incorporation |
Principal activity |
31.03.15 % |
31.03.14 % |
31.12.14 % |
|
OJSC Ferrexpo Poltava Mining |
Ukraine |
Iron ore mining |
97.3 |
97.3 |
97.3 |
|
Ferrexpo AG |
Switzerland |
Sale of iron ore pellets |
100.0 |
100.0 |
100.0 |
|
DP Ferrotrans |
Ukraine |
Trade, transportation services |
97.3 |
97.3 |
97.3 |
|
United Energy Company LLC |
Ukraine |
Holding company |
97.3 |
97.3 |
97.3 |
|
Ferrexpo Finance plc |
England |
Finance |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Services Limited |
Ukraine |
Management services & procurement |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Hong Kong Limited |
China |
Marketing services |
100.0 |
100.0 |
100.0 |
|
LLC Ferrexpo Yeristovo GOK |
Ukraine |
Iron ore mining |
100.0 |
100.0 |
100.0 |
|
LLC Ferrexpo Belanovo GOK |
Ukraine |
Iron ore mining |
100.0 |
100.0 |
100.0 |
|
Nova Logistics Limited |
Ukraine |
Service company (dormant) |
51.0 |
51.0 |
51.0 |
|
Ferrexpo Middle East FZE |
U.A.E. |
Sale of iron ore pellets |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Singapore PTE Ltd |
Singapore |
Marketing services |
100.0 |
100.0 |
100.0 |
|
First-DDSG Logistics Holding GmbH |
Austria |
Holding company |
100.0 |
100.0 |
100.0 |
|
EDDSG GmbH |
Austria |
Barging company |
100.0 |
100.0 |
100.0 |
|
DDSG Tankschiffahrt GmbH |
Austria |
Barging company |
100.0 |
100.0 |
100.0 |
|
DDSG Services GmbH 1 |
Austria |
Barging company |
100.0 |
100.0 |
100.0 |
|
DDSG Mahart Kft. |
Hungary |
Barging company |
100.0 |
100.0 |
100.0 |
|
Pancar Kft. |
Hungary |
Barging company |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Port Services GmbH |
Austria |
Port services |
100.0 |
100.0 |
100.0 |
|
Ferrexpo Shipping International Ltd. |
Marshall Islands |
Holding company |
100.0 |
100.0 |
100.0 |
|
Iron Destiny Ltd. |
Marshall Islands |
Holding company |
100.0 |
100.0 |
100.0 |
|
Transcanal SRL |
Romania |
Port services |
77.6 |
77.6 |
77.6 |
|
Helogistics Asset Leasing Kft. |
Hungary |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
Universal Services Group Ltd. |
Ukraine |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Ukraine Holding |
Ukraine |
Holding company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Invest |
Ukraine |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Ukraine Shipping Management |
Ukraine |
Barging company |
100.0 |
100.0 |
100.0 |
|
LLC DDSG Ukraine Shipping |
Ukraine |
Asset holding company |
100.0 |
100.0 |
100.0 |
|
Arlington Ltd. 2 |
Guernsey |
Holding company |
100.0 |
100.0 |
100.0 |
1 Formerly Helogistics Transport GmbH
2 The entity was acquired in February 2014
The Group's interests in the entities listed above are held indirectly by the Company.
At 31 March 2015, the Group also holds through OJSC Ferrexpo Poltava Mining an interest of 48.6% (31 March 2014: 48.6%; 31 December 2014: 48.6%) in TIS Ruda, a Ukrainian port located on the Black Sea. As this is an associate, it is accounted for using the equity method of accounting.
Note 2: Summary of significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the three months period ended 31 March 2015 have been prepared in accordance with International Accounting Standard ('IAS') 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all of the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2014.
The interim condensed consolidated financial statements do not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial year ended 31 December 2014. A copy of the statutory accounts for that year, which were prepared in accordance with International Financial Reporting Standards ('IFRS') issued by the International Accounting Standard Board ('IASB'), as adopted by the European Union as they apply to financial statements of the Group for the year ended 31 December 2014, will be delivered to the Register of Companies before the required filing deadline. The auditors' report under section 495 of the Companies Act 2006 in relation to those accounts was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
During the period ended 31 March 2015, the Ukrainian Hryvnia has devalued by approximately 49% compared to the US Dollar; from 15.769 as at 31 December 2014 to 23.443 as at the end of this reporting period. As a result of this devaluation, the total equity decreased by US$449,905 thousand as of 31 March 2015 due the exchange differences on translating foreign operations, which is reflected in the translation reserve. Further details are provided in note 7 and note 16.
The Group continues to generate positive free cash flow under the lower iron ore price environment. The principal repayments under the Group's debt facilities take place in 2Q 2016 and the Group has sufficient liquidity to operate until this time. The fall in the iron ore price and the lower cash generation of the business is, however, likely to require certain debt facilities to be renewed or rolled over with extended repayment terms in order to ensure that the Group has sufficient working capital in 2016 (see note 17 for further information).
The Directors are of the view that further refinancing and or extension of debt repayment maturities will be available and as such the Directors are of the view that the Group is a going concern and the interim consolidated financial statements have been drawn up on this basis.
Accounting policies adopted
The accounting policies and methods of computation adopted in the preparation of the interim condensed consolidated financial statements are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014.
The following new standards and interpretations have been applied from 1 January 2015, with no effect on reported results, financial position or disclosure in the interim financial statements:
Annual Improvements to IFRSs - 2010-2012 Cycle
Annual Improvements to IFRSs - 2011-2013 Cycle
IFRIC 21 Levies
Seasonality
The Group's operations are not affected by seasonality.
Note 3: Segment information
The Group is managed as a single entity, which produces, develops and markets its principal product, iron ore pellets, for sale to the metallurgical industry. While the revenue generated by the Group is monitored at a more detailed level, there are no separate measures of profit reported to the Group's Chief Operating Decision-Maker ('CODM'). In accordance with IFRS 8 Operating Segments, the Group presents its results in a single segment, which are disclosed in the income statement for the Group. The management monitors the operating result of the Group based on a number of measures including EBITDA, C1 costs and the net financial indebtedness.
EBITDA
The Group presents EBITDA because it believes that EBITDA is a useful measure for evaluating its ability to generate cash and its operating performance. The Group's full definition of EBITDA is disclosed in the Glossary on page 24.
|
US$ 000 |
Notes |
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit before tax and finance |
|
95,038 |
162,803 |
318,350 |
|
Under recovery and write-down of VAT receivable |
13 |
− |
2,063 |
6,790 |
|
Write-offs and impairment losses |
8 |
3 |
76 |
83,534 |
|
Share based payments |
|
98 |
152 |
530 |
|
Losses on disposal of PPE |
|
1,054 |
2,109 |
4,825 |
|
Depreciation and amortisation |
|
15,416 |
22,558 |
82,269 |
|
EBITDA |
|
111,609 |
189,761 |
496,298 |
C1 costs
C1 costs represent the cash costs of production of iron ore pellets from own ore divided by production volume of own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, costs of purchased ore and concentrate and production cost of gravel.
|
US$'000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Cost of sales - pellet production |
5 |
104,224 |
170,834 |
586,653 |
|
Depreciation and amortisation |
5 |
(11,846) |
(18,451) |
(64,137) |
|
Purchased concentrate and other items for resale |
5 |
(8,446) |
(9,243) |
(27,110) |
|
Inventory movements |
5 |
9,668 |
(1,675) |
10,127 |
|
Other |
|
(3,270) |
(4,455) |
(15,546) |
|
C1 cost |
|
90,330 |
137,010 |
489,987 |
|
Own ore produced (tonnes) |
|
2,723,230 |
2,714,136 |
10,670,445 |
|
C1 cash cost per tonne US$ |
|
33.2 |
50.5 |
45.9 |
Net financial indebtedness
Net financial indebtedness as defined by the Group comprises cash and cash equivalents, short-term deposits less interest bearing loans and borrowings.
|
US$ 000 |
Notes |
As at 31.03.15 |
As at 31.03.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Cash and cash equivalents |
15 |
493,902 |
366,364 |
626,509 |
|
Interest bearing loans and borrowings - current |
17 |
(249,253) |
(165,282) |
(248,374) |
|
Interest bearing loans and borrowings - non-current |
17 |
(939,451) |
(880,423) |
(1,056,253) |
|
Net financial indebtedness |
|
(694,802) |
(679,341) |
(678,118) |
Note 4: Revenue
Revenue for the three months period ended 31 March 2015 consisted of the following:
|
US$ 000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Revenue from sales of ore pellets: |
|
|
|
|
|
Export |
|
243,586 |
395,554 |
1,290,695 |
|
Total revenue from sale of iron ore pellets and concentrate |
|
243,586 |
395,554 |
1,290,695 |
|
Revenue from logistics and bunker business |
|
13,094 |
16,246 |
90,661 |
|
Revenue from other sales and services provided |
|
917 |
1,699 |
6,929 |
|
Total revenue |
|
257,597 |
413,499 |
1,388,285 |
No sales were made in Ukraine during the periods presented. Export sales of iron ore pellets and concentrate by geographical destination were as follows:
|
US$'000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Traditional Market |
|
125,512 |
206,158 |
594,045 |
|
Growth Market |
|
71,842 |
130,675 |
493,964 |
|
Natural Market |
|
46,232 |
58,721 |
202,686 |
|
Total export revenue |
|
243,586 |
395,554 |
1,290,695 |
Information about the composition of the markets is provided in the Glossary.
Note 5: Cost of sales
Cost of sales for the three months period ended 31 March 2015 consisted of the following:
|
US$ 000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Energy |
|
50,008 |
74,376 |
262,936 |
|
Personnel |
|
8,582 |
15,442 |
50,851 |
|
Materials |
|
15,737 |
23,052 |
85,043 |
|
Repairs and maintenance |
|
10,112 |
15,605 |
59,780 |
|
Depreciation and amortisation |
|
11,846 |
18,451 |
64,137 |
|
Royalties and levies |
|
3,858 |
6,216 |
22,801 |
|
Purchased concentrate and other items for resale |
|
8,446 |
9,243 |
27,110 |
|
Inventory movements |
|
(9,668) |
1,675 |
(10,127) |
|
Logistics and bunker business |
|
5,722 |
8,908 |
61,307 |
|
Other |
|
5,303 |
6,774 |
24,122 |
|
Total cost of sales |
|
109,946 |
179,742 |
647,960 |
|
Thereof for pellet production |
|
104,224 |
170,834 |
586,653 |
|
Thereof for logistics and bunker business |
|
5,722 |
8,908 |
61,307 |
Note 6: General and administrative expenses
General and administrative expenses for the three months period ended 31 March 2015 consisted of the following:
|
US$ 000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Personnel |
|
4,738 |
7,358 |
28,406 |
|
Office, maintenance and security |
|
1,202 |
1,704 |
6,780 |
|
Professional fees |
|
2,336 |
1,500 |
6,990 |
|
Audit fees |
|
329 |
330 |
1,593 |
|
Non-audit fees |
|
1 |
45 |
418 |
|
Depreciation and amortisation |
|
421 |
(454) |
2,084 |
|
Other |
|
666 |
468 |
2,371 |
|
Total general and administrative expenses |
|
9,693 |
10,951 |
48,642 |
Note 7: Foreign exchange gains and losses
Foreign exchange gains and losses for the three months period ended 31 March 2015 consisted of the following:
|
US$ 000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Operating foreign exchange gains |
|
|
|
|
|
Revaluation of trade receivables |
|
23,736 |
36,912 |
78,827 |
|
Revaluation of trade payables |
|
(672) |
(601) |
(2,265) |
|
Others |
|
(25) |
2 |
(190) |
|
Total operating foreign exchange gains |
|
23,039 |
36,313 |
76,372 |
|
Non-operating foreign exchange losses |
|
|
|
|
|
Revaluation of interest-bearing loans |
|
(38,910) |
(29,124) |
(76,517) |
|
Revaluation of cash and cash equivalents |
|
41,189 |
43,055 |
81,192 |
|
Others |
|
(7,055) |
(17,798) |
(19,521) |
|
Total non-operating foreign exchange losses |
|
(4,776) |
(3,867) |
(14,846) |
|
Total foreign exchange gains |
|
18,263 |
32,446 |
61,526 |
Operating foreign exchange gains and losses are those items that are directly related to the production and sale of pellets (e.g. trade receivables, trade payables on operating expenditure). Non-operating gains and losses are those associated with the Group's financing and treasury activities and with local income tax payables.
During the period ended 31 March 2015, the Ukrainian Hryvnia has devalued by approximately 49% compared to the US Dollar; from 15.769 as at 31 December 2014 to 23.443 as at the end of this reporting period resulting in translation differences of balances denominated in Hryvnia, such as property plant and equipment (note 12), income taxes recoverable and prepaid and other taxes recoverable and prepaid (note 13), with the effects recognised in the translation reserve (see note 16).
Note 8: Write-offs and impairment losses
Impairment losses relate to adjustments made to the carrying value of assets where this is higher than the recoverable amount. Write-offs and impairment losses for the three months period ended 31 March 2015 consisted of the following:
|
US$ 000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Write-off of VAT receivables |
|
− |
− |
1,351 |
|
Write-off of inventories |
|
− |
− |
48 |
|
Write-off of property, plant and equipment |
|
− |
− |
47 |
|
Impairment of available-for-sale investments, net of amounts reclassified from other comprehensive income |
|
− |
− |
(294) |
|
Impairment of available-for-sale investments |
|
3 |
76 |
82,382 |
|
Total write-offs and impairment losses |
|
3 |
76 |
83,534 |
The impairment loss on available-for-sale financial assets shown for the comparative period ended 31 December 2014 is related to the 15.5% equity investment in Ferrous Resources. Further information is provided in note 20.
Note 9: Finance income and expense
Finance income and expense for the period ended 31 March 2015 consisted of the following:
|
US$000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Finance income |
|
|
|
|
|
Interest income |
|
731 |
447 |
2,299 |
|
Other finance income |
|
67 |
2,227 |
16,951 |
|
Total finance income |
|
798 |
2,674 |
19,250 |
|
Finance expense |
|
|
|
|
|
Interest expense on financial liabilities measured at amortised cost |
|
(16,485) |
(13,547) |
(58,371) |
|
Effect from capitalised borrowing costs |
|
1,135 |
2,538 |
8,748 |
|
Interest on defined benefit plans |
|
(755) |
(1,242) |
(4,306) |
|
Bank charges |
|
(2,614) |
(3,639) |
(13,490) |
|
Other finance costs |
|
(210) |
(732) |
(1,053) |
|
Total finance expense |
|
(18,929) |
(16,622) |
(68,472) |
|
Net finance expense |
|
(18,131) |
(13,948) |
(49,222) |
Other finance income for the comparative period ended 31 December 2014 includes a US$16,497 thousand release of a discount recorded in the prior years to reflect changes in the estimated timing of receipts for VAT receivable balances in dispute that were previously expected to be recovered over a protracted period of time. Further information is provided in note 13.
The discount was built up in periods prior to those presented in these interim consolidated financial statements and was recorded as finance cost as reflecting the time value of money of these VAT receivable balances at the respective end of the reporting periods.
Note 10: Taxation
The Group pays corporate profit tax in a number of jurisdictions and its tax rate is influenced by the mix of profits primarily between Ukraine, Switzerland, 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 31 March 2015, the income tax expense was based on an expected tax rate of 19.0% for the financial year 2015, which is below the effective tax rate of 27.7% for the financial year 2014.
The lower expected tax rate for the period ended 31 March 2015 compared to the effective tax rate for the financial year 2014 is mainly a result of lower non-deductible expenses expected during the financial year 2015. The effective tax rate for the financial year 2014 included significant non-deductible expenses in Ukraine and Switzerland including the discount recorded on the VAT bonds sold prior to their maturity and the impairment loss recorded on an equity investment (see note 20 for further details).
During the last three financial years, current VAT receivable balances in Ukraine were mainly recovered in exchange for prepayments of corporate profit tax resulting in a substantial balance of outstanding prepaid corporate profit tax. This balance decreased to US$73,782 thousand during the financial year 2014 as a result of the Ukrainian Hryvnia devaluation compared to the US Dollar (31 March 2014: US$94,396 thousand) and a reduction of the percentage of the corporate profit tax to be prepaid for obtaining VAT refunds. During the three months period ended 31 March 2015, the Hryvnia further devalued from 15.769 at the beginning of the year to 23.443 as at the end of this reporting period resulting in a further decrease of the outstanding balance to US$54,449 thousand.
It is management's view that this balance will be either offset with future profits or recovered through an issuance of bonds by the Ministry of Finance, which are expected to trade with a discount to face value, as happened during the financial year 2014 for overdue VAT receivable balances (see note 13). As at the date of the preparation of these consolidated interim financial statements, there is an uncertainty as to the timing of the recovery of this balance. In light of this uncertainty, it was considered most appropriate to classify the entire balance as non-current in the consolidated statement of financial position.
Note 11: Earnings per share and dividends paid and proposed
Basic EPS is calculated by dividing the net profit for the period attributable to ordinary equity shareholders of Ferrexpo plc by the weighted average number of Ordinary Shares.
Diluted earnings per share are calculated by adjusting the weighted average number of Ordinary Shares in issue on the assumption of conversion of all potentially dilutive Ordinary Shares. All share awards are potentially dilutive and have been considered in the calculation of diluted earnings per share.
|
|
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Profit for the period / year attributable to equity shareholders: |
|
|
|
|
|
Basic earnings per share (US cents) |
|
9.78 |
20.51 |
30.46 |
|
Diluted earnings per share (US cents) |
|
9.76 |
20.46 |
30.39 |
The calculation of the basic and diluted earnings per share is based on the following data:
|
Thousands |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Weighted average number of shares |
|
|
|
|
|
Basic number of ordinary shares outstanding |
|
585,462 |
585,336 |
585,413 |
|
Effect of dilutive potential ordinary shares |
|
1,253 |
1,267 |
1,258 |
|
Diluted number of ordinary shares outstanding |
|
586,715 |
586,603 |
586,671 |
The basic number of ordinary shares is calculated by subtracting the shares held in treasury from the total number of ordinary shares in issue.
Dividends
|
US$000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Dividend proposed |
|
|
|
|
|
Final dividend for 2014: 3.3 US cents |
|
19,320 |
− |
19,320 |
|
Special dividend for 2014: 6.6 US cents |
|
− |
− |
38,640 |
|
Final dividend for 2013: 3.3 US cents |
|
− |
19,317 |
− |
|
Total dividends proposed |
|
19,320 |
19,317 |
57,960 |
|
|
|
|
|
|
|
Paid per ordinary share |
|
|
|
|
|
Special dividend for 2014: 6.6 US cents |
|
38,667 |
− |
− |
|
Interim dividend for 2014: 3.3 US cents |
|
− |
− |
19,011 |
|
Final dividend for 2013: 3.3 US cents |
|
− |
− |
19,279 |
|
Special dividend for 2013: 6.6 US cents |
|
− |
38,614 |
38,614 |
|
Total dividends paid during the period |
|
38,667 |
38,614 |
76,904 |
The interim dividends paid for 2014 and 2013 include withholding taxes of US$6,804 thousand and US$6,684 thousand paid subsequent to the periods ended 31 March 2015 and 2014, respectively.
Note 12: Property, plant and equipment
During the three months period ended 31 March 2015, the Group acquired property, plant and equipment with a cost of US$17,402 thousand (31 March 2014: US$67,372 thousand; 31 December 2014: US$262,252 thousand) and disposed of property, plant and equipment with original costs of US$2,995 thousand (31 March 2014: US$5,472 thousand; 31 December 2014: US$30,683 thousand). The total depreciation charge for the period was US$15,679 thousand (31 March 2014: US$24,502 thousand; 31 December 2014: US$97,901 thousand).
During the reporting period, the Ukrainian Hryvnia has devalued compared to the US Dollar from 15.769 as of 31 December 2014 to 23.443 as of 31 March 2015 reducing property, plant and equipment by US$280,981 thousand. This effect is reflected in the translation reserve included in shareholder's equity. See also note 16.
The carrying value of property, plant and equipment includes capitalised borrowing costs on qualifying assets of US$9,795 thousand (31 March 2014: US$9,885 thousand; 31 December 2014: US$13,162 thousand).
Note 13: Other taxes recoverable and prepaid
As at 31 March 2015 taxes recoverable and prepaid comprised:
|
US$000 |
|
As at 31.03.15 |
As at 31.03.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
VAT receivable |
|
44,931 |
140,124 |
71,859 |
|
Other taxes prepaid |
|
101 |
205 |
123 |
|
Total other taxes recoverable and prepaid - current |
|
45,032 |
140,329 |
71,982 |
|
VAT receivable |
|
1,038 |
45,060 |
1,519 |
|
Total other taxes recoverable and prepaid - non-current |
|
1,038 |
45,060 |
1,519 |
|
Total other taxes recoverable and prepaid |
|
46,070 |
185,389 |
73,501 |
As at 31 March 2015, US$44,347 thousand of the VAT receivable relates to the Group's Ukrainian business operations (31 March 2014: US$181,718 thousand; 31 December 2014: US$71,127 thousand). The table below provides a reconciliation of the VAT receivable balances in Ukraine:
|
US$000 |
|
3 months ended 31.03.15 |
3 months ended 31.03.14 |
Year ended |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Opening balance |
|
72,837 |
318,213 |
318,213 |
|
Net VAT incurred |
|
22,553 |
40,261 |
153,345 |
|
VAT received in cash |
|
(25,724) |
(51,232) |
(141,126) |
|
VAT recovered through sale of VAT bonds |
|
− |
− |
(97,067) |
|
Discount on sale of VAT bonds |
|
− |
− |
(29,333) |
|
VAT write-off through the income statement |
|
− |
− |
(1,351) |
|
VAT write-off capitalised |
|
− |
− |
(3,430) |
|
Translation difference |
|
(23,609) |
(81,873) |
(126,414) |
|
Closing balance, gross |
|
46,057 |
225,369 |
72,837 |
|
Discount |
|
(1,710) |
(43,651) |
(1,710) |
|
Closing balance, net |
|
44,347 |
181,718 |
71,127 |
The Ukrainian Hryvnia devalued compared to the US Dollar from 15.769 as at 31 December 2014 to 23.443 as at 31 March 2015 reducing the outstanding VAT balances expressed in US Dollar by US$23,609 thousand, which is reflected in the translation reserve. See also note 16.
During the second half of the financial year 2014, bonds were received by the Group with a face value of UAH1,607,101 thousand (US$135,573 thousand at the exchange rate at the date of issuance) in settlement for VAT due of the same amount. The bonds were issued by the Ministry of Finance to settle certain accumulated VAT liabilities and the Group had sold all VAT bonds prior to the end of the financial year 2014 with an average discount of 21.8% resulting in net proceeds totalling UAH1,256,800 thousand (US$97,067 thousand at the exchange rate at the date of sale).
As at 31 March 2015, management expect certain overdue receivable balances to be recovered inside one year through a further issuance of bonds, which will trade at a discount to face value. The adjustment of the discount at the end of the comparative periods ended 31 March 2014 and 31 December 2014 resulted in charges of US$2,063 thousand and US$6,790 thousand, respectively.
Note 14: Inventories
Inventories are held at the lower of cost or net realisable value. As at 31 March 2015 ore stockpiles amounting to US$61,581 thousand (31 March 2014: US$54,161 thousand; 31 December 2014: US$81,987 thousand) were classified as non-current as this ore is not planned to be processed within one year.
Note 15: Cash and cash equivalents
As at 31 March 2015 the Group held cash and cash equivalents of US$493,902 thousand (31 March 2014: US$366,364 thousand; 31 December 2014: US$626,509 thousand).
The Group's exposure to liquidity, counterparty and interest rate risk as well as a sensitivity analysis for financial assets and liabilities are disclosed in note 30 of the Annual Report and Accounts 2014. See also note 18 of these interim condensed consolidated financial statements for further information in respect of transactional banking arrangements with a related party.
Note 16: Share capital and reserves
The share capital of Ferrexpo plc at 31 March 2015 was 613,967,956 (31 March 2014: 613,967,956; 31 December 2014: 613,967,956) Ordinary Shares at par value of £0.10 paid for cash, resulting in share capital of US$121,628 thousand, which is unchanged since the Group's Initial Public Offering in June 2007. This balance includes 25,343,814 shares (31 March 2014: 25,343,814 shares; 31 December 2014: 25,343,814 shares), which are held in treasury, resulting from a share buyback that was undertaken in September 2008, and 3,162,399 shares held in the employee benefit trust reserve (31 March 2014:3,196,064 shares; 31 December 2014: 3,162,399 shares).
The translation reserve includes the effect from the exchange differences arising on translation of non-US Dollar functional currency operations (mainly in Ukrainian Hryvnia). During the period ended 31 March 2015, the Ukrainian Hryvnia devalued from 15.769 as at the beginning of the year to 23.443 as at 31 March 2015 and the exchange differences arising on translation of the Group's foreign operations are initially recognised in the other comprehensive income. See also the Interim Consolidated Statement of Comprehensive Income on page 4 of these financial statements for further details.
As at 31 March 2015 other reserves attributable to equity shareholders of Ferrexpo plc comprised.
|
For the financial year 2014 and the three months ended 31 March 2015 |
|
|
|
|
|
|
|
US$ 000 |
Uniting of interest reserve |
Treasury share reserve |
Employee Benefit Trust reserve |
Net unrealised gains reserve |
Translation reserve |
Total other reserves |
|
At 1 January 2014 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
(347,326) |
|
Foreign currency translation differences |
− |
− |
− |
− |
(1,185,874) |
(1,185,874) |
|
Transfer to profit and loss |
− |
− |
− |
(712) |
− |
(712) |
|
Loss on available-for-sale financial assets |
− |
− |
− |
− |
− |
− |
|
Tax effect |
− |
− |
− |
− |
80,394 |
80,394 |
|
Total comprehensive income for the period |
− |
− |
− |
(712) |
(1,105,480) |
(1,106,192) |
|
Share based payments |
− |
− |
530 |
− |
− |
530 |
|
At 31 December 2014 (audited) |
31,780 |
(77,260) |
(6,012) |
− |
(1,401,496) |
(1,452,988) |
|
Foreign currency translation differences |
− |
− |
− |
− |
(442,675) |
(442,675) |
|
Gain/(loss) on available-for-sale financial assets |
− |
− |
− |
41,800 |
− |
41,800 |
|
Tax effect |
− |
− |
− |
− |
36,372 |
36,372 |
|
Total comprehensive income for the period |
− |
− |
− |
41,800 |
(406,303) |
(364,503) |
|
Share based payments |
− |
− |
98 |
− |
− |
98 |
|
At 31 March 2015 (unaudited) |
31,780 |
(77,260) |
(5,914) |
41,800 |
(1,807,799) |
(1,817,393) |
|
For the three months ended 31 March 2014 |
|
|
|
|
|
|
|
US$ 000 |
Uniting of interest reserve |
Treasury share reserve |
Employee Benefit Trust reserve |
Net unrealised gains reserve |
Translation reserve |
Total other reserves |
|
At 1 January 2014 |
31,780 |
(77,260) |
(6,542) |
712 |
(296,016) |
(347,326) |
|
Foreign currency translation differences |
- |
- |
- |
- |
(617,186) |
(617,186) |
|
Gain on available-for-sale financial assets |
- |
- |
- |
(41) |
- |
(41) |
|
Tax effect |
- |
- |
- |
7 |
38,677 |
38,684 |
|
Total comprehensive income for the period |
- |
- |
- |
(34) |
(578,509) |
(578,543) |
|
Share based payments |
- |
- |
152 |
- |
- |
152 |
|
At 31 March 2014 (unaudited) |
31,780 |
(77,260) |
(6,390) |
678 |
(874,525) |
(925,717) |
Note 17: Interest bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost and denominated in US Dollars.
|
US$ 000 |
|
As at 31.03.15 |
As at 31.03.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Current |
|
|
|
|
|
Syndicated bank loans - secured |
|
207,500 |
122,500 |
210,000 |
|
Other bank loans - secured |
|
21,150 |
18,867 |
22,906 |
|
Other bank loans - unsecured |
|
1,503 |
− |
− |
|
Obligations under finance leases |
|
4,230 |
4,566 |
4,644 |
|
Interest accrued |
|
14,870 |
19,349 |
10,824 |
|
Total current interest bearing loans and borrowings |
3 |
249,253 |
165,282 |
248,374 |
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
Eurobond issued |
|
439,420 |
494,435 |
496,392 |
|
Syndicated bank loans - secured |
|
420,000 |
297,500 |
472,500 |
|
Other bank loans - secured |
|
60,220 |
71,409 |
73,736 |
|
Other bank loans - unsecured |
|
7,477 |
− |
− |
|
Obligations under finance leases |
|
12,334 |
17,079 |
13,625 |
|
Total non-current interest bearing loans and borrowings |
3 |
939,451 |
880,423 |
1,056,253 |
|
Total interest bearing loans and borrowings |
|
1,188,704 |
1,045,705 |
1,304,627 |
As at 31 March 2015 the Group has a syndicated US$420 million pre-export finance facility, of which US$277.5 million is available and drawn, and a fully drawn syndicated US$350 million pre-export finance facility. Both are revolving facilities with commitment amortisation over the final 24 months to the final maturity dates of 31 July 2016 and 8 August 2018 respectively. Subject to additional bank commitments being secured, the US$350 million facility can be further increased up to an amount of US$500 million within one year of the effective date, which was 8 August 2014.
As at 31 March 2015 the major bank debt facilities were guaranteed and secured as follows:
· Ferrexpo AG and Ferrexpo Middle East FZE assigned the rights to revenue from certain sales contracts;
· OJSC Ferrexpo Poltava Mining assigned all of its rights of certain export contracts for the pellets sales to Ferrexpo AG and Ferrexpo Middle East FZE; and
· the Group pledged bank accounts of Ferrexpo AG and Ferrexpo Middle East FZE into which all proceeds from the sale of certain iron ore pellet contracts are received.
In addition to the Group's major bank debt facilities listed above, an unsecured US$500 million Eurobond was issued on 7 April 2011, subsequent to the exchange transaction mentioned below, US$285,669 thousand remains due for repayment on 7 April 2016. This bond has a 7.875% coupon and interest is payable on a semi-annual basis.
On 24 February 2015, the Group exchanged and cancelled US$214,331 thousand of the aforementioned US$500 million Eurobond and issued new notes with a par value totalling US$160,724 thousand and repaid US$53,607 thousand in cash. The new notes are repayable in two equal instalments on 7 April 2018 and 7 April 2019 and have a 10.375% interest coupon payable semi-annually.
Further information on the Group's exposure to interest rate, foreign currency and liquidity risk is provided in note 30 of the Annual Report and Accounts 2014.
Note 18: Related party disclosure
During the periods presented the Group entered into arm's length transactions with entities under the common control of the majority owner of the Group, Kostyantin Zhevago and with associated companies and with other related parties. Management considers that the Group has appropriate procedures in place to identify and properly disclose transactions with the related parties.
Entities under common control are those under the control of Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in which the Group holds an interest of 48.6%. This is the only associated company of the Group. Other related parties are principally those entities controlled by Anatoly Trefilov who is a member of the supervisory board of OJSC Ferrexpo Poltava Mining. Related party transactions entered into by the Group during the periods presented are summarised in the tables on the following pages.
During the period ended 31 March 2015, the Ukrainian Hryvnia has devalued by approximately 49% compared to the US Dollar; from 15.769 as at 31 December 2014 to 23.443 as at the end of this reporting period. This devaluation had an effect on the totals of the transactions and the balances denominated in Hryvnia when translating into US Dollar.
Revenue, expenses, finance income and finance expenses
|
|
3 months ended 31.03.15 (unaudited) |
3 months ended 31.03.14 (unaudited) |
Year ended 31.12.14 (audited) |
||||||
|
US$ 000 |
Entities under common control |
Associated companies |
Other related parties |
Entities under common control |
Associated companies |
Other related parties |
Entities under common control |
Associated companies |
Other related parties |
|
Other sales a |
86 |
- |
214 |
146 |
- |
168 |
696 |
- |
524 |
|
Total related party transactions within revenue |
86 |
- |
214 |
146 |
- |
168 |
696 |
- |
524 |
|
Materials b |
1,508 |
- |
4 |
3,609 |
- |
9 |
12,334 |
- |
26 |
|
Purchased concentrate and other items for resale c |
277 |
- |
- |
- |
- |
- |
769 |
- |
- |
|
Spare parts and consumables d |
180 |
- |
- |
528 |
- |
- |
2,423 |
- |
2 |
|
Gas e |
7,886 |
- |
- |
7,763 |
- |
- |
39,259 |
- |
- |
|
Total related parties transactions within cost of sales |
9,851 |
- |
4 |
11,900 |
- |
9 |
54,785 |
- |
28 |
|
Selling and distribution expenses f |
2,731 |
4,927 |
2,018 |
2,920 |
5,944 |
2,465 |
11,201 |
24,130 |
5,984 |
|
General and administration |
194 |
- |
- |
299 |
- |
- |
1,267 |
- |
- |
|
Total related parties transactions within expenses |
12,776 |
4,927 |
2,022 |
15,119 |
5,944 |
2,474 |
67,253 |
24,130 |
6,012 |
|
Finance income h |
619 |
- |
- |
388 |
- |
- |
1,804 |
- |
- |
|
Finance expenses h |
(17) |
- |
- |
(10) |
- |
- |
(99) |
- |
- |
|
Net finance income |
602 |
- |
- |
378 |
- |
- |
1,705 |
- |
- |
Entities under common control
The Group entered into various related party transactions with entities under common control. A description of the most material transactions, which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below. All transactions were carried out on an arm's length basis in the normal course of business.
a Sales of power, steam and water and other materials for US$23 thousand (31 March 2014: US$43 thousand; 31 December 2014: US$160 thousand) and income from premises leased to Kislorod PCC of US$38 thousand (31 March 2014: US$64 thousand; 31 December 2014: US$258 thousand).
b Purchases of compressed air, oxygen and metal scrap from Kislorod PCC for US$970 thousand (31 March 2014: US$1,541 thousand; 31 December 2014: US$5,347 thousand); and
b Purchases of cast iron balls from AutoKraZ Holding Co. for US$266 thousand (31 March 2014: US$1,744 thousand; 31 December 2014: US$5,530 thousand).
b Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas for US$249 thousand (31 March 2014: US$251 thousand; 31 December 2014: US$1,209 thousand).
c Purchases of concentrate and other items for resale from Vostok Ruda Ltd for US$277 thousand (31 March 2014: nil; 31 December 2014: US$769 thousand).
d Purchases of spare parts from CJSC Kiev Shipbuilding and Ship Repair Plant ('KSRSSZ') in the amount of US$49 thousand (31 March 2014: US$90 thousand; 31 December 2014: US$821 thousand);
d Purchases of spare parts from Valsa GTV of US$24 thousand (31 March 2014: US$284 thousand; 31 December 2014: US$749 thousand);
d Purchases of ferromanganese from Raw & Refined Commodities AG for US$56 thousand (31 March 2014: US$110 thousand; 31 December 2014: US$512 thousand).
e Procurement of gas from OJSC Ukrzakordongeologia for US$7,886 thousand (31 March 2014: US$7,763 thousand; 31 December 2014: US$39,259 thousand).
f Purchases of advertisement, marketing and general public relations services from FC Vorskla for US$2,722 thousand (31 March 2014: US$2,898 thousand; 31 December 2014: US$11,137 thousand).
g Insurance premiums paid to ASK Omega for workmen's insurance and general cover of US$103 thousand (31 March 2014: US$145 thousand; 31 December 2014: US$574 thousand);
g Fees paid to Bank Finance & Credit (Bank F&C) for bank services of US$69 thousand (31 March 2014: US$118 thousand; 31 December 2014: US$ 439 thousand).
h Transactional banking services are provided to certain subsidiaries of the Group by Bank Finance & Credit (Bank F&C) Finance income and expenses relate to these transactional banking services. Further information is provided under transactional banking arrangements on page 20.
Associated companies
The Group entered into related party transactions with its associated company TIS Ruda LLC, which were carried out on an arm's length basis in the normal course of business for the members of the Group (see note 1). A description of the most material transactions which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below:
f Purchases of logistics services in the amount of US$4,927 thousand (31 March 2014: US$5,944 thousand; 31 December 2014: US$24,130 thousand) relating to port operations, including port charges, handling costs, agent commissions and storage costs.
Other related parties
The Group entered into various transactions with other related parties. A description of the most material transactions which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below:
a Sales of material and services to Slavutich Ruda Ltd. for US$203 thousand (31 March 2014: US$168 thousand; 31 December 2014: US$508 thousand).
f Purchases of logistics management services from Slavutich Ruda Ltd. relating to customs clearance services and the coordination of rail transit. Total billings amounted to US$2,018 thousand (31 March 2014: US$2,465 thousand; 31 December 2014: US$5,984 thousand). Slavutich Ruda Ltd. earned commission income of US$104 thousand on these services (31 March 2014: US$222 thousand; 31 December 2014: US$1,350 thousand).
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature which were undertaken between Group companies and entities under common control, associated companies and other related parties during the periods presented.
|
|
3 months ended 31.03.15 (unaudited) |
3 months ended 31.03.14 (unaudited) |
Year ended 31.12.14 (audited) |
||||||
|
US$ 000 |
Entities under common control |
Associated companies |
Other related parties |
Entities under common control |
Associated companies |
Other related parties |
Entities under common control |
Associated companies |
Other related parties |
|
Purchases with independent confirmation |
- |
- |
- |
- |
- |
- |
458 |
- |
- |
|
Purchases with shareholder approval |
- |
- |
- |
- |
- |
- |
887 |
- |
- |
|
Purchases in the ordinary course of business |
76 |
- |
- |
1,167 |
- |
- |
2,724 |
- |
5 |
|
Total purchases of property, plant and equipment i |
76 |
- |
- |
1,167 |
- |
- |
4,069 |
- |
5 |
Entities under common control
Individual transactions of a capital nature which exceeded US$200 thousand are described below.
Current year
i During the first three months period ended 31 March 2015, the Group entered in various transactions of a capital nature with related parties totalling US$76 thousand. These transactions were in the ordinary course of business. No transaction exceeded the US$200 thousand threshold set for a detailed description.
Subsequent to the reporting period ended 31 March 2015, the Group received an additional 27 rail cars totalling US$1,431 thousand (US$842 thousand at the prevailing exchange rate at delivery), which were ordered back in February 2014. See below for further information.
Prior periods:
i During the financial year 2014, the Group entered into various transactions of a capital nature with related parties totalling to US$2,724 thousand, which were in the ordinary course of business.
• The Group procured goods and services totalling US$1,807 thousand from OJSC Berdichev Machine-Building Plant Progress for various ongoing projects and
design documentation services from OJSC DIOS totalling US$597 thousand.
In August 2014, the Group acquired in two separate transactions a railway line and an associated power line from LLC Vorskla Steel totalling US$458 thousand. The transaction was not considered to be in the ordinary course of business and an independent confirmation was obtained and an announcement made in accordance with the UK Listing Rules.
In February 2014, the Group ordered 300 rail cars from PJSC Stakhanov Railcar Company, of which 233 rail cars amounting to US$12,349 thousand were under the authority of the shareholder approval obtained on 24 May 2012 obtained under the listing rules applicable at that time and an additional 67 rail cars amounting to
US$3,551 thousand were ordered in the ordinary course of business. A total prepayment of US$11,925 thousand (US$4,410 thousand at current exchange rate) was made in relation to these rail cars. The rail cars were scheduled for delivery in the second half of the financial year 2014. As a consequence of the ongoing conflict in the eastern part of Ukraine, 25 rail cars totalling US$1,325 thousand (US$887 thousand at the prevailing exchange rate at delivery) were delivered during the financial year 2014 with the remainder outstanding at the period end against a prepayment of US$4,458 thousand (at current exchange rate). A further 27 rail cars were received after the reporting date.
Balances with related parties
The outstanding balances, as a result of transactions with related parties, for the periods presented are shown in the table below:
|
|
3 months ended 31.03.15 (unaudited) |
3 months ended 31.03.14 (unaudited) |
Year ended 31.12.14 (audited) |
||||||
|
US$ 000 |
Entities under common control |
Associated companies |
Other related parties |
Entities under common control |
Associated companies |
Other related parties |
Entities under common control |
Associated compa nies |
Other related parties |
|
Available-for-sale financial assets j |
28 |
- |
- |
276 |
- |
- |
46 |
- |
- |
|
Other non-current assets k |
3,109 |
- |
- |
5,487 |
- |
- |
4,726 |
- |
- |
|
Prepayments for property, plant and equipment l |
4,895 |
- |
- |
9,993 |
- |
- |
604 |
- |
- |
|
Total non-current assets |
8,032 |
- |
- |
15,756 |
- |
- |
5,376 |
- |
- |
|
Trade and other receivables m |
627 |
- |
73 |
890 |
- |
74 |
712 |
- |
91 |
|
Prepayments and other current assets n |
697 |
32 |
304 |
859 |
1,336 |
248 |
164 |
- |
595 |
|
Cash and cash equivalents o |
164,681 |
- |
- |
138,817 |
- |
- |
161,473 |
- |
- |
|
Total current assets |
166,005 |
32 |
377 |
140,566 |
1,336 |
322 |
162,349 |
- |
686 |
|
Trade and other payables p |
2,156 |
- |
189 |
1,201 |
- |
255 |
1,429 |
151 |
490 |
|
Current liabilities |
2,156 |
- |
189 |
1,201 |
- |
255 |
1,429 |
151 |
490 |
A description of the most material balances which are over US$200 thousand in the current or comparative periods is given below:
Entities under common control
j The balance of the available-for-sale financial assets comprised shareholdings in PJSC Stakhanov Railcar Company (1.1%) and Vostok Ruda Ltd. (1.1%). The ultimate beneficial owner of these companies is Kostyantin Zhevago. PJSC Stakhanov Railcar Company is further listed on the Ukrainian stock exchange. The changes in value in the table above relate to fair value adjustments recorded during the respective reporting periods. The shareholdings for all available-for-sale financial assets remained unchanged during the periods disclosed above. The balance of US$28 thousand as at 31 March 2015 related to the investment in PJSC Stakhanov Railcar Company (31 March 2014: US$276 thousand; 31 December 2014: US$46 thousand). The investment in Vostok Ruda Ltd. was fully impaired in a previous period.
k As at 31 March 2015, other non-current assets related to a deposit of US$3,109 thousand with bank F&C (31 March 2014: US$5,487 thousand; 31 December 2014: US$4,726 thousand) as a security in respect of loans made to employees under the Group's social loyalty programme. Further information is provided under transactional banking arrangements below.
l As at 31 March 2015, a prepayment of US$4,458 thousand (at current exchange rate) remained in connection with an advance payment made in February 2014 for 300 rail cars ordered from PJSC Stakhanov Railcar Company (31 March 2014: US$9,437 thousand; 31 December 2014: US$6,007 thousand). As at 31 March 2015, the Group received 25 rail cars and another 27 rail cars subsequent to the reporting date. Due to continued uncertainty surrounding the delivery of the remaining number of rail cars or recovery of the prepayment, the Group recorded an allowance for the full outstanding amount as at 31 March 2015 and 31 December 2014 (see section Purchases of property, plant, equipment and investments above for further details). Prepayments of US$407 thousand were made to OJSC Berdichev Machine-Building Plant Progress (31 March 2014: US$445 thousand; 31 December 2014: US$527 thousand).
m As at 31 March 2015, trade and other receivables included outstanding amounts of US$176 thousand due from Vorskla Steel Ltd. (31 March 2014: US$304 thousand; 31 December 2014: US$244 thousand) in relation to other sales and US$343 thousand (31 March 2014: US$399 thousand; 31 December 2014: US$317 thousand) from Kislorod PCC for the sale of power, steam and water.
n Prepayments and other current assets include US$582 (31 March 2014: nil; 31 December 2014: nil) for concentrate made to Vostok Ruda. The comparative as at 31 March 2014 includes US$607 thousand of prepayment made to OJSC Ukrzakordongeologia for gas, no such prepayments as at 31 March 2015 and 31 December 2014.
o As at 31 March 2015, cash and cash equivalents with Bank F&C were US$164,681 thousand (31 March 2014: US$138,817 thousand; 31 December 2014: US$161,473 thousand). Further information is provided under Transactional banking arrangements below.
p Trade and other payables amounting to US$1,529 thousand for gas purchased from OJSC Ukrzakordongeologia (31 March 2014: nil; 31 December 2014: nil) , US$446 thousand for compressed air and oxygen purchased from Kislorod PCC (31 March 2014: US$528 thousand; 31 December 2014: US$483 thousand) and US$22 thousand due to Valsa GTV (31 March 2014: US$214 thousand; 31 December 2014: US$92 thousand) The balance as at the end of the period ended 31 March 2014 included an amount of US$242 thousand (31 December 2014: US$192 thousand) due to AutoKraZ Holding Co.. The balance as at the end of the period ended 31 December 2014 included an amount of US$397 thousand payable to PJSC Stakhanov Railcar Company, no amounts were due as at 31 March 2015 and 31 March 2014.
Associated companies
n Prepayments and other current assets relate to prepayments of US$32 thousand (31 March 2014: US$1,336 thousand; 31 December 2014: nil) made TIS Ruda LLC for transhipment services.
Other related parties
n Prepayments and other current assets relate to prepayments of US$304 thousand for distribution services made to Slavutich Ruda Ltd. (31 March 2014: US$248 thousand; 31 December 2014: US$595 thousand).
p Trade and other payables amounting to US$189 thousand as at 31 March 2015 are in respect of distribution services provided by Slavutich Ruda Ltd. (31 March 2014: US$255 thousand; 31 December 2014: US$490 thousand).
Transactional banking arrangements
The Group has transactional banking arrangements with Bank Finance & Credit ('Bank F&C') in Ukraine which is under common control of the majority shareholder of Ferrexpo plc. Finance income and expenses are disclosed in the table on page 17.
On 25 May 2013, the Group entered into a new uncommitted multicurrency revolving loan facility agreement and a documentary credit facility agreement with Bank F&C which will expire on 29 May 2016. The aggregate maximum limit of these facilities amounts to UAH80 million (31 March 2015: US$3,413 thousand; 31 March 2014: US$7,303 thousand; 31 December 2014: US$5,073 thousand) and, as required under Ukrainian legislation, fixed assets are pledged. The total value of pledges under the terms of the loan facility agreements is US$2,639 thousand as at 31 March 2015. The terms and conditions of both facilities were the subject of an independent confirmation. No amounts are drawn and no letters of credit are outstanding under this facility as at 31 March 2015 (31 March 2014: nil; 31 December 2014: nil).
Bank F&C provides mortgages and loans to employees of the Group for the acquisition, construction and renovation of apartments in Ukraine. This is part of a social loyalty programme started by the Group in December 2011 allowing certain employees of the Group to borrow at preferential interest rates. OJSC Ferrexpo Poltava Mining and LLC Ferrexpo Yeristovo GOK act as guarantors for the bank's loans to the employees of the Group and have deposited US$3,109 thousand at Bank F&C as security (31 March 2014: US$5,487 thousand; 31 December 2014: US$4,726 thousand). The interest rate margin earned by Bank F&C covers the costs of administrating the mortgages and loans. Detailed information on the social loyalty programme is provided in the Corporate Social Responsibility Review section of the Annual Report and Accounts 2014.
Cash and cash equivalent balances held with Bank F&C are in the normal course of business in Ukraine and are held on call or from time to time on overnight deposit. Interest is paid on balances held. The interest rates received by the Group were in line with relevant comparable market rates throughout the periods presented.
Note 19: Commitments and contingencies
Commitments
|
US$ 000 |
|
As at 31.03.15 |
As at 31.03.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Operating lease commitments |
|
25,516 |
66,607 |
40,738 |
|
Capital commitments on purchase of PPE |
|
93,260 |
76,566 |
108,763 |
Legal
In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition or the results of future operations of the Group.
The Group is currently involved in a share dispute which commenced in 2005 and has been disclosed in its various public documents since IPO in 2007. The main chronology of the dispute is below:
On 21 April 2010, the Higher Commercial Court of Ukraine invalidated the share sale and purchase agreement ('SPA') pursuant to which a 40.19% stake in OJSC Ferrexpo Poltava Mining ('FPM') was sold on 18 November 2002 to nominee companies that were previously ultimately controlled by Kostyantin Zhevago, which ultimately sold the shares to Ferrexpo AG.
On 2 December 2014, the Supreme Court of Ukraine set aside the judgement of the Higher Commercial Court of Ukraine delivered in April 2010 and remitted the case for review to the Higher Commercial Court of Ukraine. On 16 February 2015, the Higher Commercial Court of Ukraine confirmed the decisions of the lower courts which dismissed the claim for invalidation of the SPA. As at the date of the publication of these interim financial statements for the period ended 31 March 2015, the original SPA of 18 November 2002 is valid.
In October 2011, the claimants commenced further proceedings for the restoration of their shareholding in FPM. On 20 October 2014, the Kyiv City Commercial Court dismissed the claim in full. This judgment was confirmed by the Kyiv Appeal Commercial Court and the Higher Commercial Court of Ukraine on 28 January 2015 and 14 April 2015, respectively.
After having taken legal advice, the management of the Group believes that risks related to further court proceedings in respect of this case are remote. In light of the risks surrounding the operation and independence of Ukrainian courts, including those associated with the Ukrainian legal system in general, however the claimants may ultimately prevail in this dispute and the Group's ownership of the relevant interest in FPM may be successfully challenged.
Tax and other regulatory compliance
Ukrainian legislation and regulations regarding taxation and customs continue to evolve. Legislation and regulations are not always clearly written and are subject to varying interpretations and inconsistent enforcement by local, regional and national authorities, and other governmental bodies. Instances of inconsistent interpretations are not unusual. The uncertainty of application and the evolution of Ukrainian tax laws, including those affecting cross-border transactions, create a risk of additional tax payments having to be made by the Group, which could have a material effect on the Group's financial position and results of operations. This includes also a transfer pricing law which significantly increased the power of the tax authorities. The Group does not believe that these risks are any more significant than those of similar enterprises in Ukraine.
Recoverable VAT amounting to US$2,413 thousand (31 March 2014: US$61,685 thousand; 31 December 2014: US$3,587 thousand) outstanding at 31 March 2015 and US$3,482 thousand already refunded by the tax authorities during the financial year 2014 are currently in the process of being considered by the Ukrainian court system in several different cases. As the VAT is fully recoverable under the relevant Ukrainian legislation, the Group expects to receive positive court decisions for these ongoing court proceedings and expect these amounts to be recovered in a further issuance of bonds. Consequently, the VAT is recorded at its full amount in the financial statements, net of an estimated discount to reflect the expected difference to the bonds. See also disclosure made in note 13. No provision has been made for any related penalties and fines, which would in the case of a final negative ruling become payable.
Note 20: Financial instruments
Fair values
Set out below are the carrying amounts and fair values of the Group's financial instruments that are carried in the interim consolidated statement of financial position:
|
|
Carrying amount |
Fair Value |
||||
|
US$ 000
|
As at 31.03.15 (unaudited) |
As at 31.03.14 (unaudited) |
As at 31.12.14 (audited) |
As at 31.03.15 (unaudited) |
As at 31.03.14 (unaudited) |
As at 31.12.14 (audited) |
|
Financial assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
493,902 |
366,364 |
626,509 |
493,902 |
366,364 |
626,509 |
|
Trade and other receivables |
84,137 |
115,006 |
87,226 |
84,137 |
115,006 |
87,226 |
|
Available-for-sale financial assets |
41,828 |
82,658 |
46 |
41,828 |
82,658 |
46 |
|
Other financial assets |
8,196 |
14,101 |
8,944 |
8,196 |
14,101 |
8,944 |
|
Total financial assets |
628,063 |
578,129 |
722,725 |
628,063 |
578,129 |
722,725 |
|
Financial liabilities |
|
|
|
|
|
|
|
Trade and other payables |
24,341 |
30,263 |
32,351 |
24,341 |
30,263 |
32,351 |
|
Accrued liabilities |
22,162 |
29,949 |
30,497 |
22,162 |
29,949 |
30,497 |
|
Interest bearing loans and borrowings |
1,188,704 |
1,045,705 |
1,304,627 |
1,088,985 |
1,051,191 |
1,204,836 |
|
Total financial liabilities |
1,235,207 |
1,105,917 |
1,367,475 |
1,135,488 |
1,111,403 |
1,267,684 |
Other financial assets
The fair values of cash and cash equivalents, trade and other receivables and payables are approximately equal to their carrying amounts due to their short maturity.
Interest bearing loans and borrowings
The fair values of interest-bearing loans and borrowings are based on the discounted cash flows using market interest rates except for the fair value of the Eurobond issued, which is based on the market price quotation at the reporting date.
Available-for-sale financial assets
As at 31 March 2015, the Group held a 15.5% equity investment in Ferrous Resources Limited ("Ferrous"), which was acquired during the financial year 2013 in various transactions with total transaction costs of US$82,382 thousand. This was also the carrying amount as at the end of the comparative period ended 31 March 2014. In the second half of the financial year 2014, the iron ore prices in the global market declined significantly and as no recovery was expected in the near future, the investment in Ferrous was fully impaired due to uncertainties in respect of the current operational activity and the future development of the mining operation. On 29 April 2015, the Group signed an irrevocable tender and support agreement for the disposal of its entire stake in Ferrous for a total cash consideration of US$41,800 thousand, which is management's best estimate of the fair value of the investment as of 31 March 2015. As a result, the fully impaired investment was revalued with a gain of US$41,800 thousand recognised in the statement of other comprehensive income. The completion of the transaction is subject to the satisfaction of various conditions outside of the control of the Group. If the transaction is completed, the amount of the fair value adjustment will be reclassified to the income statement and the asset will be derecognised.
The available-for-sale equity investment in PJSC Stakhanov Railcar Company in the amount of US$28 thousand (31 March 2014: US$276 thousand; 31 December 2014: US$46 thousand) is measured at its fair value based on the quoted market price for its shares on the Ukrainian Stock exchange ('PFTS').
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
US$ 000 |
|
As at 31.03.15 (unaudited) |
|
||
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
|
|
|
|
|
Available-for-sale financial assets |
|
28 |
- |
41,800 |
41,828 |
|
Total financial assets |
|
28 |
- |
41,800 |
41,828 |
|
US$ 000 |
|
As at 31.03.14 (unaudited) |
|
||
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
|
|
|
|
|
Available-for-sale financial assets |
|
276 |
- |
82,382 |
82,658 |
|
Total financial assets |
|
276 |
- |
82,382 |
82,658 |
|
US$ 000 |
|
As at 31.12.14 (audited) |
|
||
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
|
|
|
|
|
Available-for-sale financial assets |
|
46 |
- |
- |
46 |
|
Total financial assets |
|
46 |
- |
- |
46 |
There were no transfers between the different levels during the reporting period.
As of 31 March 2015, the fair value of the available-for-sale financial assets in Level 1 decreased by US$18 thousand including a translation and impairment loss (31 March 2014: decrease of US$120 thousand; 31 December 2014: decrease of US$350 thousand). The loss for the period ended 31 March 2014 was initially included in other comprehensive income. As at 31 December 2014, the investment was considered to be impaired and the total effect included in other comprehensive income was reclassified to the income statement.
Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy is shown in the table below:
|
US$ 000 |
|
As at 31.03.15 |
As at 31.03.14 |
As at 31.12.14 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
Opening balance |
|
- |
82,382 |
82,382 |
|
Total gains or losses: |
|
- |
- |
- |
|
- in profit or loss |
|
- |
- |
(82,382) |
|
- in other comprehensive income |
|
41,800 |
- |
- |
|
Purchases |
|
- |
- |
- |
|
Transfer out of Level 3 |
|
- |
- |
- |
|
Closing balance |
|
41,800 |
82,382 |
- |
Further information on the Group's exposure to interest rate, foreign currency and liquidity risk is provided in note 30 of the Annual Report and Accounts 2014.
Note 21: Events after the reporting period
No material adjusting or non-adjusting events have occurred subsequent to the period end except for the signing of a tender and support agreement in respect of the Group's 15.5% stake in Ferrous.
On 30 April 2015, the Group announced that it has agreed to unconditionally tender for the disposal of its entire stake in Ferrous for a total cash consideration of US$41,800 thousand. As a result of this, the fully impaired investment in Ferrous has been revalued as of 31 March 2015. See note 20 for further information.
.
Glossary
|
Act |
The Companies Act 2006 |
|
AGM |
The Annual General Meeting of the Company |
|
Articles |
Articles of Association of the Company |
|
Audit Committee |
The Audit Committee of the Company's Board |
|
Belanovo or Belanovskoye |
An iron ore deposit located immediately to the north of Yeristovo |
|
Benchmark Price |
Platts 62% Fe iron ore fines price CFR China |
|
Beneficiation Process |
A number of processes whereby the mineral is extracted from the crude ore |
|
BIP |
Business Improvement Programme, a programme of projects to increase production output and efficiency at FPM |
|
Board |
The Board of Directors of the Company |
|
Bt |
Billion tonnes |
|
Capesize |
Capesize vessels are typically above 150,000 tonnes deadweight. Ships in this class include oil tankers, supertankers and bulk carriers transporting coal, ore, and other commodity raw materials. Standard capesize vessels are able to transit through the Suez Canal |
|
Capital Employed |
The aggregate of equity attributable to shareholders, non-controlling interests and borrowings |
|
CFR |
Delivery including cost and freight |
|
C1 Costs |
Represent the cash costs of production of iron pellets from own ore, divided by production volume, from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, costs of purchased ore, concentrate and production cost of gravel |
|
CIF |
Delivery including cost, insurance and freight |
|
CIS |
The Commonwealth of Independent States |
|
Code |
The UK Corporate Governance Code published in 2012 |
|
Company |
Ferrexpo plc, a public company incorporated in England and Wales with limited liability |
|
CPI |
Consumer Price Index |
|
CSR |
Corporate Safety and Social Responsibility |
|
CSR Committee |
The Corporate Safety and Social Responsibility Committee of the Board of the Company |
|
DAP |
Delivery at place |
|
DFS |
Detailed feasibility study |
|
Directors |
The Directors of the Company |
|
Dragline Excavators |
Heavy machinery used to excavate material. A dragline consists of a large bucket which is suspended from a boom |
|
EBITDA |
The Group calculates EBITDA as profit from continuing operations before tax and finance plus depreciation and amortisation and non-recurring exceptional items included in other income and other expenses, share based payment expenses and the net of gains and losses from disposal of investments and property, plant and equipment |
|
EBT |
Employee Benefit Trust |
|
EPS |
Earnings per share |
|
Executive Committee |
The Executive Committee of management appointed by the Company's Board |
|
Executive Directors |
The Executive Directors of the Company |
|
FBM |
Ferrexpo Belanovo Mining, also known as BGOK, a company incorporated under the laws of Ukraine |
|
Fe |
Iron |
|
Ferrexpo |
The Company and its subsidiaries |
|
Ferrexpo AG Group |
Ferrexpo AG and its subsidiaries including FPM |
|
Fevamotinico S.a.r.l. |
A company incorporated with limited liability in Luxembourg |
|
FOB |
Delivered free on board, which means that the seller's obligation to deliver has been fulfilled when the goods have passed over the ship's rail at the named port of shipment, and all future obligations in terms of costs and risks of loss or damage transfer to the buyer from that point onwards |
|
FPM |
Ferrexpo Poltava Mining, also known as Ferrexpo Poltava GOK Corporation or PGOK, a company incorporated under the laws of Ukraine |
|
FRMC |
Financial Risk Management Committee, a sub-committee of the Executive Committee |
|
FTSE 250 |
Financial Times Stock Exchange top 250 companies |
|
FYM |
Ferrexpo Yeristovo Mining, also known as YGOK, a company incorporated under the laws of Ukraine |
|
Group |
The Company and its subsidiaries |
|
Growth Markets |
These are predominantly in Asia and have the potential to deliver new and significant sales volumes to the Group |
|
HSE |
Health, safety and environment |
|
IAS |
International Accounting Standards |
|
IASB |
International Accounting Standards Board |
|
IFRS |
International Financial Reporting Standards, as adopted by the EU |
|
IPO |
Initial public offering |
|
Iron ore concentrate |
Product of the benefication process with enriched iron content |
|
Iron ore sinter fines |
Fine iron ore screened to -6.3mm |
|
Iron ore pellets |
Balled and fired agglomerate of iron ore concentrate, whose physical properties are well suited for transportation to and reduction within a blast furnace |
|
JORC |
Australasian Joint Ore Reserves Committee - the internationally accepted code for ore classification |
|
K22 |
GPL ore has been classified as either K22 or K23 quality, of which K22 ore is of higher quality (richer) |
|
KPI |
Key Performance Indicator |
|
Kt |
Thousand tonnes |
|
LIBOR |
The London Inter Bank Offered Rate |
|
LLC |
Limited Liability Company |
|
LTIFR |
Lost-Time Injury Frequency Rate |
|
LTIP |
Long-Term Incentive Plan |
|
m3 |
Cubic metre |
|
Majority Shareholder |
Fevamotinico S.a.r.l., The Minco Trust and Kostyantin Zhevago (together) |
|
Mm |
Millimetre |
|
Mt |
Million tonnes |
|
Mtpa |
Million tonnes per annum |
|
Natural Markets |
These include Turkey, the Middle East and Western Europe and are those markets where Ferrexpo has a competitive advantage over more distant producers, but where market share remains relatively low |
|
Nominations Committee |
The Nominations Committee of the Company's Board |
|
Non-executive Directors |
Non-executive Directors of the Company |
|
NOPAT |
Net operating profit after tax |
|
OHSAS 18001 |
International safety standard 'Occupational Health & Safety Management System Specification' |
|
Ordinary Shares |
Ordinary Shares of 10 pence each in the Company |
|
Ore |
A mineral or mineral aggregate containing precious or useful minerals in such quantities, grade and chemical combination as to make extraction economic |
|
Panamax |
Modern panamax ships typically carry a weight of between 65,000 to 90,000 tonnes of cargo and can transit both Panama and Suez canals |
|
PPI |
Ukrainian producer price index |
|
Probable Reserves |
Those measured and/or indicated mineral resources which are not yet 'proved', but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions |
|
Proved Reserves |
Measured mineral resources of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions |
|
Rail car |
Railway wagon used for the transport of iron ore concentrate or pellets |
|
Relationship Agreement |
The relationship agreement entered into among Fevamotinico S.a.r.l., Kostyantin Zhevago, The Minco Trust and the Company |
|
Remuneration Committee |
The Remuneration Committee of the Company's Board |
|
Reserves |
Those parts of mineral resources for which sufficient information is available to enable detailed or conceptual mine planning and for which such planning has been undertaken. Reserves are classified as either proved or probable |
|
Sinter |
A porous aggregate charged directly to the blast furnace which is normally produced by firing fine iron ore and/or iron ore concentrate, other binding materials, and coke breeze as the heat source |
|
Spot price |
The current price of a product for immediate delivery |
|
Sterling/£ |
Pound Sterling, the currency of the United Kingdom |
|
STIP |
Short-Term Incentive Plan |
|
Tailings |
The waste material produced from ore after economically recoverable metals or minerals have been extracted. Changes in metal prices and improvements in technology can sometimes make the tailings economic to process at a later date |
|
Tolling |
The process by which a customer supplies concentrate to a smelter and the smelter invoices the customer the smelting charge, and possibly a refining charge, and then returns the metal to the customer |
|
Ton |
A US short ton, equal to 0.9072 metric tonnes |
|
Tonne or t |
Metric tonne |
|
Traditional Markets |
These lie within Central and Eastern Europe and include steel plants that were designed to use Ferrexpo pellets. Ferrexpo has been supplying some of these customers for more than 20 years. Ferrexpo has well-established logistics routes and infrastructure to these markets by both river barge and rail. These markets include Austria, Czech Republic, Hungary, Serbia and Slovakia |
|
Treasury Shares |
A company's own issued shares that it has purchased but not cancelled |
|
TSF |
Tailings storage facility |
|
TSR |
Total shareholder return. The total return earned on a share over a period of time, measured as the dividend per share plus capital gain, divided by initial share price |
|
UAH |
Ukrainian Hryvnia, the currency of Ukraine |
|
Ukr SEPRO |
The quality certification system in Ukraine, regulated by law to ensure conformity with safety and environmental standards |
|
US$/t |
US Dollars per tonne |
|
VAT |
Value Added Tax |
|
Value-in-use |
The implied value of a material to an end user relative to other options, e.g. evaluating, in financial terms, the productivity in the steel making process of a particular quality of iron ore pellets versus the productivity of alternative qualities of iron ore pellets. |
|
WAFV |
Weighted average fair value |
|
WMS |
Wet magnetic separation |
|
Yeristovo or Yeristovskoye |
The deposit being developed by FYM |
This information is provided by RNS
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