Ferrexpo Plc · LSE:FXPO
Ferrexpo — H1 2019 Earnings Presentation
23 slides from Ferrexpo's earnings presentation, August 2019
Slide 1: Half Year Results Presentation August 2019
2019 HALF YEAR RESULTS PRESENTATION AUGUST 2019
Slide 2: Disclaimer
DISCLAIMER This document is being supplied to you solely for your information and does not constitute relation to the contents of this presentation. You agree that you will not at any time have or form part of any offer or invitation or inducement to sell or issue, or any solicitation of any discuss
Slide 3: Steve Lucas, Chairman
Steve Lucas Chairman 2
Slide 4: 1H 2019 Financial Performance
1H 2019 FINANCIAL PERFORMANCE CHRIS MAWE, CFO 3
Slide 5: Strong performance with profit after tax up 78%
S T R O N G P E R F O R M A N C E W I T H P R O F I T A F T E R TA X U P 7 8 % Summary Financials $M (unless otherwise stated) 1H 19 1H 18 Change 2018 Operations – 5% increase in output, pellet line refurbishment in 2H 2019 Pellet production (kt) 5,353 5,096 5% 10,607 – 4% increase in sales, stocks
Slide 6: 59% increase in 1H 2019 EBITDA vs. 1H 2018
59% INCREASE IN 1H 2019 EBITDA VS. 1H 2018 EBITDA 1H 2019 vs. 1H 2018 $M 9 9 8 22 46 5 109 372 234 1H 2018 EBITDA Platts 62% Fe Conversion to 65% C3 freight Sales volumes Sales mix C1 cost Other 1H 2019 EBITDA index Fe index MARKET OPERATIONS FOREX Increase in fines – Higher production volumes price
Slide 7: C1 cost reflects local inflation, stronger currency, stripping & maintenance
C 1 C O S T R E F L E C T S L O C A L I N F L AT I O N , S T R O N G E R C U R R E N C Y, STRIPPING & MAINTENANCE Average C1 cost 1H 2019 vs. 1H 2018 Costs reflect: $ per tonne – Local inflation of 9%: wages, electricity tariffs 1.4 0.8 0.03 0.01 – Real UAH appreciated 13% vs. $ compared to 1H 2018
Slide 8: Higher cash generation funded working capital, investment, dividends & net debt reduction
H I G H E R C A S H G E N E R AT I O N F U N D E D W O R K I N G C A P I T A L , I N C R E A S E D I N V E S T M E N T, D I V I D E N D PAY M E N T S & N E T D E B T REDUCTION EBITDA Cash flow 1H 2019 VS. 1H 2018 – Higher iron ore fines prices slightly offset by cost inflation $M (unless otherwise s
Slide 9: Continued deleveraging & strong balance sheet
CONTINUED DELEVERAGING & STRONG BALANCE SHEET Strong debt reduction 1000 3.0 – Since 31 Dec 2015 net debt has reduced by $586M Net Debt Net debt to LTM EBITDA – $40M undrawn on 2017 PXF (current outstanding balance $360M) 900 2.72 2.54 868 2.5 – 2017 PXF facility amortises at c.$11M per month starti
Slide 10: Conclusion to financial review
CONCLUSION TO FINANCIAL REVIEW Excellent financial performance – Higher production and sales – EBITDA up 59% – Profit after tax up 78% – Significant increase in cash generation applied to: • Capital investment – low risk growth • Dividend payments • Net debt reduction • Working capital – increased s
Slide 11: Market, Operations & Strategy
Yeristovo mine The town of Horishni Plavni Poltava mine Tailings Dam Concentrator Pelletizer facilities facilities MARKET, OPERATIONS & STRATEGY KOSTYANTIN ZHEVAGO, CEO
Slide 12: Iron ore market dynamics: very positive 1H 2019
IRON ORE MARKET DYNAMICS: VERY POSITIVE 1H 2019 H I G H E R S U P P LY E X P E C T E D I N 2 H 2 0 1 9 FY 2019 iron ore market deficit to be highest in 7 years – Supply disruptions in 1H 2019 with 62% Fe rising above $100 per tonne 50 – Iron ore supply in 2H 2019 to increase. Also increased pellet a
Slide 13: Sales to top steel mills throughout the world under long term contracts
SALES TO TOP STEEL MILLS THROUGHOUT THE WORLD UNDER LONG TERM CONTRACTS 1H 2019 geographic split of sales volume % – Overall long term customer performance in 1H 2019 in line with (1H 2018 % split) contract agreements CENTRAL & – China sales under long term contracts in 1H 2019 EASTERN EUROPE 48% –
Slide 14: Operations delivering improvements
O P E R AT I O N S D E L I V E R I N G I M P R O V E M E N T S SAFETY FIRST MINING – focus on improved material movement efficiency – Zero fatalities (2018: one) – Mine optimisation programmes have reduced mining costs, through: – Total accidents halved to 5 in 1H 2019 vs. 1H 2018 • Improved dig rat
Slide 15: Current capital projects making good progress: grinding section
C U R R E N T C A P I TA L P R O J E C T S M A K I N G G O O D P R O G R E S S O U T P U T T O R E A C H 1 2 M T PA B Y 2 0 2 1 New grinding section (section 9) – Process 6MTPA of crushed ore into pellet feed – Total cost: $35M – 1H 2019 spend:$7M – Remaining spend: $8M – Expected completion: 2020 1
Slide 16: Current capital projects: concentrate stockyard
C U R R E N T C A P I TA L P R O J E C T S M A K I N G G O O D P R O G R E S S O U T P U T T O R E A C H 1 2 M T PA B Y 2 0 2 1 Concentrate stockyard – Decoupling of concentrator & pellet plant by providing concentrate storage capacity – Total cost: $24M – 1H 2019 spend: $7M – Remaining spend: $7M –
Slide 17: Construction of new press filtration plant commenced in 1H 2019
C O N S T R U C T I O N O F N E W P R E S S F I LT R AT I O N P L A N T COMMENCED IN 1H 2019 Press filtration plant – Replacement of disc filtration to reduce moisture in balling plant – Total cost: $115M – 1H 2019 spend: $8M – equipment order placed – Remaining spend: $107M – Expected completion: c
Slide 18: Ferrexpo capital projects
F E R R E X P O C A P I TA L P R O J E C T S 17
Slide 19: Brownfield expansions can increase output to 20 MTPA
F E R R E X P O ’ S B R O W N F I E L D E X PA N S I O N S C A N I N C R E A S E O U T P U T T O 2 0 M T PA W I T H M O D E S T C A P I T A L I N T E N S I T Y – Ferrexpo is a low cost pellet producer with over 6 billion tonnes of JORC resources + 13 billion tonnes Soviet classified resources – Can
Slide 20: Summary: outlook, strategy and capital allocation
SUMMARY Outlook – Long term market dynamics underpin pellet demand – Ferrexpo prices its pellets in line with international benchmarks & sells under long term contract – Sales mix will reflect underlying demand Strategy – Increase output – Continue operational improvements 1H 2019 capital allocation
Slide 21: Thank you
Thank you 20
Slide 22: Large resource and well invested asset base
FERREXPO HAS A LARGE RESOURCE AND WELL INVESTED ASSET BASE PRODUCING A HIGH QUALITY PRODUCT Significant resource base World class asset – Premium iron ore product: 65% Fe pellets over US$2.15bn invested since IPO PRODUCTION DEVELOPMENT LICENCE MAINTENANCE Logistics: barging, rail cars, port/transshi
Slide 23: Current capital projects making good progress
C U R R E N T C A P I TA L P R O J E C T S M A K I N G G O O D P R O G R E S S O U T P U T T O R E A C H 1 2 M T PA B Y 2 0 2 1 Expected Remaining Project Description Status Total cost Spend 1H 2019 completion spend Projects to reach 12MTPA Construction & Process 6MTPA of crushed ore into pellet New