Ferrexpo Plc · LSE:FXPO
Ferrexpo — H1 2014 Earnings Presentation
31 slides from Ferrexpo's earnings presentation, Aug 11, 2014
Slide 1: Producing iron ore pellets for over 35 years
Producing iron ore pellets for over 35 years 1 H 2 0 1 4 I N T E R I M R E S U LT S
Slide 2: Disclaimer
DISCLAIMER This document is being supplied to you solely for your information and does not constitute or form This presentation and its contents are confidential. By reviewing and / or attending this part of any offer or invitation or inducement to sell or issue, or any solicitation of any offer to
Slide 3: Introduction
INTRODUCTION MICHAEL ABRAHAMS CBE DL, CHAIRMAN 3
Slide 4: 1H 2014 Financial Results
1 H 2 0 1 4 F I N A N C I A L R E S U LT S C H R I S M AW E , C F O 4
Slide 5: 1H 2014: Solid Operational and Financial Performance
1 H 2 0 1 4 : S O L I D O P E R AT I O N A L A N D F I N A N C I A L PERFORMANCE 1H 2014 1H 2013 Change 2013 ― Increase in production & sales volumes US$M (unless otherwise stated) Pellet production (000’ tonnes) 5,369 5,246 2% 10,813 ― Market price declines partly mitigated by higher Pellet sales (
Slide 6: Revenue 1H 2014 vs. 1H 2013
REVENUE 1H 2014 VS. 1H 2013 900 800 140 30 29 700 60 17 22 600 500 US$M 400 775 759 300 200 100 0 Revenue, 1H 2013 Global iron ore Freight cost to Volume, own ore Pellet premium Pricing terms & CFR sales & Revenue, 1H 2014 prices China mix other 6
Slide 7: EBITDA 1H 2014 vs. 1H 2013
EBITDA 1H 2014 VS. 1H 2013 350 47 300 16 40 250 68 37 1 200 6 US$M 150 100 244 218 321 50 0 EBITDA, 1H Sales price Volume, own ore C1 / constant Other costs / EBITDA, C1 / forex effect Other costs / Forex one-off EBITDA, 1H 2013 currency constant constant forex effect non-cash gain 2014 currency cur
Slide 8: Lower Costs Due to FYM & Devaluation
L O W E R C O S T S D U E T O F Y M & D E VA L U AT I O N C1 cash cost evolution Breakdown of C1 cash cost 65 61.8 60 Explosives, US$ C1 Cash cost 3% Royalties, 3% Spare parts, 55 Electricity, 4% 25% 7.2 Maintenance & 50 consumables, 6% 45 47.8 Grinding 40 media, 7% 35 Materials, Personnel 16% costs
Slide 9: Cash Flow 1H 2014 vs. 1H 2013
CASH FLOW 1H 2014 VS. 1H 2013 US$M (unless otherwise stated) 1H 2014 1H 2013 Change 2013 ― EBITDA increased by 32% to US$321M EBITDA 321 244 32% 506 ― Working capital reflects stocking of FPM lean ore & concentrate FX non-cash gain (47) - - (1) ― 5 VAT repayments received in 1H 2014 Interest paid (2
Slide 10: Capex: On Track to Increase Volume & Quality
CAPEX: ON TRACK TO INCREASE VOLUME & QUALITY FPM Expenditure reduced reflecting large past Delivering benefits to consumption norms Sustaining investments US$11.4M Electricity consumption (kWh/t) Grinding bodies (t/th.t) 6 FPM Capacity Delivery of 1 Metso Medium & Fine Crushing 190 Upgrade Line / 3
Slide 11: Liquidity and Financing 1H 2014 vs. 1H 2013
LIQUIDITY AND FINANCING 1H 2014 VS. 1H 2013 Credit Metrics – High Liquidity – Increase in net debt due to higher working capital Net debt Gross debt Opening net debt - 1 January 2014 (639) (1,029) – Secured long dated US$40M ECA financing, avg maturity of Operating cash flow 213 - 5.6 years Capital
Slide 12: Conclusion to Financial Review
CONCLUSION TO FINANCIAL REVIEW Market weakness mitigated by: • Higher volume • Improved pellet premiums • Index based pricing • Improved efficiency • Currency devaluation Solid financial results Growth projects remain on track Devaluation impacted carrying value of VAT & prepaid CPT Mainta
Slide 13: Business Update
B U S I N E S S U P D AT E K O S T YA N T I N Z H E VA G O
Slide 14: Marketing & Logistics
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Slide 15: Iron Ore Pellets Trading at a Premium
I R O N O R E P E L L E T S T R A D I N G AT A P R E M I U M Iron ore fines (62% Fe) Iron ore fines (58% Fe) Metal Bulletin Pellet Index (65% Fe) 110% % change in iron ore price (rebased to Jan 100% 90% 2013) 80% 70% 60% 50% – Pellet prices reflect: lack of material new supply, structure of pell
Slide 16: Marketing Expansion with Focus on Crisis Resistant Clients
M A R K E T I N G E X PA N S I O N W I T H F O C U S O N C R I S I S R E S I S TA N T C L I E N T S Diversified sales portfolio to high quality steel mills – Not reliant on any one region for demand, optionality to divert volume to strongest regional market – In 1H 2014: continued to expand long ter
Slide 17: Industry Pelletising Cost Curve: Ferrexpo Is Well Placed
INDUSTRY PELLETISING COST CURVE: FERREXPO IS WELL PLACED Pelletising Cost Curve Pellet Suppliers Source: CRU1 70 2% ArcelorM 2% GIIC 3% IOC 4% Samarco 56 Vale Samarco US$ per tonne Vale 5% 42 Iran Ferrexpo Vale IOC LKAB LKAB CLIFFS 5% Cliffs 35% China Metinvest Metinvest 28 Metalloinvest 5% LKAB ENR
Slide 18: Operations & Investments
O P E R AT I O N S & I N V E S T M E N T S 18
Slide 19: Strong Performance from FPM
STRONG PERFORMANCE FROM FPM – Significant increase in processing yields – Mined ore volumes in 1H 2014 -4.7% – Pellet output in 1H 2014 +2.5% – Major repair & maintenance programme, whilst maintaining day to day activities – Commissioning of flotation 2 – Allows more concentrate to be floated, incre
Slide 20: FYM Pit May 2014
F Y M P I T M AY 2 0 1 4 20
Slide 21: FYM Producing, Lowering Costs & Operational Risk Profile
FYM PRODUCING, LOWERING COSTS & O P E R AT I O N A L R I S K P R O F I L E – FYM ore and higher volumes reduced C1 costs by US$6.8/t in 1H 2014 vs. 1H 2013 – Lower operational risk through two operating mines % of FYM Concentrate & pellet production of total Group production FYM ore 50% Yield (pelle
Slide 22: FYM a World Class Operation
F Y M A W O R L D C L A S S O P E R AT I O N , C A N A D D F U R T H E R TONNAGE PilingsPilings for concentrator for concentrator?? Main workshop service bay Wash centre FYM offices 22
Slide 23: Ukraine
UKRAINE 23
Slide 24: Ukraine
UKRAINE Uncertain operating environment but progress has been made: • Introduction of flexible exchange rate • VAT refunds reintroduced • VAT bonds issued for VAT accumulated prior to 2014 But still some difficulties: • Prepaid corporate profit tax • Royalties • Inflation Strong international
Slide 25: Outlook
= OUTLOOK
Slide 26: Ferrexpo a World Class Iron Ore Pellet Producer
FERREXPO A WORLD CLASS IRON ORE PELLET PRODUCER Outlook: Iron ore price lower due to increased supply but market remains strong for pellets Costs have benefitted from FYM investment and higher volumes as well as UAH devaluation Future inflation could offset devaluation impact Projects on tra
Slide 27: Thank You
THANK YOU 27
Slide 28: Appendix
APPENDIX 28
Slide 29: Group VAT Reconciliation
G R O U P VAT R E C O N C I L I AT I O N 350 300 103 250 US$M 200 30 3 321 150 100 185 115 50 0 1 January 2014 Devaluation loss Anticipated discount on Net VAT recovered in 1H Net VAT recoverable as 1st VAT bonds received bonds 2014 of 30 June 2014 in July 29
Slide 30: Impact of UAH Devaluation on Financial Statements
I M PA C T O F U A H D E VA L U AT I O N O N F I N A N C I A L S TAT E M E N T S US$M 1H 2014 Revaluation of fixed assets (471.7) Revaluation of gross VAT receivable (103.1) Revaluation of VAT discount 19.0 Revaluation of prepaid corporate profit tax (35.7) Revaluation of other net assets (120.5) To
Slide 31: Ferrexpo Group Investor Relations
Ferrexpo Group Investor Relations Ingrid McMahon – [email protected] +44 207 389 8304 www.ferrexpo.com 31