AFARAK GROUP: INTERIM REPORT Q2/2017

07:00 London, 09:00 Helsinki, 11 August 2017 - Afarak Group Plc ("Afarak" or "the Company") (LSE: AFRK, NASDAQ: AFAGR)

AFARAK GROUP: INTERIM REPORT Q2/2017

Robust performance in Q2, Group EBITDA at EUR 4.8 million.

HIGHLIGHTS IN THE SECOND QUARTER OF 2017

Afarak's EBITDA stood at EUR 4.8 million, compared to EUR 0.8 million, a year earlier. This robust improvement, compared to the same quarter in 2016, was mainly driven by higher ferrochrome prices and strong market fundamentals.

• Compared to a year earlier, ferrochrome market prices were higher, though lower than those registered in the first quarter.  As a result, year-on-year performance was notably stronger, but below the record results registered in quarter one. This was in line with the market sentiment communicated in quarter one
• Revenue increased by 20.0% to EUR 47.4 (Q2/2016: 39.5) million
• Processed material sold decreased by 26.4% to 20,773 (Q2/2016: 28,214) tonnes, reflecting the full switch from silicomanganese to ferrochome production at Mogale
• Tonnage mined increased by 2% to 41,427 (Q2/2016: 40,618) tonnes
• Personnel increased considerably during the period mainly driven by the employment of 82 temporary workers on a test project in Serbia and new appointments at Mogale in South Africa.
• EBITDA stood at EUR 4.8 (Q2/2016: 0.8) million and the EBITDA margin was 10.2% (Q2/2016: 2.0%)
• EBIT was EUR 3.3 (Q2/2016: -0.9) million, with the EBIT margin at 7.0% (Q2/2016: -2.2%)
• Profit for the period from continuing operations totalled EUR 1.4 (Q2/2016: -1.0) million, with cash flow from operations standing at EUR -7.3 (Q2/2016: -0.4) million. Cash and cash equivalents at 30 June totalled EUR 11.7 (30 June 2016: 13.2) (31 March 2017: 16.2) million. Net interest-bearing debt was EUR -5.0 (-7.7) (31 March 2017: -11.1) million.
• An extraordinary capital distribution of EUR 0.02 per share and a total of EUR 5.2 million was paid to shareholders during the second quarter
• In view of the realised cash flow and the funds required for capital expenditure and investments in the second half of the year, the Company will not be paying an additional capital redemption

Key Group figures

		Q2/17	Q2/16	H1/17	H1/16	2016
Revenue	EUR million	47.4	39.5	104.1	80.3	153.6
EBITDA	EUR million	4.8	0.8	17.5	4.1	5.5
EBIT	EUR million	3.3	-0.9	14.4	0.8	-1.0
Earnings before taxes	EUR million	1.0	-1.3	7.8	-0.4	-3.1
Profit	EUR million	2.9	-1.0	7.1	-0.8	-0.9
Earnings per share	EUR	0.01	-0.00	0.02	-0.00	0.00
EBITDA margin	%	10.2	2.0	16.8	5.1	3.6
EBIT margin	%	7.0	-2.2	13.8	1.0	-0.7
Earnings margin	%	2.0	-3.2	7.5	-0.5	-2.0
Personnel (end of period)		923	769	923	769	813

 

MARKET SENTIMENT FOR THE THIRD QUARTER 2017

The price levels for ferrochrome and Chrome Ore remain highly volatile. Although the third quarter reflects the seasonal slowdown, we still expect improved performance in Q3 2017, compared to a year earlier. We also believe that chrome ore prices have bottomed out and expect stronger price levels for second half year. Having said that, the seasonally slower market, decreased ferrochrome prices and negative effects of exchange rate movements are expected to contribute to a lower performance compared to the second quarter results.
All in all, we expect a stable continuation of our business in 2017 and further benefits from our change management initiatives throughout the company.

CEO GUY KONSBRUCK

"Afarak continued to achieve solid and robust results in 2017.  In quarter two, we achieved another positive result with Group EBITDA reaching EUR 4.8 million, up from EUR 0.8 million a year earlier.  Ferrochrome prices, though lower than in quarter one, have had a positive impact on our results. This result was in line with the market sentiment we expressed in quarter one.  Going forward, market volatility remains and the benchmark price for quarter three has been further reduced. On the other hand, we have been successfully reducing our COP in all business units, and continue to focus on further improvements via various programs.

Operationally, we have performed well across both business segments. We have increased revenues considerably, due to higher market prices than a year earlier. Management's interventions, including the switch of furnaces to ferrochrome and the resumption of open-cast mining, have also yielded results. During the quarter, management also preserved working capital and decided to temporarily halt production at our EWW plant in Germany, to manage levels of inventory and do early maintenance. We subsequently reduced our scheduled maintenance stop in July by one full week. Euroalliages has initiated a case calling for protectionist measures in favour of EWW in response to non-European producers.  This confirms the strategic role EWW has in Europe as the sole ferrochrome producer.

Despite our operational advances, safety must be a top priority in our work.  I believe that we can improve our performance in this area and the Company has increased its investing in its South African operations to further enhance health and safety.  This is a key priority for the new Board that was elected during our Annual General Meeting in May 2017.

In the second quarter, the Company paid a EUR 0.02 per share capital redemption, following the exceptional result registered in quarter one. Although the second quarter was an improvement on 2016, as anticipated, it did not match the record results in Q1. We also recorded a negative cash flow in the quarter, as we managed our production for further improvements in efficiency, with a consequential impact on working capital levels. The Group is also planning a number of capital investments across our business units and it is therefore not appropriate to propose an additional extraordinary capital redemption at this time.

Moving forward, the price levels for ferrochrome and Chrome Ore remain highly volatile. Although the third quarter reflects the seasonal slowdown, we still expect improved performance in Q3 2017, compared to a year earlier. We also believe the chrome ore prices have bottomed out and expect stronger price levels for second half year. Having said that, the seasonally slower market, decreased ferrochrome prices and negative effects of exchange rate movements are expected to contribute to a lower performance compared to the second quarter results.

All in all, we expect a stable continuation of our business in 2017 and further benefits from our change management initiatives throughout the Company."

DISCLOSURE PROCEDURE

Afarak follows the disclosure procedure enabled by Disclosure obligation of the issuer (7/2013) published by the Finnish Financial Supervision Authority, and hereby publishes its Q1/2017 interim report enclosed to this stock exchange release. The Interim Report is attached to this release and is also available on the Company's website at www.afarak.com.

INVESTOR CONFERENCE CALL

Management will host an investor conference call in English on Friday 11^th August 2017 at 12.00 Finnish time, 10.00 UK time. Please dial-in at least 10 minutes beforehand, quoting the reference: 1634154.

Finnish number [phone]
UK number [phone]

Participants can also download the Quarter 2 Investor Call Presentation from the Presentation page on the Investors Section on the Afarak website (http://www.afarak.com/en/investors/presentations/).

FINANCIAL REPORTING IN 2017

The Interim Report for Q3 will be published on Friday 17^th November, 2017 and the closed period will be between 17^th October and 17^th November 2017.

AFARAK GROUP PLC
Guy Konsbruck
CEO

For additional information, please contact:

Afarak Group Plc

Guy Konsbruck, CEO, [phone], [e-mail]
Jean Paul Fabri, PR Manager, [phone], [e-mail]

Financial reports and other investor information are available on the Company's
website: www.afarak.com.

Afarak Group is a specialist alloy producer focused on delivering sustainable
Growth with a Speciality Alloys business in southern Europe and a FerroAlloys
business in South Africa. The Company is listed on NASDAQ Helsinki (AFAGR) and
the Main Market of the London Stock Exchange (AFRK).

Distribution:
NASDAQ Helsinki
London Stock Exchange
Main media

www.afarak.com

Afarak Q2 Release EN

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Source: Afarak Group via Globenewswire