TIDMFXPO
RNS Number : 3774O
Ferrexpo PLC
06 August 2014
6 August 2014
FERREXPO plc
("Ferrexpo" or the "Group")
2014 Interim Results
Ferrexpo, the FTSE 250 iron ore pellet producer, today announces
its interim results for the six months ended 30 June 2014.
Michael Abrahams, Non-Executive Chairman, said:
"The Board would like to express their deepest sympathy for
those who have been affected by the conflict in the east of
Ukraine. The Group's facilities are located in the Poltava region
which is in the centre of the country, 313 kilometres south of Kyiv
and 425 kilometres north of Donetsk. To date, Ferrexpo's operations
have not been directly impacted by the unrest in the east and
Ferrexpo's solid operational performance and strong export sales
during the period were able to provide the country with much needed
revenue and tax income.
Operating costs were reduced during the period through
production efficiencies as well as from the devaluation of the
Hryvnia against the US dollar. The reduction in costs, however,
could be offset in the future by inflation. The Hryvnia devaluation
has also resulted in a significant write down of the outstanding US
dollar balance of VAT and prepaid corporate profit tax.
The Group remains on track to increase its pellet volume to 12
million tonnes and to upgrade the iron content of all of its pellet
production to 65% Fe. Further growth in its production volumes and
quality will depend on its ability to fund capital expenditure from
its own cash flows.
We are deeply grateful to all of our colleagues in Ukraine for
their dedication and commitment to the Company during this
difficult period."
1H 2014 Financial Highlights:
US$ million (unless otherwise 6 months ended 6 months ended Change Year ended
stated) 30.06.14 30.06.13 31.12.13
Total pellet production (kt) 5,369 5,246 2% 10,813
--------------- --------------- ------- -----------
Sales volumes (kt) 5,498 5,324 3% 10,689
--------------- --------------- ------- -----------
Revenue 759 775 (2%) 1,581
--------------- --------------- ------- -----------
EBITDA 321 244 32% 506
--------------- --------------- ------- -----------
Profit before tax 248 150 65% 305
--------------- --------------- ------- -----------
Diluted EPS (US cents per
share) 34.65 21.43 62% 44.69
--------------- --------------- ------- -----------
Dividend (US cents per share) 3.3 3.3 - 9.9(1)
--------------- --------------- ------- -----------
Working capital (59) (67) 12% (103)
--------------- --------------- ------- -----------
Net cash flow from operating
activities 138 83 66% 233
--------------- --------------- ------- -----------
Capital investment 132 147 (10%) 278
--------------- --------------- ------- -----------
Net debt (694) (566) 23% (639)
--------------- --------------- ------- -----------
Net debt to EBITDA 1.2x 1.4x - 1.3x
--------------- --------------- ------- -----------
(1) This amount includes a special dividend of 6.6 US cents per share
1H 2014 Summary:
-- Most regrettably there was a contractor fatality during the
period at the Group's operations. The health and safety of all
personnel at the Group's operations is vital to the success of the
business and a full investigation is being conducted to prevent
future work related injuries and fatalities.
-- 2% growth in production volumes whilst completing a major maintenance and upgrade programme.
-- Strong customer demand, sales volumes increased by 3% to 5.5 million tonnes.
-- Higher pellet premiums and an improved marketing performance
partly offset a lower iron ore benchmark price.
-- Ferrexpo's net realised FOB price declined by 9% compared to
a 19% decline in the iron ore fines benchmark price.
-- 23% decline in the cash cost of production to US$47.8/t due to:
o Positive contribution from FYM ore and production efficiencies
which reduced costs by US$6.80/t
o An average 29% decline in UAH vs. US$ 1H 2014 vs. 1H 2013
reduced costs by US$7.2/t
-- EBITDA increased by 32% to US$321 million (1H 2013: US$244
million) including a US$47 million non-cash benefit from the
revaluation of US dollar denominated receivables at the Group's
Ukrainian subsidiaries.
-- The Group's VAT balance as of 30 June 2014 reduced to US$185
million reflecting a US$103 million loss due to the Hryvnia
devaluation and a US$30 million anticipated discount to face value
for VAT bonds (31 December 2013: US$261 million).
-- VAT refunds during 1H 2014 were on time but required the
prepayment of corporate profit tax (CPT). The balance of pre-paid
CPT as of 30 June 2014 was US$89 million which was after a US$36
million cash loss was recorded due to the Hryvnia devaluation.
-- After period end, Ferrexpo received VAT bonds worth US$115
million reflecting an approximate 22% discount to face value
(exchange rate as of 2 July).
-- Cash flow from operations increased by 66% reflecting higher volumes and lower costs.
-- Group remains on track to achieve an annualised production
rate of 12 million tonnes per annum in 2H 2014
-- Net debt to EBITDA ratio of 1.2x.
There will be an analyst and investor meeting at 09.00 (UK time)
today at the offices of JP Morgan on 60 Victoria Embankment, London
EC4Y 0JP. A live video webcast and slide presentation of this event
will be available on www.ferrexpo.com. It is recommended that
participants register at 08.45. The presentation will be hosted by
Michael Abrahams (Chairman), Kostyantin Zhevago (CEO) and Chris
Mawe (CFO).
Webcast link: http://www.media-server.com/m/p/3keb4p8f
Webcast access on mobile devices:
For access to the live and on demand webcast from any IOS Apple
or Android mobile devices.
For further information contact:
Ferrexpo:
Ingrid McMahon +44 207 389 8304
Maitland:
Peter Ogden +44 207 379 5151
Liz Morley
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets
in Ukraine. It has been mining, processing and selling high quality
iron ore pellets to the global steel industry for over 35 years.
Ferrexpo's resource base is one of the largest iron ore deposits in
the world. The Group is the 5(th) largest supplier of pellets to
the global steel industry and the largest exporter of pellets from
the CIS. In 2013, it produced 10.8 million tonnes of pellets, a 12%
increase compared to 2012. Ferrexpo has a diversified customer base
supplying steel mills in Austria, Slovakia, the Czech Republic,
Germany and other European states, as well as in China, India,
Japan, Taiwan and South Korea. Ferrexpo is listed on the main
market of the London Stock Exchange under the ticker FXPO. For
further information, please visit www.ferrexpo.com
REVIEW OF 1H 2014
Ferrexpo has had a good operational start to 2014 achieving a 2%
increase in pellet production to 5.4 million tonnes compared to 1H
2013, whilst continuing to complete a major refurbishment and
upgrade programme of its production facilities. Its cost of
production decreased by 23% compared to 1H 2013 due to improvements
in efficiency and higher output as well as a devaluation in the
Group's operating currency. The Group sold 5.5 million tonnes of
pellets, an increase of 3% compared to 1H 2013. These factors,
together with a US$47 million one-off non-cash currency gain,
helped drive a 32% increase in EBITDA to US$321 million (1H 2013:
US$244 million).
Notably, this progress was achieved in a sharply lower iron ore
price environment where the benchmark iron ore price index declined
by 31% since the start of the year, while the Group's country of
operation, Ukraine, witnessed historic political change. To date,
Ferrexpo's operations have not been directly impacted by events in
Ukraine.
Ferrexpo believes that its resilient financial results in 1H
2014 are, in part, testimony to the Group's strategy to reduce risk
where possible. The Group produces a high quality product, which
trades at a premium to benchmark iron ore fines, at a competitive
cost that is exported to a first class customer base located in
Europe and Asia. It receives all its revenue in US dollars, it has
an established and reliable logistics network, and its operations
are well invested following many years of prudent investment.
Lastly the Company maintains a strong balance sheet with sufficient
liquidity bearing in mind that it operates in a volatile commodity
market and that its mining operations are based in a single
location.
Market environment and Pricing
The World Steel Association reported that global crude steel
production grew 3% in 1H 2014 compared to 1H 2013 to 821 million
tonnes. Of this, 412 million tonnes were produced in China
representing 6% growth in Chinese steel production, while Japan and
Germany, key growth markets for the Group, showed steel production
increases of 1% and 4% respectively.
During the same period, the Platts benchmark price for 62% Fe
iron ore fines declined by 19% to US$111 per tonne compared to an
average price of US$137 per tonne in 1H 2013 (FY 2013: US$135 per
tonne), reflecting increased supply from the four largest producers
without any significant weather related supply disruptions. Iron
ore production from key Australia producers increased by 20% to 310
million tonnes while production from Vale, the world's largest iron
ore producer, increased by 10% to 151 million tonnes in the first
half of 2014(2) compared to the same period in 2013.
The premium paid for iron ore pellets in the key markets of
Western Europe and North East Asia increased significantly from
US$28 per tonne in calendar year 2013 to US$38 per tonne in
calendar year 2014 (pellet premiums in these markets are agreed on
an annual basis). While on the Chinese spot market pellet premiums
also increased from US$18 per tonne in 1H 2013 to US$29 per tonne
in 1H 2014 which (2H 2013: US$24 per tonne). The increase generally
reflects the structure of the pellet market and continued demand
from steel mills for higher grade product.
As a result, Ferrexpo's net realised FOB/DAP(3) pellet price for
the period declined by 9% compared to 1H 2013 which outperformed
the 19% decline in the benchmark 62% Fe fines price for the same
period.
Marketing
In 1H 2014, Ferrexpo sold 5.5 million tonnes of iron ore pellets
compared to 5.3 million tonnes in 1H 2013, a 3% increase. Demand
from the Group's customers was strong throughout the period with
long term contracts performing at or above base volume levels.
The table below shows the breakdown of sales by key market
regions.
6 months ended 6 months ended
30.06.14 30.06.13
Eastern and Central Europe 50% 48%
--------------- ---------------
China 23% 29%
--------------- ---------------
North East Asia 10% 4%
--------------- ---------------
Western Europe 10% 4%
--------------- ---------------
Turkey 7% 15%
--------------- ---------------
Total sales volume (million
tonnes) 5,498 5,324
--------------- ---------------
The Group's fastest growing markets were Germany and Japan,
where sales volumes increased by 123% and 133% respectively as the
marketing team continued to execute its strategy of diversifying
into premium markets. As a result, sales to China reduced by 19%
reflecting increased sales to Western Europe and North East
Asia.
In 1H 2014, 93% of sales were priced on an index basis compared
to 46% in 1H 2013, with all of the Group's contracts priced on a
standard industry basis. Ferrexpo maintained its ocean freight
costs to the Far East in line with the benchmark C3
(Tubarao/Qingdao) freight rate, enabling the Group to supply
pellets on a globally competitive basis.
The Group's long term contracts and spot sales are priced
according to various reference periods. The table below shows the
breakdown of sales by contract type.
(2) Source: Production data announced by BHP Billiton, Rio Tinto, Fortescue, Atlas Iron, Vale
(3) Free on Board, i.e. pellets delivered to port for seaborne
export. Delivered at point, i.e. pellets deliver to the Western
boarder for export to Europe
6 months ended 6 months ended
30.06.14 30.06.13
Monthly index 81% 25%
--------------- ---------------
Spot fixed 7% 8%
--------------- ---------------
Current quarter index 6% 19%
--------------- ---------------
Lagging 3 month index 6% 2%
--------------- ---------------
Quarterly negotiated 0% 46%
--------------- ---------------
Total sales volume 5498 5324
--------------- ---------------
% index linked 93% 45%
--------------- ---------------
Production
In 1H 2014, total pellet production increased 2% to 5.4 million
tonnes compared to 1H 2013. Production of premium 65% Fe pellets
increased 13% to 2.6 million tonnes.
During the period, the total amount of mined ore sent to the
crushing plant reduced by 4% to 14.7 million tonnes, while the
final output of pellets produced, from own ore, increased by 3% to
5.2 million tonnes. The increase in efficiency and output was due
to the replacement of FPM's leaner ore with higher grade FYM ore as
well as productivity improvements from the ongoing modernisation of
the beneficiation plants. Pellet output from FYM ore increased by
81% to 1.6 million tonnes (1H 2013: 0.9 million tonnes). To
increase output and minimise overall cost, FPM has focused on
processing the higher grade portion of its ore together with the
ore from FYM.
During 2Q 2014 FPM completed a major planned refurbishment of
pellet line number 3. This was a significant achievement for the
operations as it was the first time a maintenance programme of such
scale had been undertaken and it was completed without disrupting
production of the remaining three pellet lines. The Group intends
to refurbish pellet line number 4 in 2015.
Following the successful completion of the refurbishment of
pellet line number 3 in 1H 2014, the Group remains on track to
achieve an annualised production rate of 12 million tonnes per
annum in 2H 2014.
The following table shows the pellet production statistics for
the period:
Production in tonnes '000 6 months ended 6 months ended % change
30.06.14 30.06.13
=========================== ======== =============== =============== =========
Pellets from FPM ore 3,659.0 4,226.1 (13.4)
62% Fe 1,994.0 2,220.1 (10.2)
65% Fe 1,665.0 2,006.1 (17.0)
------------------------------------ --------------- --------------- ---------
Pellets from FYM ore 1,553.9 858.8 80.9
62% Fe 747.9 635.6 17.7
65% Fe 806.0 223.1 261.2
------------------------------------ --------------- --------------- ---------
Total pellet production
from own ore 5,212.9 5,084.9 2.5
62% Fe 2,741.9 2,855.7 (4.0)
65% Fe 2,471.0 2,229.2 10.8
------------------------------------ --------------- --------------- ---------
Pellet production from
third party materials 155.7 160.9 (3.2)
62% Fe 0.0 65.7 (100.0)
65% Fe 155.7 95.2 63.6
------------------------------------ --------------- --------------- ---------
Total pellet production 5,368.6 5,245.8 2.3
62% Fe 2,741.9 2,921.4 (6.1)
65% Fe 2,626.7 2,324.4 13.0
------------------------------------ --------------- --------------- ---------
Production Costs
The Group's average C1 cost reduced by 23% to US$47.8 per tonne
in 1H 2014 compared to US$61.8 per tonne in 1H 2013 and by 20% when
compared to US$59.8 per tonne for FY 2013. The decline was driven
by increased volume output and efficiency improvements as well as a
depreciation of the Hryvnia.
In constant currency terms, the average C1 cost in 1H 2014
declined by 11% to US$55.0 per tonne compared to US$61.8 per tonne
in 1H 2013. The decline of US$6.8 per tonne reflects the positive
contribution from FYM ore, following the ramp up of mining
activities in 1H 2013, as well as the better absorption of fixed
costs due to higher volume output.
The average exchange rate of the UAH to the US dollar in 1H 2014
was 10.28 compared to 7.99 in 1H 2013. The higher rate in 1H 2014
reduced the C1 cost by US$7.2 per tonne as approximately 55% of the
Group's cost to produce a pellet is in Hryvnia.
Cost inflation for the period was principally driven by an 8%
increase in electricity tariffs. On 31 July, the Ukrainian
parliament adopted a series of measures aimed at boosting budget
revenues. This included an 8% royalty on iron ore and 1.5% tax on
salaries. These measures are expected to expire at the end of 2014.
These factors may impact the C1 cost of production but the Group
hopes to at least partially offset them through higher volumes and
production efficiencies. Ferrexpo is currently seeking
clarification from the Ukrainian tax office regarding the method of
calculation.
Ferrexpo is a low cost pellet producer and is competitively
placed on the global benchmark cost curve for 62% Fe iron ore fines
after adjusting for different types of iron ore product, including
premiums or discounts received relative to the benchmark price.
This allows the Group to remain profitable even in times of low
iron ore prices.
Capital investments
In 1H 2014 the Group invested a total of US$132 million (1H
2013: US$147 million) of which US$40 million was for sustaining
capex (1H 2013: US$39 million) and US$92 million (1H 2013: US$108
million) related to development capex. The Group is nearing
completion of its US$650 million investment programme to grow its
pellet output to 12 million tonnes per annum and to increase the
average quality of its pellets to 65% Fe.
Capacity upgrade project (included as part of sustaining
capex)
The capacity upgrade project remains on schedule and budget to
increase production during 2H 2014 to its target run rate of 12
million tonnes of pellets per annum. This involves the
modernisation of plant equipment and the reduction of bottlenecks
at FPM's production facilities. In 1H 2014 the Group spent US$40
million compared to US$39 million in 1H 2013. The project is
expected to be completed by the end of 2014. Thereafter,
maintenance and modernisation activities will be reported as part
of sustaining capex.
During the period, FPM modernised two sections of the
beneficiation plant, installed a high-speed Eirich mixer and
replaced a third of the kiln on pelletising line number 3.
Planned activities in 2H 2014 include the upgrade of two further
grinding sections and completion of the engineering design for a
new grinding section.
Quality upgrade project
Ferrexpo remains on schedule and budget to achieve its target of
increasing the iron content of its pellet product to 65% Fe for all
pellet production by the end of 2015. Currently approximately half
of the Group's pellet output has a Fe content of 65% with the
remainder containing 62% Fe. In this respect, the Group spent US$27
million on upgrading its processing capability in 1H 2014 (1H 2013:
US$14 million).
Work completed during the period included the commissioning of
flotation section 2. The Group now has two units in operation which
allows for more concentrate to be floated thereby increasing the
amount of 65% Fe pellets that can be produced. In the past, the
limited flotation capacity has restricted FPM's ability to increase
65% Fe pellet production.
Planned activities in 2H 2014 include commissioning of flotation
section 3, upgrading of flotation section 1, completion of the
engineering design for a new press filtration plant and
commissioning of the slurry-pumping station number 3 and pipelines
for tailings transportation to the storage facilities.
The commissioning of flotation section 3 will allow FPM to
process tailings from sections 1 and 2 thereby increasing total
concentrate volumes.
65% Fe pellets are regarded as a premium pellet product in the
industry as they contain lower levels of silica compared to a 62%
Fe pellet. The lower the silica the less fines that is created in a
blast furnace thereby increasing the steel mill's productivity. By
increasing its supply of 65% Fe pellets the Group will be able to
target new premium customers.
FYM capital project
During the period, the FYM spent US$43 million (1H 2013: US$51
million) on capital projects. This included ongoing pit development
as per the mine plan, completion of associated mine infrastructure
as well as the commencement of foundation piling for the crushing
area of the concentrator.
In terms of developing FYM's capability to process its own ore,
it is the Board's intention to continue to authorise expenditure
for a 10 million tonne per annum concentrator in stages, in line
with the Company's ability to finance the project. Previously,
US$35 million had been approved for a detailed design study and
preparatory ground and construction works. In addition, the Board
has now authorised US$40 million for payment during 2H 2014 for
long lead items including high-pressure grinding rollers.
Financial management
Ferrexpo's financial position reflects its strategy of
maintaining prudent balance sheet metrics and ensuring sufficient
liquidity given that it operates in a volatile commodity market and
produces from a single location.
Ferrexpo's net debt to EBITDA as of 30 June 2014 was 1.2x (31
December 2013: 1.3x; 1H 2013:1.4x) comfortably below its
maintenance covenants of three times. At the period end, the Group
had US$359 million of cash (31 December 2013: US$390 million; 1H
2013: US$446 million) and net debt of US$694 million (31 December
2013: US$639 million; 1H 2013: US$566 million).
The Group's policy is to pay a modest but consistent dividend
throughout the economic cycle and return capital to shareholders
when appropriate, while maintaining adequate liquidity to support
the business and its growth plans. The Directors recommend an
interim dividend of 3.3 US cents per Ordinary Share (1H 2013: 3.3
US cents) for payment on 19 September 2014 to shareholders on the
register at the close of business on 15 August 2014. The
ex-dividend date will be 13 August 2014. The dividend will be paid
in UK Pounds Sterling, with an election to receive in US
Dollars.
Ukraine
Ukraine is witnessing a period of historic change. On 22
February, the Ukrainian parliament voted to remove Viktor
Yanukovych as president and on 25 May, Petro Poroshenko was elected
as the new president with a clear majority. The Group's facilities
are located in central Ukraine in the Poltava region 313 kilometres
south of Kyiv and 425 kilometres north of Donetsk. Ferrexpo's
operations have been able to operate normally throughout this
period. Ferrexpo, however, is monitoring the situation closely.
Following a protracted dispute with Russia regarding the pricing
and payment of gas supplies, Russia stopped its supply of gas to
the country on 15 June 2014. To date, Ferrexpo's operations remain
unaffected.
As part of the economic support for Ukraine, the IMF approved a
US$17.1 billion bailout package on 1 May which is dependent on the
country undertaking certain economic reforms. This money will be
released by the IMF over two years. The country subsequently
received US$3.2 billion as a first instalment.
The new government has committed itself to economic reform and
has already met some of the requirements of the loan including
raising the price of gas to households and allowing the exchange
rate to float. After the period end, Ukraine issued local currency
VAT bonds to industry for outstanding amounts accrued since 2010,
of which Ferrexpo received bonds with a face value of approximately
US$115 million which have traded at an approximate 22% discount to
face value (see VAT section below, financial review and note 12 to
the accounts).
The Group's priority continues to be to develop its production
and logistics capabilities in order to supply its first class
customer base with high quality premium iron ore product as it has
done throughout its 40 year production history.
Hryvnia devaluation
During the period, the Hryvnia devalued by 48% against the US
dollar from a fixed rate of 7.993 at the end of 2013 to 11.823 as
of 30 June 2014. The average exchange rate for 1H 2014 was 10.276
compared to 7.993 in 1H 2013.
As a result, Ferrexpo's operating costs including the cost of
production, internal logistics costs and general admin costs
decreased by US$10.4 per tonne. The Group also reported a one-off
gain of US$47 million in the income statement principally derived
from the revaluation of US dollar denominated trade receivables at
the local subsidiaries. The devaluation, however, reduced the
carrying value of those assets held in Ukraine and denominated in
local currency, and consequently the Group's net assets decreased
by US$712 million.
Please see the financial review and notes 7, 11, 12, and 15 of
the accountsfor further information.
VAT
The Group's VAT position has stabilised. During the period it
received five repayments of VAT from the Ukrainian government in
exchange for the prepayment of corporate profit tax. As such, the
gross balance of VAT outstanding did not increase and in constant
currency terms was in line with the balance as of 31 December 2013
at US$318 million (31 December 2013: US$321 million). The balance
of prepaid corporate profit tax, however, increased to US$89
million.
Due to the devaluation of the Hryvnia, however, the VAT balance
expressed in US dollars decreased by US$103 million to US$215
million.
Following the period end, on 2 July 2014, the Group received
local currency VAT bonds as part repayment for outstanding
balances. At the exchange rate as of 2 July 2014, the book value of
the bonds was US$115 million. To date, the bonds have traded at an
approximate 22% discount to face value resulting in a US$10.5
million net release of provisions and discounts which were recorded
at the end of 2013. Further VAT bonds are expected to be received
for the remaining balance of outstanding VAT, while current VAT
incurred is expected to be received as a cash refund in the normal
course of business.
The VAT bonds have a five year tenure maturing on 2 July 2019
with a 9.5% coupon and amortisation of the principal payable
semi-annually.
Further details of the Ukrainian VAT receivable are disclosed in
the financial review and in note 12 to the accounts.
Corporate Social Responsibility
-- Health and safety
Most regrettably there was a contractor fatality during the
period at the Group's operations. The prevention of fatalities and
injuries to employees is the highest priority of the Board and
management, who follow the principle that all accidents are
avoidable.
The lost-time injury frequency rate ('LTIFR') at FPM was 0.3 per
million man hours in 1H 2014 (1H 2013: 0.6 per million man hours).
The LTIFR at FYM remains zero with no lost time injuries being
recorded during the period.Overall, Ferrexpo's total LTIFR in
Ukraine for 1H 2014 was 0.23 compared to 0.65 in 1H 2013 (FY 2013:
0.64).
-- Community and Financial Support
Expenditure on community support projects during the period was
US$10 million (1H 2013: US$4 million) which was for the further
development of Komsomolsk and the surrounding towns in the Poltava
region.
-- People
The Board would like to express its sincere appreciation to all
of Ferrexpo's employees for their continued focus and dedication to
achieving the Company's goals especially in what can be regarded as
unprecedented times in Ukraine.
Corporate governance
The Board of Ferrexpo remains committed to maintaining high
standards of governance throughout the Group. The UK Corporate
Governance Code of 2012, highlights the need for progressive
refreshing of the Board and recommends that the re-election of
directors who have served more than six years be reviewed. The
Board has appointed external recruitment consultants to search for
suitable candidates who can provide diversity and balance in terms
of knowledge, experience and gender.
Ferrexpo is pleased to report that Bert Nacken has been
appointed as an independent non-executive director, with effect
from 1 August 2014. Mr Nacken has extensive experience of managing
large mining operations including as Chief Operating Officer of BHP
Billiton's Western Australian Iron Ore business. His expertise will
be invaluable to Ferrexpo, and the Board looks forward to working
with him.
Lucio Genovese who was an independent non-executive director of
Ferrexpo since the Group's IPO in 2007 has stepped down from the
Board as of 1 August 2014. Mr Genovese will continue to serve as
Ferrexpo's representative on the board of Ferrous Resources to
which he was appointed in March 2014. The Board is very grateful
for the significant contribution he has made as an independent
director and as chairman of the Remuneration Committee.
Update on Risks
Since the publication of the 2013 annual results in March 2014,
the Group assesses that the risks facing the business, as
highlighted on pages 28 to 31 of the 2013 Annual Report and
Accounts have not changed materially other than that set out below.
An update is provided below on key risks following developments in
1H 2014.
-- Exchange Rate Risk
The Group receives all of its income in US dollars while
approximately 55% of its cost base is denominated in Ukrainian
Hryvnia. The Hryvnia depreciated by 48% against the US dollar in
the first half of the year. This has had a significant positive
effect on the costs of the Group and ensures that Ferrexpo is
highly competitive at a time when iron ore prices are trading below
US$100 per tonne.
The devaluation has also resulted in adjustments to the carrying
value of certain assets and liabilities of the Group, resulting in
unrealized cash and non-cash net losses. Please see the financial
review and notes 7, 11, 12, and 15 of the accounts for further
information.
-- VAT
During 1H 2014, the Group received regular VAT refunds and as a
result its VAT outstanding balance in Hryvnia as of 30 June 2014
was in line with the balance as of 31 December 2013. On 2 July
2014, the Group received VAT bonds worth approximately US$115
million at par (as of the UAH to US dollar exchange rate at 2 July
2014) as part repayment for outstanding VAT prior to 2014. The
Group expects to receive the remainder of the outstanding VAT
balance through the issuance of further VAT bonds or as a cash
refund in the normal course of business.
Please see the financial review and note 12 in the accounts for
further details.
-- Taxes
During the period under review, the amount of corporate profit
tax (CPT) required by the Ukrainian tax authorities to be paid in
order to receive regular VAT refunds declined from 50% as a
proportion of the monthly VAT refund as of January 2014 to 25% by
June 2014. As part of the IMF aid package, the Ukrainian government
has committed to eliminating the requirement for CPT payments to be
linked to the repayment of VAT. The requirement to pre-pay CPT
reduces the cash flows of the Group and its ability to invest.
-- Iron ore price
During the period under review, the benchmark iron ore fines
price declined by 19% to US$111 per tonne compared to an average of
US$137 per tonne in 1H 2013. This has negatively impacted Group
profitability for the period although the Group was able to partly
offset this effect as it sells iron ore pellets which receive a
price premium relative to the benchmark price. As 5 August 2014,
the benchmark fines price has remained at around US$95 per tonne
since the period end.
-- Gas supply
Following a protracted dispute with Russia regarding the pricing
and payment of gas supplies, Russia stopped its supply of gas to
the country on 15 June 2014. Ferrexpo's operations have not been
impacted. It is likely, however, that additional measures may have
to be taken later in the year if no new arrangements with Russia
are concluded.
-- Political and legal
Please see page 8 for an update on events in Ukraine during the
period under review.
Going Concern
An update of the Group's key business activities and risk
factors likely to affect its future development, performance and
position since 31 December 2013 are set out on pages 1 to 11 of
this report. Full disclosure of the Group's business activities and
risk factors are disclosed in the 2013 Annual Report and Accounts.
The financial position of the Company as of 30 June 2014 including
its cash flows, liquidity position and borrowing facilities are
described in the Financial Review on pages 12 to 17. Note 37 of the
2013 Annual Report and Accounts, on pages 133 to 141, sets of out
the Group's objectives, policies and processes for managing its
capital; its financial risk management objectives and details of
its financial instruments; its exposures to credit risk, liquidity
risk as well as currency risk and interest rate risk.
The Group's forecasts and projections, taking into account
possible changes in the iron ore market, the Group's current and
expected competitive positioning on the global industry cost curve
and the general economic environment, show that Ferrexpo has
adequate financial resources to continue in operational existence
for the foreseeable future. For this reason, the Directors continue
to adopt the going concern basis of accounting in preparing the
financial statements of the Group.
Outlook
Ferrexpo is operating in a difficult environment which is
undergoing political change, however, it is continuing to build on
its reputation at home and abroad as a sustainable business
benefitting all of its stakeholders. It is a competitive producer
of high quality pellets, with a large reserve life, selling to
premium customers and markets. The Group intends to deliver
financial value to all stakeholders by remaining a globally
competitive pellet producer and by utilising its cash flows to grow
its output and improve the quality of its pellets.
FINANCIAL REVIEW
US$ million (unless otherwise stated) 6 months ended 30.06.14 6 months ended 30.06.13 Change Year ended
31.12.13
---------------------------------------- ------------------------ ------------------------ ------- -----------
Revenue 758.9 774.7 (2.0%) 1,581.4
---------------------------------------- ------------------------ ------------------------ ------- -----------
EBITDA(4) 321.1 244.0 31.6% 505.9
---------------------------------------- ------------------------ ------------------------ ------- -----------
As % of revenue 42.3% 31.5% 10.8% 32.0%
---------------------------------------- ------------------------ ------------------------ ------- -----------
Profit before taxation 247.6 150.0 65.1% 305.4
---------------------------------------- ------------------------ ------------------------ ------- -----------
Income tax (39.6) (24.0) 65.0% (41.6)
---------------------------------------- ------------------------ ------------------------ ------- -----------
Profit for the period 208.0 125.9 65.2% 263.8
---------------------------------------- ------------------------ ------------------------ ------- -----------
Diluted earnings per share (US cents) 34.65 21.43 61.7% 44.69
---------------------------------------- ------------------------ ------------------------ ------- -----------
Ordinary dividend per share (US cents) 3.3 3.3 - 3.3
---------------------------------------- ------------------------ ------------------------ ------- -----------
Special dividend per share (US cents) - - - 6.6
---------------------------------------- ------------------------ ------------------------ ------- -----------
The Group delivered financial results in the period, increasing
the EBITDA margin by 10.8% to 42.3%. This was as a result of higher
sales volumes, increased operating efficiencies and lower costs.
Costs also benefitted from the devaluation of the operating
currency which reduced the local cost base in US dollar terms as
well as one-off gain of US$47.4 million principally resulting from
the revaluation of local US dollar trade receivables. After this
gain, profit for the period was 65.2% higher at US$208.0 million
and diluted EPS increased by 61.7% to 34.65 cents per share.
Losses of US$103.1 million and US$35.7 million were incurred
respectively on the VAT outstanding and prepaid corporate profit
tax balances as a result of the devaluation of the local currency.
These were recorded in reserves and were not reflected in the
figures above.
(4) 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, property, plant
and equipment. See note 3 in the accounts.
Revenue
Group revenue was US$758.9 million in 1H 2014, 2.0% lower than
1H 2013 (US$774.7 million) reflecting a lower benchmark iron ore
price which on average reduced by 18.7% compared to the same period
in 2013. This was compensated for by increased sales volumes which
were 3.3% higher at 5.5 million tonnes and a better marketing
performance. The Group's net realised FOB/DAP price outperformed
the benchmark price for iron ore over the comparable period by
9.3%, falling only 9.4%. The Group's price outperformance compared
to the general industry was due to an increase in the premium paid
for iron ore pellets compared to iron ore fines, improved sales mix
and the move to full index pricing for all customers. The benchmark
62% fines price and typical pellet premiums are shown in the table
below.
US$ per tonne 6 months ended 6 months ended Change Year ended
30.06.14 30.06.13 31.12.13
Average Platts 62% Fe iron
ore fines 111.48 137.18 (18.7%) 135.37
--------------- --------------- -------- -----------
Pellet premiums ex China 38.0 28.0 35.7% 28.0
--------------- --------------- -------- -----------
Pellet premiums China 28.7 17.8 61.2% 21.1
--------------- --------------- -------- -----------
Other revenue increased to US$43.0 million (1H 2013: US$33.9
million). This reflected higher freight services at the Group's
logistics operations which provide services to third parties in
Europe as well as the Group's own operations.
Cost of Sales
Total cost of sales for the period ended 30 June 2014, reduced
by 14.4% compared to 1H 2013 to US$333.1 million (1H 2013: US$389.3
million). This reflected higher sales volumes of 3.3% and lower C1
costs per tonne of pellets produced due to production efficiencies
and the devaluation of the Ukrainian Hryvnia. The Hryvnia
depreciated by 47.9% against the US dollar from 7.993 per US dollar
at the end of 2013 to 11.823 per US dollar as of 30 June 2014. The
average UAH exchange rate for 1H 2014 was 10.276 per US dollar
compared to 7.993 per US dollar in 1H 2013.
The Group's average C1 cost reduced by 22.7% to US$47.8 per
tonne in 1H 2014 compared to US$61.8 per tonne in 1H 2013. Of the
US$14.0 per tonne reduction in the C1 cost, US$6.8 per tonne
reflects the positive contribution from FYM ore, following the ramp
up of mining activities in 1H 2013, as well as the improvement in
consumption norms due to higher volume output of 2.5%. The
devaluation of the Hryvnia reduced the Group's average C1 cost by
approximately US$7.2 per tonne in 1H 2014 compared to 1H 2013 as
55% of production costs are in Hryvnia.
Cost inflation for the period was principally driven by an 8%
increase in electricity tariffs. On 31 July, the Ukrainian
parliament adopted a series of measures aimed at boosting budget
revenues. This included an 8% royalty on iron ore and 1.5% tax on
salaries. These measures are expected to expire at the end of 2014.
These factors may impact the C1 cost of production but the Group
hopes to at least partially offset them through higher volumes and
production efficiencies. Ferrexpo is currently seeking
clarification from the Ukrainian tax office regarding the method of
calculation.
Selling and Distribution Expenses
Selling and distribution expenses increased by US$8.9 million in
the period compared to 1H 2013 to US$164.8 million as a result of a
higher proportion of sales made on a CFR basis, increased sales
volume of 3.3% and higher market rates for cape size vessels. This
was partly offset by lower rail costs due to the devaluation of the
Hryvnia as well as tariff discounts from the Ukrainian rail
authorities for the Group using its own rail wagons of 3% to 6%,
depending on the route. As of 30 June 2014, the Group owned 2,200
rail cars and expects to receive delivery of a further 300 in 2H
2014.
Distribution costs incurred in delivering product to the
Ukrainian border decreased by 8.5% to US$68.0 million (1H 2013:
US$74.3 million), equating to US$12.4 per tonne compared to US$14.0
per tonne in 1H 2013. These costs benefitted from the above
mentioned rail tariff discounts as well as the devaluation of the
Hryvnia.
General and Administrative Expenses and Other Expenses
General and administrative expenses were US$23.7 million or
US$4.1 per tonne sold in 1H 2014 compared to $27.5 million or
US$5.2 per tonne in 1H 2013. The improvement reflects local
currency depreciation compared to the US dollar and cost
savings.
Other expenses were US$15.7 million in 1H 2014 compared to
US$10.0 million in 1H 2013 principally as a result of increased
levels of support for the local community during the recent events
in Ukraine.
Foreign Exchange
At At Average Average
30 June 2014 1 January 1H 2014 1H 2013
2014 Change Change
UAH vs. US
dollar 11.823 7.993 (47.9%) 10.276 7.993 (28.6%)
--------------- ----------- -------- --------- --------- --------
The ongoing operating and capital costs of the Group's
subsidiaries in Ukraine were significantly reduced during the
period due to the devaluation of the Hryvnia which moved from a
rate of 7.993 at the end of 2013 to 11.823 as of 30 June 2014.
The major effects on the balance sheet and the income statement
of the depreciation against the US dollar are shown in the table
below:
US$ million 6 months ended
30.06.14
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)
---------------
Total exchange losses on translating foreign
operations (712.0)
---------------
Operating foreign exchange gains 47.4
---------------
Non-operating foreign exchange losses (3.0 )
---------------
Total reflected in the income statement 44.4
---------------
C1 cost constant currency per tonne 55.0
---------------
C1 cost actual per tonne 47.8
---------------
Foreign exchange benefit per tonne 7.20
---------------
The net assets of the Group are denominated in local currency
and retranslated at the rate prevailing at the end of the
accounting period. The exchange rate movement reduced net assets by
US$712.0 million which, in accordance with accounting standards,
was taken to reserves. This included US$103.1 million reduction in
the gross balance of VAT due, a US$19.0 million reduction in the
provisions made against VAT recoverability and a US$35.7 million
reduction in the value of the Group's prepaid CPT.
Foreign exchange gains for the period taken to the income
statement were US$47.4 million compared to US$0.3 million in 1H
2013 and included a one-off gain of US$47.4 million as a result of
the revaluation of US dollar denominated trade receivables in
Ukraine. Net non-operating foreign exchange losses amounted to
US$3.0 million (1H 2013: gain of US$1.3 million) and related to the
revaluation of third party foreign currency loans at the local
subsidiaries offset by the translation of US dollar cash balances
held in Ukraine.
For further information see the VAT section of the financial
review and notes 7, 11, 12, and 15 of the accounts.
Net Finance Expense
Net finance expense was US$15.6 million compared to US$47.4
million in 1H 2013. The decline is largely due to the reversal of a
provision made in prior periods for the cost of financing overdue
VAT receivables (as of 30 June 2013 an amount of US$18.0 million
was recorded in finance expense). During the period the VAT
situation improved and the gross outstanding UAH balances for 2013
and earlier are now expected to be received in full in the next
twelve months through the issue of VAT bonds. Total losses on the
VAT receivable, however, amount to US$133.6 million of which
US$103.1 million related to the movement in exchange rate and has
been taken to reserves and US$30.5 million related to the expected
discount on the VAT bonds when they start to trade.
Interest income was US$0.9 million compared to US$1.0 million in
1H 2013 which reflected lower cash balances during the period.
Interest expense was in-line with 1H 2013 at US$26.9 million (1H
2013: US$27.3 million).
Corporate profit tax
The income tax charge for 1H 2014 was US$39.6 million (1H 2013:
US$24.0 million) based on an expected average weighted tax rate of
16.0% for the financial year 2014 (1H 2013: 16.0%). Total income
tax paid in the period was US$45.0 million (1H 2013: US$63.4
million).
At the end of June 2014, the prepaid corporate profit tax
balance was US$88.6 million compared to US$87.5 million as of 31
December 2013. Due to the UAH devaluation against the US dollar
this amount was reduced by US$35.7 million which was included in
the translation reserve.
Cash Flows
The Group increased operating net cash flow by 65.5% to US$137.7
million (H1 2013 US$83.2 million) as a result of regular VAT
refunds, lower corporate profit tax prepayments compared to the
prior year and improved EBITDA generation. Cash flow from
operations was invested in the growth projects.
Net debt increased modestly as a result of higher working
capital mainly reflecting a US$33.1 million increase in inventories
due to the stockpiling of lean FPM ore which is expected to be
processed in 2015 following the completion of the quality upgrade
project.
VAT
VAT refunds have been received regularly during 1H 2014 in
exchange for the prepayment of corporate profit tax. On 2 July
2014, the Ukrainian government issued the first tranche of local
currency VAT bonds as part repayment for outstanding obligations
dating back to 2010 and Ferrexpo received bonds with a face value
of UAH1,366 million. The bonds have a five year tenure maturing on
2 July 2019 with a 9.5% coupon and amortisation of the principal
payable semi-annually. Since issuance, the VAT bonds have traded at
an approximate 22% discount to face value.
Repayment of VAT through bonds is expected to result in a loss
of US$30.5 million, US$10.5 million below the amount provided for
at the end of 2013. The devaluation of the local currency, however,
resulted in a one off loss of US$103.1 million which has been
charged to reserves.
The VAT amounts recorded are analysed below:
Reconciliation of outstanding VAT US$ millions
Gross VAT recoverable as of 31 December
2013 321.0
-------------
Devaluation impact (charged to reserves) (103.1)
-------------
Anticipated discount on bonds (30.5)
-------------
Net VAT recovered 1H 2014 (2.8)
-------------
Net VAT recoverable as of 30 June
2014 184.6
-------------
The discounts and provisions recorded in the income statement
for VAT are shown below:
US$ millions
Discount as of 31 December 2013 (60.1)
-------------
Write down on VAT receivable (5.9)
-------------
Release of discount 16.5
-------------
Exchange gains recognised in reserves 19.0
-------------
Closing balance as of 30 June 2014 (30.5)
-------------
In total, a net release of US$10.6 million was recorded in the
income statement split between finance income (US$16.5 million) and
write down on VAT receivable (US$5.9 million).
As a result of the above, the net Group VAT as of 30 June 2014
was US$184.6 million (30 June 2013: US$269.9 million; 31 December
2013: US$260.9 million).
For further information see the foreign exchange section of the
financial review and note 12 of the accounts.
Capital investment
Capital investment continues to be focussed on the Group's
growth projects whilst realising reductions in project costs
through procurement savings as well as through a more favourable
exchange rate for local content. In 1H 2014 the projects remained
on budget. Capital commitments were US$113.2 million as of 30 June
2014 (31 December 2013: US$102.9 million; 1H 2013: US$121.0
million).
The split of capital expenditure for the Group's operations is
shown in the table below:
Breakdown of capital investment
6 months ended 6 months ended
US$ million 30.06.14 30.06.13
FPM Sustaining 11.4 38.4
--------------- ---------------
FPM Capacity upgrade
project 28.3 0.8
--------------- ---------------
FPM Mine life extension 4.6 12.1
--------------- ---------------
FPM Quality upgrade
project 26.5 13.4
--------------- ---------------
FYM mine infrastructure 36.8 50.7
--------------- ---------------
FYM concentrator 6.4 0
--------------- ---------------
FBM 3.2 2.3
--------------- ---------------
Logistics 13.0 19.0
--------------- ---------------
Other 1.4 10.1
--------------- ---------------
Total 131.6 146.8
--------------- ---------------
Expenditure at FYM related to the further development of the
mine and completion of the associated infrastructure for US$36.8
million as well as for the development of a 10 million tonne
concentrator. To date, the Board has approved US$75.0 million for
the development of the concentrator. In 1H 2014, US$6.4 million was
spent on down payments for long lead time items, engineering design
and preliminary site construction works with the balance expected
to be spent over the next 12 months.
Group liquidity and debt
In 1H 2014, Ferrexpo maintained prudent financial metrics. As of
30 June 2014, net debt to EBITDA reduced to 1.2x compared to 1.4x
at 30 June 2013 as a result of improved earnings.
Summary of Group Liquidity and Debt
US$ million As of 30.06.14 As of 30.06.13 Change As of 31.12.13
------------------------------------------------ --------------- --------------- -------- ---------------
Cash and equivalents 359.4 446.4 (19.5%) 390.5
------------------------------------------------ --------------- --------------- -------- ---------------
Gross debt (1,052.9) (1,012.8) 4.0% (1,029.2)
------------------------------------------------ --------------- --------------- -------- ---------------
Net debt (693.5) (566.3) 22.5% (638.7)
------------------------------------------------ --------------- --------------- -------- ---------------
Undrawn facilities 280.0 25.0 - 280.0
------------------------------------------------ --------------- --------------- -------- ---------------
Total liquidity (undrawn facilities plus cash) 639.4 471.4 35.6% 670.5
------------------------------------------------ --------------- --------------- -------- ---------------
The Group's borrowing facilities are US dollar denominated,
committed and have an average life of 2.4 years with an average
interest cost of 5.0% per annum. Of the gross debt of US$1.1
billion, US$212 million is repayable within one year. Overall 55%
of the interest costs are at fixed rates. Financing was concluded
for capital projects from export credit agencies during 1H 2014
amounting to US$40 million. These new facilities have an average
maturity of 5.6 years at an average interest cost of 2.43% per
annum.
Directors' Responsibility Statement
The Interim Report complies with the Disclosure and Transparency
Rules ('DTR') of the United Kingdom's Financial Conduct Authority
in respect of the requirement to produce a half-yearly financial
report. The Interim Report is the responsibility of, and has been
approved by, the Directors.
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34;
-- the Interim Management Report includes a fair review of the
important events during the first six months and description of the
principal risks and uncertainties for the remaining six months of
the year, as required by DTR4.2.7R; and
-- the Interim Management Report includes a fair review of
disclosure of related party transactions and changes therein, as
required by DTR 4.2.8R.
The Directors are also responsible for the maintenance and
integrity of the Ferrexpo plc website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
For and on behalf of the Board
Michael Abrahams CBE DL
Chairman
Chris Mawe
Chief Financial Officer
Independent Review Report to Ferrexpo PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the interim report for the six months
ended 30 June 2014 which comprises the Interim Consolidated Income
Statement, Interim Consolidated Statement of Comprehensive Income,
Interim Consolidated Statement of Financial Position, Interim
Consolidated Statement of Cash Flows, Interim Consolidated
Statement of Changes in Equity and related notes 1 to 20. We have
read the other information contained in the interim report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the interim report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards ('IFRSs') as adopted by the European Union. The
condensed set of financial statements included in this interim
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland), 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim report for the six months ended 30 June 2014 is not
prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
5 August 2014
Interim Consolidated Income Statement
Year
6 months ended ended
US$'000 Notes 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Revenue 4 758,913 774,702 1,581,385
Cost of sales 3/5 (333,102) (389,305) (773,221)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Gross profit 425,811 385,397 808,164
------------------------------------------------------- ------ --------------- ------------------------ ----------
Selling and distribution expenses (164,761) (155,823) (335,718)
General and administrative expenses 6 (23,683) (27,456) (54,839)
Other income 4,246 2,451 6,662
Other expenses (15,699) (9,966) (23,457)
Operating foreign exchange gains 7 47,445 339 622
------------------------------------------------------- ------ --------------- ------------------------ ----------
Operating profit from continuing operations before
adjusted items 273,359 194,942 401,434
------------------------------------------------------- ------ --------------- ------------------------ ----------
Write-down of VAT receivable 12 (5,866) - (36,421)
Write-offs and impairment losses 8 (1,362) (50) (854)
Share of profit from associates 3,212 2,007 3,551
Losses on disposal of property, plant and equipment (3,015) (890) (8,492)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Profit before tax and finance 266,328 196,009 359,218
------------------------------------------------------- ------ --------------- ------------------------ ----------
Finance income 9/12 17,643 1,079 2,372
Finance expense 9 (33,265) (48,458) (65,953)
Non-operating foreign exchange (losses)/gains 7 (3,062) 1,305 9,755
------------------------------------------------------- ------ --------------- ------------------------ ----------
Profit before tax 247,644 149,935 305,392
------------------------------------------------------- ------ --------------- ------------------------ ----------
Income tax expense (39,623) (24,001) (41,608)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Profit for the period/year 208,021 125,934 263,784
------------------------------------------------------- ------ --------------- ------------------------ ----------
Attributable to:
Equity shareholders of Ferrexpo plc 203,256 125,622 261,984
Non-controlling interests 4,765 312 1,800
------------------------------------------------------- ------ --------------- ------------------------ ----------
208,021 125,934 263,784
------------------------------------------------------- ------ --------------- ------------------------ ----------
Earnings per share:
Basic (US cents) 10 34.72 21.46 44.76
Diluted (US cents) 10 34.65 21.43 44.69
Interim Consolidated Statement of Comprehensive Income
Year
6 months ended ended
US$ 000 Notes 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Profit for the period/year 208,021 125,934 263,784
Items that may subsequently be reclassified to
profit or loss:
Exchange differences on translating foreign operations (760,526) 167 (437)
Income tax effect 47,568 - -
Net losses on available-for-sale investments (183) (150) (138)
Income tax effect 42 28 30
------------------------------------------------------------- --------------- ------------------------ ------------
Net other comprehensive income to be reclassified to profit
or loss in subsequent periods (713,099) 45 (545)
------------------------------------------------------------- --------------- ------------------------ ------------
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement (losses)/gains on defined benefit pension
liability (2,485) 77 498
Income tax effect 294 (9) (58)
------------------------------------------------------------- --------------- ------------------------ ------------
Net other comprehensive income not being reclassified to
profit or loss in subsequent periods (2,191) 68 440
------------------------------------------------------------- --------------- ------------------------ ------------
Other comprehensive income for the period/year, net of tax (715,290) 113 (105)
------------------------------------------------------------- --------------- ------------------------ ------------
Total comprehensive income for the period/year, net of tax (507,269) 126,047 263,679
------------------------------------------------------------- --------------- ------------------------ ------------
Total comprehensive income attributable to:
Equity shareholders of Ferrexpo plc (499,351) 125,740 261,888
Non-controlling interests (7,918) 307 1,791
------------------------------------------------------------- --------------- ------------------------ ------------
(507,269) 126,047 263,679
------------------------------------------------------------ --------------- ------------------------ ------------
Interim Consolidated Statement of Financial Position
As at As at
US$'000 Notes 30.06.14 30.06.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Assets
Property, plant and equipment 11 1,137,167 1,419,980 1,533,819
Goodwill and other intangible assets 81,118 119,353 117,086
Investments in associates 9,278 19,003 20,546
Available-for-sale financial assets 19 82,595 21,690 82,778
Inventories 13 63,810 20,244 58,303
Other non-current assets 43,211 53,106 34,575
Income taxes recoverable and prepaid 55,207 - 54,242
Other taxes recoverable and prepaid 12 - 127,502 78,281
Deferred tax assets 32,370 37,318 37,612
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total non-current assets 1,504,756 1,818,196 2,017,242
------------------------------------------------------------ ------ ------------ ------------ ---------------
Inventories 13 134,747 134,238 180,863
Trade and other receivables 102,539 152,800 102,498
Prepayments and other current assets 25,629 29,309 25,073
Income taxes recoverable and prepaid 33,347 65,402 33,233
Other taxes recoverable and prepaid 12 184,700 142,522 182,863
Cash and cash equivalents 3/14 359,441 446,430 390,491
------------------------------------------------------------ ------ ------------ ------------ ---------------
840,403 970,701 915,021
------------------------------------------------------------ ------ ------------ ------------ ---------------
Assets classified as held for sale 1,003 4,901 106
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total current assets 841,406 975,602 915,127
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total assets 2,346,162 2,793,798 2,932,369
------------------------------------------------------------ ------ ------------ ------------ ---------------
Equity and liabilities
Share capital 15 121,628 121,628 121,628
Share premium 185,112 185,112 185,112
Other reserves 12/15 (1,047,552) (347,406) (347,326)
Retained earnings 1,896,283 1,635,783 1,753,200
------------------------------------------------------------ ------ ------------ ------------ ---------------
Equity attributable to equity shareholders of the parent 1,155,471 1,595,117 1,712,614
------------------------------------------------------------ ------ ------------ ------------ ---------------
Non-controlling interest 14,510 20,944 22,428
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total equity 1,169,981 1,616,061 1,735,042
------------------------------------------------------------ ------ ------------ ------------ ---------------
Interest-bearing loans and borrowings 3/16 840,977 986,258 928,196
Defined benefit pension liability 40,373 51,875 53,154
Provision for site restoration 2,037 2,501 2,871
Deferred tax liability 1,585 2,018 2,031
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total non-current liabilities 884,972 1,042,652 986,252
------------------------------------------------------------ ------ ------------ ------------ ---------------
Interest-bearing loans and borrowings 3/16 211,983 26,496 101,043
Trade and other payables 32,991 38,387 50,001
Accrued liabilities and deferred income 30,429 39,689 35,508
Income taxes payable 4,086 19,278 12,554
Other taxes payable 11,720 11,235 11,969
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total current liabilities 291,209 135,085 211,075
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total liabilities 1,176,181 1,177,737 1,197,327
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total equity and liabilities 2,346,162 2,793,798 2,932,369
------------------------------------------------------------ ------ ------------ ------------ ---------------
The financial statements were approved by the Board of Directors
on the 5 August 2014.
Kostyantin Zhevago Christopher Mawe
Chief Executive Officer Chief Financial Officer
Interim Consolidated Statement of Cash Flows
Year
6 months ended ended
US$'000 Notes 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Profit before tax 247,644 149,935 305,392
Adjustments for:
Depreciation of property, plant and equipment and
amortisation of intangible assets 44,315 46,349 99,645
Interest expense 30,798 45,705 60,466
Write-down of VAT receivable 12 5,866 - 36,421
Interest income 9 (17,643) (1,079) (2,372)
Share of profit from associates (3,212) (2,007) (3,551)
Movement in allowance for doubtful receivables (254) 174 661
Losses on disposal of property, plant and
equipment 3,015 890 8,492
Write-offs and impairment losses 8 1,362 50 854
Site restoration provision 142 136 503
Employee benefits 3,632 4,313 8,654
Share based payments 190 600 1,266
Operating foreign exchange gains 2/7 (47,445) (339) (622)
Non-operating foreign exchange losses/(gains) 2/7 3,062 (1,305) (9,755)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Operating cash flow before working capital changes 271,472 243,422 506,054
------------------------------------------------------- ------ --------------- ------------------------ ----------
Changes in working capital:
(Increase)/decrease in trade and other
receivables (10,671) (29,661) 27,485
Increase in inventories (33,084) (2,485) (88,482)
Decrease in trade and other accounts payable (14,511) (34,427) (29,489)
Increase in VAT recoverable and other taxes
recoverable and payable (448) (14) (12,516)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Cash generated from operating activities 212,758 176,835 403,052
------------------------------------------------------- ------ --------------- ------------------------ ----------
Interest paid (28,101) (27,906) (57,037)
Income tax paid (45,048) (63,427) (108,321)
Post-employment benefits paid (1,911) (2,303) (4,768)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Net cash flows from operating activities 137,698 83,199 232,926
------------------------------------------------------- ------ --------------- ------------------------ ----------
Cash flows from investing activities
Purchase of property, plant and equipment (130,513) (138,651) (270,534)
Proceeds from disposal of property, plant and
equipment 764 626 910
Purchase of intangible assets (1,121) (8,082) (7,268)
Purchase of available-for-sale investment (17) (21,285) (82,382)
Interest received 972 1,029 2,090
Dividends from associates 2,755 - -
------------------------------------------------------- ------ --------------- ------------------------ ----------
Net cash flows used in investing activities (127,160) (166,363) (357,184)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Cash flows from financing activities
Proceeds from borrowings and finance 40,015 - 26,279
Repayment of borrowings and finance (15,268) (9,607) (19,308)
Arrangement fees paid (3,578) - (10,643)
Dividends paid to equity shareholders of Ferrexpo
plc (57,893) (58,190) (77,882)
Dividends paid to non-controlling shareholders - - (1)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Net cash flows used in financing activities (36,724) (67,797) (81,555)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Net decrease in cash and cash equivalents (26,186) (150,961) (205,813)
Cash and cash equivalents at the beginning of the
period/year 390,491 596,560 596,560
Effect of exchange rate changes on cash and cash
equivalents (4,864) 831 (256)
------------------------------------------------------- ------ --------------- ------------------------ ----------
Cash and cash equivalents at the end of the
period/year 14 359,441 446,430 390,491
------------------------------------------------------- ------ --------------- ------------------------ ----------
Interim Consolidated Statement of Changes in Equity
For the financial year
2013 and the six months
ended 30 June 2014 Attributable to equity shareholders of the parent
---------------------------------------------------------------------------------------------------
Uniting Employee Net
of Treasury Benefit unreali-sed
interest share Trust gains Translation Total
Issued Share reserve reserve reserve reserve reserve Retained capital and Non-controlling Total
US$ 000 capital premium (note 15) (note 15) (note 15) (note 15) (note 15) earnings reserves interests equity
At 1 January
2013 121,628 185,112 31,780 (77,260) (7,808) 820 (295,588) 1,568,077 1,526,761 20,637 1,547,398
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
Profit for the
period - - - - - - - 261,984 261,984 1,800 263,784
Other
comprehensive
income - - - - - (108) (428) 440 (96) (9) (105)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
income for
the period - - - - - (108) (428) 262,424 261,888 1,791 263,679
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - - (77,301) (77,301) - (77,301)
Share-based
payments - - - - 1,266 - - - 1,266 - 1,266
At 31 December
2013
(audited) 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 - - - - - - - 203,256 203,256 4,765 208,021
Other
comprehensive
income - - - - - (141) (700,275) (2,191) (702,607) (12,683) (715,290)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
income for
the period - - - - - (141) (700,275) 201,065 (499,351) (7,918) (507,269)
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - - (57,982) (57,982) - (57,982)
Share-based
payments - - - - 190 - - - 190 - 190
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
At 30 June
2014
(unaudited) 121,628 185,112 31,780 (77,260) (6,352) 571 (996,291) 1,896,283 1,155,471 14,510 1,169,981
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ----------
For the six months ended 30
June 2013 Attributable to equity shareholders of the parent
----------------------------------------------------------------------------------------------------
Uniting Employee Net
of Treasury Benefit unreali-sed
interest share Trust gains Translation
Issued Share reserve reserve reserve reserve reserve Retained Total capital Non-controlling Total
US$ 000 capital premium (note 15) (note 15) (note 15) (note15) (note15) earnings and reserves interests equity
At 1 January 2013 121,628 185,112 31,780 (77,260) (7,808) 820 (295,588) 1,568,077 1,526,761 20,637 1,547,398
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Profit for the period - - - - - - - 125,622 125,622 312 125,934
Other comprehensive income - - - - - (122) 172 68 118 (5) 113
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Total comprehensive income
for the period - - - - - (122) 172 125,690 125,740 307 126,047
Equity dividends paid to
shareholders of Ferrexpo plc - - - - - - - (57,984) (57,984) - (57,984)
Share-based payments - - - - 600 - - 600 - 600
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
At 30 June 2013 (unaudited) 121,628 185,112 31,780 (77,260) (7,208) 698 (295,416) 1,635,783 1,595,117 20,944 1,616,061
------------------------------ -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Note 1: Corporate information
Organisation and operation
Ferrexpo plc (the 'Company') is incorporated in the United
Kingdom with 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, Japan, China,
Dubai 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 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% (30 June 2013: 51.0%; 31 December 2013: 50.3%) of
Ferrexpo plc's issued share capital. The Group's operations are
largely conducted through Ferrexpo plc's principal subsidiary, OJSC
Ferrexpo Poltava Mining.
The Group comprises of Ferrexpo plc and its consolidated
subsidiaries as set out below:
Equity interest owned
-------------------------------
Name Country of incorporation Principal activity 30.06.14 30.06.13 31.12.13
% % %
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
Trade, transportation
DP Ferrotrans Ukraine 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
Management services &
Ferrexpo Services Limited Ukraine 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(2) 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(1) Ukraine Holding company 100.0 100.0 100.0
LLC DDSG Invest(1) Ukraine Asset holding company 100.0 100.0 100.0
LLC DDSG Ukraine Shipping
Management(1) Ukraine Barging company 100.0 100.0 100.0
LLC DDSG Ukraine
Shipping(1) Ukraine Asset holding company 100.0 100.0 100.0
Arlington Ltd. (3) Guernsey Holding company 100.0 - -
--------------------------- -------------------------- ---------------------------- --------- --------- ---------
(1) The entities were incorporated in February and March
2013.
(2) Formerly Helogistics Transport GmbH.
(3) The entity was acquired in February 2014.
The Group's interests in the entities listed above are held
indirectly by the Company.
At 30 June 2014, the Group also holds through OJSC Ferrexpo
Poltava Mining an interest of 48.6% (30 June 2013: 48.6%; 31
December 2013: 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
six months period ended 30 June 2014 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
as at 31 December 2013.
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 2013. 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 2013, has been delivered to the Register of Companies. 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 30 June 2014, the Ukrainian Hryvnia has
devalued by approximately 48% compared to the US Dollar; from 7.993
as at 31 December 2013 to 11.823 as at the end of this reporting
period. As a result of this devaluation, the total equity decreased
by US$712,059 thousand as of 30 June 2014 due the exchange
differences on translating foreign operations which is reflected in
the translation reserve. Further details are provided in note 7 and
note 15.
Changes in accounting policies
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
2013 except for the adoption of new amendments and improvements to
IFRSs effective as of 1 January 2014, noted below:
Standards adopted affecting reported results, financial position
or disclosures
IFRS 12 Disclosure of involvement with other entities
The new standard covers the disclosures that were previously
required in consolidated financial statements under IAS 27
Consolidated and separate financial statements as well as those
included in IAS 31 Interests in joint ventures and IAS 28
Investments in associates. The new standard became mandatory in the
EU for financial years beginning on or after 1 January 2014. A
number of additional disclosures will be required in the next
Annual Report and Accounts under the new standard. There is no
impact on these interim condensed consolidated financial statements
to be considered.
Standards and interpretations adopted with no effect on reported
results, financial position or disclosures
IFRS 10 Consolidated financial statements
The new standard provides additional guidance to assist in the
determination of which entities are controlled and are required to
be consolidated. This standard replaces the portion of IAS 27
Consolidated and separate financial statements that addresses the
accounting for consolidated financial statements. The new standard
became mandatory in the EU for financial years beginning on or
after 1 January 2014. The new standard did not have an impact on
the financial position or performance of the Group.
IFRS 11 Joint arrangements
The new standard replaces IAS 31 Interests in joint ventures and
SIC 13 Jointly-controlled entities - non-monetary contributions by
ventures. The standard defines contractually agreed sharing of
control of an arrangement and the accounting for joint operations
and joint ventures. The new standard became mandatory in the EU for
annual periods beginning on or after 1 January 2014. The new
standard did not have an impact on the financial position or
performance of the Group.
IAS 32 Financial instruments: presentation - offsetting
financial assets and financial liabilities
The amendment clarifies existing application issues relating to
the offset of financial assets and financial liabilities
requirements. The amendment became effective for financial years
beginning on or after 1 January 2014 with retrospective
application. The amendment did not have an impact on the financial
position or performance of the Group.
Note 2: Summary of significant accounting policies continued
IAS 36 Impairment of assets - recoverable amount disclosures
The amendment to the standard was issued in May 2013 and became
effective for financial years beginning on or after 1 January 2014.
The amendment removes the requirement to disclose recoverable
amounts when there has been no impairment or reversal of
impairment. Further to that, the disclosure requirements have been
aligned with those under US GAAP for impaired assets. The amendment
did not have an impact on the financial position or performance of
the Group.
IFRIC 21 Levies
The new interpretation clarifies when to recognise a liability
for a levy imposed by governments (including government agencies
and similar bodies) in accordance with laws and regulations. The
IASB implementation date is for periods beginning on or after 1
January 2014 whereas the interpretation becomes mandatory in the EU
only for annual periods beginning on or after 17 June 2014. Income
taxes in accordance with IAS 12, fines and other penalties and
liabilities arising from trading schemes are not covered by this
interpretation. The Group does not intend to take advantage of the
possibility of an early adoption of this interpretation.
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 42.
Year
6 months ended ended
US$ 000 Notes 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Profit before tax and finance 266,328 196,009 359,218
Write-down of VAT receivable 12 5,866 - 36,421
Write-offs and impairment losses 8 1,362 50 854
Share based payments 190 600 1,266
Losses on disposal of PPE 3,015 890 8,492
Depreciation and amortisation 44,315 46,349 99,645
------------------------------------ ------ --------------- ------------------------ ----------
EBITDA 321,076 243,898 505,896
------------------------------------ ------ --------------- ------------------------ ----------
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.
Year
6 months ended ended
US$'000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Cost of sales - pellet production 5 307,878 375,610 726,960
Depreciation and amortisation 5 (34,753) (36,348) (78,690)
Purchased concentrate and other items for resale 5 (16,139) (15,767) (34,805)
Inventory movements 5 2,345 (1,055) 25,476
Other (10,073) (8,062) (13,213)
---------------------------------------------------- --------------- ------------------------ -----------
C1 cost 249,258 314,378 625,728
---------------------------------------------------- --------------- ------------------------ -----------
Own ore produced (tonnes) 5,212,877 5,084,898 10,465,606
---------------------------------------------------- --------------- ------------------------ -----------
C1 cash cost per tonne US$ 47.8 61.8 59.8
---------------------------------------------------- --------------- ------------------------ -----------
Note 3: Segment information continued
Net financial indebtedness
Net financial indebtedness as defined by the Group comprises
cash and cash equivalents, term deposits, interest bearing loans
and borrowings.
US$ 000 Notes As at 30.06.14 As at 30.06.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Cash and cash equivalents 14 359,441 446,430 390,491
Interest bearing loans and borrowings - current 16 (211,983) (26,496) (101,043)
Interest bearing loans and borrowings - non-current 16 (840,977) (986,258) (928,196)
------------------------------------------------------- ------ --------------- --------------- ---------------
Net financial indebtedness (693,519) (566,324) (638,748)
------------------------------------------------------- ------ --------------- --------------- ---------------
As of 30 June 2014, the Group has a committed undrawn facility
of US$350 million with an average maturity of three years. Note 16
provides further information.
Note 4: Revenue
Revenue for the six months period ended 30 June 2014 consisted
of the following:
Year
6 months ended ended
US$ 000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Revenue from sales of ore pellets:
Export 715,951 740,775 1,494,899
-------------------------------------------------------------- --------------- ------------------------ ----------
Total revenue from sale of iron ore pellets and concentrate 715,951 740,775 1,494,899
-------------------------------------------------------------- --------------- ------------------------ ----------
Revenue from logistics and bunker business 39,763 29,728 76,321
Revenue from services provided 89 335 1,155
Revenue from other sales 3,110 3,864 9,010
-------------------------------------------------------------- --------------- ------------------------ ----------
Total revenue 758,913 774,702 1,581,385
-------------------------------------------------------------- --------------- ------------------------ ----------
No sales were made in Ukraine during the periods presented.
Export sales of iron ore pellets and concentrate by geographical
destination were as follows:
Year
6 months ended ended
US$'000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Traditional Market 351,550 338,740 663,950
Growth Market 255,983 258,543 565,901
Natural Market 108,418 143,492 265,048
Total export revenue 715,951 740,775 1,494,899
------------------------ --------------- ------------------------ -----------
Information about the composition of the markets is provided in
the Glossary.
Note 5: Cost of sales
Cost of sales for the six months period ended 30 June 2014
consisted of the following:
Year
6 months ended ended
US$ 000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Materials 41,604 54,806 107,530
Purchased concentrate and other items for resale 16,139 15,767 34,805
Electricity 64,063 78,542 158,849
Personnel costs 27,277 35,766 66,194
Spare parts and consumables 2,929 9,222 15,921
Depreciation and amortisation 34,753 36,348 78,690
Fuel 35,159 40,185 74,653
Gas 36,235 41,859 82,028
Repairs and maintenance 27,378 34,416 72,299
Royalties and levies 11,848 9,597 23,162
Cost of sales from logistics business 9,652 4,481 16,531
Bunker fuel 15,572 9,214 29,731
Inventory movements (2,345) 1,055 (25,476)
Other 12,838 18,047 38,304
---------------------------------------------------- --------------- ------------------------ ----------
Total cost of sales 333,102 389,305 773,221
---------------------------------------------------- --------------- ------------------------ ----------
Year
6 months ended ended
US$ 000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Cost of sales - pellet production 307,878 375,610 726,960
Cost of sales - logistics and bunker business 25,224 13,695 46,261
------------------------------------------------- --------------- ------------------------ ----------
Total cost of sales 333,102 389,305 773,221
------------------------------------------------- --------------- ------------------------ ----------
Note 6: General and administrative expenses
General and administrative expenses for the six months period
ended 30 June 2014 consisted of the following:
Year
6 months ended ended
US$ 000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Personnel costs 14,707 15,066 31,972
Buildings and maintenance 1,255 1,416 2,571
Taxes other than income tax and other charges 52 750 184
Professional fees 2,963 1,994 6,715
Depreciation and amortisation 997 1,612 4,022
Communication 603 516 1,328
Vehicles maintenance and fuel 730 1,097 1,584
Repairs 260 487 982
Audit fees 822 781 1,606
Non-audit fees 74 762 900
Security 311 1,254 497
Other 909 1,721 2,478
------------------------------------------------- --------------- ------------------------ ----------
Total general and administrative expenses 23,683 27,456 54,839
------------------------------------------------- --------------- ------------------------ ----------
Note 7: Foreign exchange gains and losses
Foreign exchange gains and losses for the six months period
ended 30 June 2014 consisted of the following:
Year
6 months ended ended
US$ 000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Operating foreign exchange gains
Revaluation of trade receivables 48,388 4 1
Revaluation of trade payables (985) 36 30
Others 42 299 591
------------------------------------------------------- --------------- ------------------------ ----------
Total operating foreign exchange gains 47,445 339 622
------------------------------------------------------- --------------- ------------------------ ----------
Non-operating foreign exchange gains
Revaluation of interest-bearing loans (33,598) (1,553) 2,892
Revaluation of cash and cash equivalents 49,018 3,004 7,329
Others (18,482) (146) (466)
------------------------------------------------------- --------------- ------------------------ ----------
Total non-operating foreign exchange (losses)/gains (3,062) 1,305 9,755
------------------------------------------------------- --------------- ------------------------ ----------
Total foreign exchange gains 44,383 1,644 10,377
------------------------------------------------------- --------------- ------------------------ ----------
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 30 June 2014, the Ukrainian Hryvnia has
devalued by approximately 48% compared to the US Dollar; from 7.993
as at 31 December 2013 to 11.823 as at the end of this reporting
period. This has affected mainly the opening balances of property
plant and equipment (note 11), income taxes recoverable and prepaid
and other taxes recoverable and prepaid (note 12).
Note 8: Write-offs and impairment losses
Impairment losses relate to adjustments made against the
carrying value of assets where this is higher than the recoverable
amount. Write-offs and impairment losses for the six months period
ended 30 June 2014 consisted of the following:
Year
6 months ended ended
US$ 000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Write-off of VAT receivables 1,351 - -
Write-off of inventories - - 528
Write-off of property, plant and equipment 11 50 326
Total write-offs and impairment losses 1,362 50 854
---------------------------------------------- --------------- ------------------------ ----------
Note 9: Finance income and expense
Finance income and expense for the period ended 30 June 2014
consisted of the following:
Year
6 months ended ended
US$000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Finance income
Interest income 949 1,002 2,062
Other finance income 16,694 77 310
Total finance income 17,643 1,079 2,372
--------------------------------------------------------------- --------------- ------------------------ ----------
Finance expense
Interest expense on financial liabilities measured at
amortised cost (26,925) (27,330) (53,340)
Effect from capitalised borrowing costs 4,991 3,746 8,966
Interest on defined benefit plans (2,480) (2,740) (5,487)
Bank charges (7,476) (3,562) (10,976)
Other finance costs (1,375) (18,572) (5,116)
--------------------------------------------------------------- --------------- ------------------------ ----------
Total finance expense (33,265) (48,458) (65,953)
--------------------------------------------------------------- --------------- ------------------------ ----------
Net finance expense (15,622) (47,379) (63,581)
--------------------------------------------------------------- --------------- ------------------------ ----------
Note 9: Finance income and expensecontinued
Other finance income includes a US$16,497 thousand release of a
discount recorded in the prior years for VAT in dispute that was
expected to be recovered over a protracted period of time. Further
information is provided in note 12.
This discount was built up in prior periods and recorded as a
finance cost. The amount recorded for the six months ended 30 June
2013 and the year ended 31 December 2013 were US$18,000 thousand
and US$3,695 thousand respectively.
Note 10: 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.
Year
6 months ended ended
30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Profit for the period / year attributable to equity
shareholders:
Basic earnings per share (US cents) 34.72 21.46 44.76
Diluted earnings per share (US cents) 34.65 21.43 44.69
--------------------------------------------------------------- --------------- ------------------------ ----------
The calculation of the basic and diluted earnings per share is
based on the following data:
Year
6 months ended ended
Thousands 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Weighted average number of shares
Basic number of ordinary shares outstanding 585,383 585,239 585,294
Effect of dilutive potential ordinary shares 1,225 989 926
------------------------------------------------- --------------- ------------------------ ----------
Diluted number of ordinary shares outstanding 586,608 586,228 586,220
------------------------------------------------- --------------- ------------------------ ----------
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
Year
6 months ended ended
US$000 30.06.14 6 months ended 30.06.13 31.12.13
(unaudited) (unaudited) (audited)
Dividend proposed
Interim dividend for 2014: 3.3 US cents 19,319
Final dividend for 2013: 3.3 US cents - - 19,317
Special dividend for 2013: 6.6 US cents - - 38,633
Interim dividend for 2013: 3.3 US cents - 19,317 -
------------------------------------------- --------------- ------------------------ ----------
Total dividends proposed 19,319 19,317 57,950
------------------------------------------- --------------- ------------------------ ----------
Paid per ordinary share
Final dividend for 2014: 3.3 US cents 19,279 - -
Special dividend for 2013: 6.6 US cents 38,614 - -
Interim dividend for 2013: 3.3 US cents - - 19,692
Final dividend for 2012: 3.3 US cents - 19,441 19,441
Special dividend for 2012: 6.6 US cents - 38,749 38,749
------------------------------------------- --------------- ------------------------ ----------
Total dividends paid during the period 57,893 58,190 77,882
------------------------------------------- --------------- ------------------------ ----------
Note 11: Property, plant and equipment
During the six months period ended 30 June 2014, the Group
acquired property, plant and equipment with a cost of US$130,090
thousand (30 June 2013: US$136,309 thousand; 31 December 2013:
US$319,320 thousand) and disposed of property, plant and equipment
with original costs of US$11,244 thousand (30 June 2013: US$6,168
thousand; 31 December 2013: US$32,782 thousand). The total
depreciation charge for the period was US$44,315 thousand (30 June
2013: US$46,349 thousand; 31 December 2013: US$99,645
thousand).
During the reporting period, the Ukrainian Hryvnia has devalued
compared to the US Dollar from 7.993 as of 31 December 2013 to
11.823 as of 30 June 2014 reducing property, plant and equipment by
US$471,680 thousand. This effect is reflected in the translation
reserve included in shareholder's equity. See also note 15.
Property, plant and equipment include capitalised borrowing
costs on qualifying assets of US$12,515 thousand (30 June 2013:
US$5,254 thousand; 31 December 2013: US$8,966 thousand).
Note 12: Other taxes recoverable and prepaid
As at 30 June 2014 taxes recoverable and prepaid comprised:
US$000 As at 30.06.14 As at 30.06.13 As at 31.12.13
(unaudited) (unaudited) (audited)
VAT receivable 184,585 142,376 182,628
Other taxes prepaid 115 146 235
----------------------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid - current 184,700 142,522 182,863
----------------------------------------------------------- --------------- --------------- ---------------
VAT receivable - 127,502 78,281
----------------------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid - non-current - 127,502 78,281
----------------------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid 184,700 270,024 261,144
----------------------------------------------------------- --------------- --------------- ---------------
As of 30 June 2014, US$211,856 thousand of the VAT receivable
before discount relates to the Group's Ukrainian business
operations (30 June 2013: US$304,981 thousand; 31 December 2013:
US$318,213 thousand).
The Ukrainian Hryvnia devalued compared to the US Dollar from
7.993 as of 31 December 2013 to 11.823 as of 30 June 2014 reducing
the gross balance of VAT outstanding expressed in US Dollar by
US$103,089 thousand and the associated provision of US$36,421
thousand by US$11,798 thousand. These net differences are reflected
in the translation reserve. See also note 15.
Subsequent to the end of the reporting period, bonds were
received by the Group with a face value of UAH1,365,616 thousand
(US$115,464 thousand at the current exchange rate) in settlement
for VAT due of the same amount. The bonds were issued by the
Ministry of Finance to settle certain accumulated VAT liabilities,
are tradable and mature over a period of five years in 10 equal
instalments. The bonds carry a 9.5% annual coupon payable
semi-annually. At the date of issuance, the bonds traded with a
discount of 22% to face value. An additional charge of US$2,925
thousand has been made to the income statement reflecting the
difference between the estimated value of VAT bonds at 31 December
2013 and the value estimated at 30 June 2014. See also note 20.
As at the end of the financial year 2013, part of the VAT
balance was in the court system and management estimated that these
balances would be recovered over a protracted period of time. As a
result a discount of US$23,696 thousand was recorded and charged to
finance expense during the financial years 2012 and 2013. From this
balance, US$16,497 was released to finance income in 2014 (note 9)
with the remainder reflected in the translation reserve. As at 30
June 2014, management now expect amounts in the court system to be
recovered inside one year through a further issuance of bonds which
will trade at a similar discount to face value and a provision of
US$2,941 thousand has been recorded in the income statement to
reflect this.
Further information on VAT is provided in the Update on Risks
section and the Financial Review on page 9 and page 15
respectively.
Note 13: Inventories
Inventories are held at the lower of cost or net realisable
value. As at 30 June 2014 ore stockpiles amounting to US$63,810
thousand (30 June 2013: US$20,244; 31 December 2013: US$58,303
thousand) were classified as non-current as this ore is not planned
to be processed within one year.
Note 14: Cash and cash equivalents
As at 30 June 2014 the Group held cash and cash equivalents of
US$359,441 thousand (30 June 2013: US$446,430 thousand; 31 December
2013: US$390,491 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 37 of the Annual Report and
Accounts 2013. See also note 17 of these interim condensed
consolidated financial statements for further information in
respect of transactional banking arrangements with a related
party.
Note 15: Share capital and reserves
The share capital of Ferrexpo plc at 30 June 2014 was
613,967,956 (30 June 2013: 613,967,956; 31 December 2013:
613,967,956) Ordinary Shares at par value of GBP0.10 paid for cash,
resulting in share capital of US$121,628 thousand which is
unchanged since the Group's Initial Public Offering in June 2007.
This balance includes 25,343,814 shares (30 June 2013: 25,343,814
shares; 31 December 2013: 25,343,814 shares) which are held in
treasury, resulting from a share buyback that was undertaken in
September 2008, and 3,193,201 shares held in the employee benefit
trust reserve (30 June 2013: 3,275,435 shares; 31 December 2013:
3,275,435 shares).
The translation reserve includes the effect from the exchange
differences arising on translation of foreign non-US Dollar
functional currency operations (mainly in Ukrainian Hryvnia).
During the period ended 30 June 2014, the Ukrainian Hryvnia
devalued from 7.993 as at the beginning of the year to 11.823 as at
30 June 2014 and the exchange differences arising on translation of
the Group's foreign operations is initially recognised in the other
comprehensive income. See also the Interim Consolidated Statement
of Comprehensive Income on page 21 of these financial statements
for further details. As at 30 June 2014 other reserves attributable
to equity shareholders of Ferrexpo plc comprised.
For the financial
year 2013 and the
six months ended 30
June 2014
Uniting of Employee Net
interest Treasury Benefit Trust unreali-sed Translation Total other
US$ 000 reserve share reserve reserve gains reserve reserve reserves
At 1 January 2013 31,780 (77,260) (7,808) 820 (295,588) (348,056)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Foreign currency
translation
differences - - - - (428) (428)
Loss on
available-for-sale
investments - - - (138) - (138)
Tax effect - - - 30 - 30
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Total comprehensive
income for the
period - - - (108) (428) (536)
Share based
payments - - 1,266 - - 1,266
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
At 31 December 2013
(audited) 31,780 (77,260) (6,542) 712 (296,016) (347,326)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Foreign currency
translation
differences - - - - (747,843) (747,843)
Loss on
available-for-sale
investments - - - (183) - (183)
Tax effect - - - 42 47,568 47,610
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Total comprehensive
income for the
period - - - (141) (700,275) (700,416)
Share based
payments - - 190 - - 190
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
At 30 June 2014
(unaudited) 31,780 (77,260) (6,352) 571 (996,291) (1,047,552)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
For the six months
ended 30 June 2013
Uniting of Employee Net
interest Treasury Benefit Trust unreali-sed Translation Total other
US$ 000 reserve share reserve reserve gains reserve reserve reserves
At 1 January 2013 31,780 (77,260) (7,808) 820 (295,588) (348,056)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Foreign currency
translation
differences - - - - 172 172
Gain on
available-for-sale
investments - - - (150) - (150)
Tax effect - - - 28 - 28
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Total comprehensive
income for the
period - - - (122) 172 50
Share based
payments - - 600 - - 600
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
At 30 June 2013
(unaudited) 31,780 (77,260) (7,208) 698 (295,416) (347,406)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Note 16: 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 30.06.14 As at 30.06.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Current
Syndicated bank loans - secured 175,000 - 70,000
Bank loans - secured 22,761 12,880 16,775
Obligations under finance leases 4,515 3,866 4,523
Interest accrued 9,707 9,750 9,745
----------------------------------------------- -------------- -------------- --------------
Total current interest bearing loans and
borrowings 3 211,983 26,496 101,043
----------------------------------------------- -------------- -------------- --------------
Non-current
Eurobond issued 495,074 492,563 493,810
Syndicated bank loans - secured 245,000 420,000 350,000
Other bank loans - secured 85,564 55,965 66,129
Obligations under finance leases 15,339 17,730 18,257
----------------------------------------------- -------------- -------------- --------------
Total non-current interest bearing loans
and borrowings 3 840,977 986,258 928,196
----------------------------------------------- -------------- -------------- --------------
Total interest bearing loans and borrowings 1,052,960 1,012,754 1,029,239
----------------------------------------------- -------------- -------------- --------------
As at 30 June 2014 the Group has a syndicated US$420 million
revolving pre-export finance facility and a US$500 million
Eurobond.
The revolving pre-export finance facility was drawn in full on 7
October 2011. This finance facility is available for 60 months
including amortisation over the final 24 months. The maturity is 31
August 2016.
As at 30 June 2014 the major bank debt facility was 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.
The unsecured US$500 million Eurobond was issued on 7 April 2011
and is due for repayment on 7 April 2016. The bond has a 7.875%
coupon and interest is payable on a semi-annual basis.
In 2013 the Group secured an additional US$350 million revolving
pre-export finance facility which is undrawn as of 30 June 2014. At
the reporting date, US$280 million from this new facility is
available for draw down subject to declaration of the effective
date. As at 30 June 2014 the Group has no other committed credit
lines (30 June 2013: US$25,300 thousand; 31 December 2013:
nil).
Note 17: Related party disclosure
During the periods presented the Group entered into arm's length
transactions with entities under the common control of the majority
owner of the Group, Kostyantin Zhevago and with associated
companies and with other related parties. Management considers that
the Group has appropriate procedures in place to identify and
properly disclose transactions with the related parties.
Entities under common control are those under the control of
Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in
which the Group holds an interest of 48.6%. This is the only
associated company of the Group. Other related parties are
principally those entities controlled by Anatoly Trefilov who is a
member of the supervisory board of OJSC Ferrexpo Poltava Mining.
Related party transactions entered into by the Group during the
periods presented are summarised in the following tables:
Revenue, expenses, finance income and finance expenses
6 months ended 30.06.14 (unaudited) 6 months ended 30.06.13 (unaudited) Year ended 31.12.13 (audited)
------------------------------------- ------------------------------------- -----------------------------------
Entities Asso-ciated Other Entities Asso-ciated Other Entities Asso-ciated Other
under compa-nies related under compa-nies related under compa-nies related
common parties common parties common parties
US$ 000 control control control
Other sales (a) 318 - 289 310 - 182 647 - 491
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
Total related
party
transactions
within revenue 318 - 289 310 - 182 647 - 491
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
Materials (b) 6,570 - 95 6,389 - 18 13,897 - 43
Purchased
concentrate and
other items for
resale (c) - - - 5,329 - - 7,053 - -
Spare parts and
consumables (d) 1,292 - 1 1,396 - - 2,838 - 2
Gas (e) 19,102 - - 15,810 - - 33,581 - -
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
Total related
parties
transactions
within cost of
sales 26,964 - 96 28,924 - 18 57,369 - 45
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
Selling and
distribution
expenses (f) 5,539 11,850 3,512 5,438 11,507 3,514 11,183 22,582 8,335
General and
administration
expenses (g) 666 - - 1,135 - 8 1,747 - 12
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
Total related
parties
transactions
within expenses 33,169 11,850 3,608 35,497 11,507 3,540 70,299 22,582 8,392
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
Finance income (h) 847 - - 625 - - 1,673 - -
Finance expenses
(h) (27) - - (156) - - (184) - -
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
Net finance
income/(expenses) 820 - - 469 - - 1,489 - -
------------------- --------- ------------ ------------ --------- ------------ ------------ --------- ------------ ----------
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$80 thousand (30 June 2013: US$69 thousand; 31 December 2013:
US$149 thousand) and income from premises leased to Kislorod PCC of
US$134 thousand (30 June 2013: US$115 thousand; 31 December 2013:
US$238 thousand).
(b) Purchases of compressed air, oxygen and metal scrap from
Kislorod PCC for US$2,753 thousand (30 June 2013: US$2,529
thousand; 31 December 2013: US$5,988 thousand); and
(b) Purchases of cast iron balls from AutoKraZ Holding Co. for
US$3,262 thousand (30 June 2013: US$3,254 thousand; 31 December
2013: US$6,865 thousand).
(b) Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas
for US$406 thousand (30 June 2013: US$108 thousand; 31 December
2013: US$711 thousand).
(c) No purchases of concentrate and other items for resale from
Vostok Ruda Ltd in the period ended 30 June 2014 (30 June 2013:
US$5,329 thousand; 31 December 2013: US$7,053 thousand).
(d) Purchases of spare parts from CJSC Kiev Shipbuilding and
Ship Repair Plant ('KSRSSZ') in the amount of US$355 thousand (30
June 2013: US$328 thousand; 31 December 2013: US$864 thousand);
(d) Purchases of spare parts from Valsa GTV of US$511 thousand
(30 June 2013: US$698 thousand; 31 December 2013: US$1,226
thousand);
(d) Purchases of ferromanganese from Raw and Refined Commodities
AG for US$284 thousand (30 June 2013: US$199 thousand; 31 December
2013: US$354 thousand).
Note 17: Related party disclosure continued
(e) Procurement of gas for US$19,102 thousand (30 June 2013:
US$15,810 thousand; 31 December 2013: US$33,581 thousand) from OJSC
Ukrzakordongeologia.
(f) Purchases of advertisement, marketing and general public
relations services from FC Vorskla of US$5,503 thousand (30 June
2013: US$5,400 thousand; 31 December 2013: US$11,000 thousand).
(g) Insurance premiums of US$328 thousand (30 June 2013: US$363
thousand; 31 December 2013:US$728 thousand) paid to ASK Omega for
workmen's insurance and general cover.;
(g) Fees of US$209 thousand (30 June 2013: US$228 thousand; 31
December 2013: US$433 thousand) paid to Bank Finance & Credit
(Bank F&C) for bank services.
(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 38.
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). These are described below:
(f) Purchases of logistics services in the amount of US$11,850
thousand (30 June 2013: US$11,507 thousand; 31 December 2013:
US$22,582 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. Descriptions of the material transactions are below:
(a) Sales of material and services to Slavutich Ruda Ltd. for
US$281 thousand (30 June 2013: US$182 thousand; 31 December 2013:
US$491 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$3,512
thousand (30 June 2013: US$3,514 thousand; 31 December 2013:
US$8,335 thousand). Slavutich Ruda Ltd. earned commission income of
US$324 thousand on these services (30 June 2013: US$492 thousand;
31 December 2013: US$979 thousand).
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature
which were undertaken between Group companies and entities under
common control, associated companies and other related parties
during the periods presented.
6 months ended 30.06.14 6 months ended 30.06.13 (unaudited) Year ended 31.12.13 (audited)
(unaudited)
----------------------------------------------- ----------------------------------------------- -----------------------------------------------
US$ 000 Entities Asso-ciated Other related parties Entities Asso-ciated Other related parties Entities Asso-ciated Other related parties
under compa-nies under compa-nies under compa-nies
common common common
control control control
Purchases - - - - - - - - -
with
independent
fair and
reasonable
confirmation
Purchases - - - - - - 18,141 - -
with
shareholder
approval
Purchases in
the ordinary
course of
business 1,742 - 4 2,428 - - 3,741 - -
-------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Total
purchases of
property,
plant and
equipment
(i) 1,742 - 4 2,428 - - 21,882 - -
-------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Entities under common control
i During the first six months of the financial year 2014, the
Group entered in various transactions of a capital nature with
related parties totalling to US$1,742 thousand. These transactions
were in the ordinary course of business. Individual transactions of
a capital nature which exceeded US$200 thousand are listed
below.
-- During the period ended 30 June 2014, the Group procured
goods and services totaling US$1,512 thousand from OJSC Berdichev
Machine-Building Plant Progress for various ongoing projects.
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 previous
listing rules (see below).A further 67 rail cars amounting to
US$3,551 thousand were ordered in the ordinary course of business.
A prepayment of US$8,743 thousand was made in relation to these
rail cars which are due for delivery between July and December
2014.
Note 17: Related party disclosure continued
Prior periods:
During the financial year 2013, the Group entered into various
transactions of a capital nature with related parties totalling
US$3,741 thousand. These transactions were in the ordinary course
of business and on an arm's length basis. Individual transactions
which exceeded US$200 thousand are listed below:
-- In January 2013, the Group procured three railway platforms
in the amount of US$218 thousand from PJSC Stakhanov Railcar
Company.
-- In April 2013, the Group entered into a contract with OJSC
Berdichev Machine-Building Plant Progress and OJSC Uzhgorodsky
Turbogas for the production and supply of deslimers for a new
flotation section in the amount of US$585 thousand.
-- In June and September 2013, the Group procured metal works
from OJSC Berdichev Machine-Building Plant Progress in the amount
of US$1,297 thousand and US$1,054 thousand in connection with the
construction of a new crushing section.
The Group received shareholder approval on 24th May 2012 for an
option to purchase up to 500 rail cars from PJSC Stakhanov Railcar
Company between the date of the approval and 31 December 2014. In
February 2013, the Group exercised the right under this option to
order 267 rail cars. These rail cars, amounting to US$18,141
thousand, were delivered and taken into operation during the
financial year 2013 and increased the total fleet of rail cars from
1,933 units to 2,200 units as at 31 December 2013.
Balances with related parties
The outstanding balances, as a result of transactions with
related parties, for the periods presented are shown in the table
below:
6 months ended 30.06.14 6 months ended 30.06.13 (unaudited) Year ended 31.12.13 (audited)
(unaudited)
----------------------------------------------- ----------------------------------------------- -----------------------------------------------
Entities Asso-ciated Other related parties Entities Asso-ciated Other related parties Entities Asso-ciated Other related parties
under compa-nies under compa-nies under compa-nies
common common common
US$ 000 control control control
Investments
available-for-sale
(j) 213 - - 405 - - 396 - -
Other non-current
assets (k) 5,797 - - 2,580 - - 7,438 - -
Prepayments for
property, plant
and equipment (l) 9,161 - - 13,658 - - 1,548 - -
-------------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Total non-current
assets 15,171 - - 14,063 - - 9,382 - -
-------------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Trade and other
receivables (m) 806 - 15 931 - 64 1,150 - 31
Prepayments and
other current
assets (n) 1,118 1,283 - 746 2,278 170 136 1,172 186
Cash and cash
equivalents (o) 155,416 - - 92,739 - - 143,005 - -
-------------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Total current
assets 157,340 1,283 15 94,416 2,278 234 144,291 1,172 217
-------------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Trade and other
payables (p) 961 - 42 2,997 - 302 3,099 - 275
-------------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Current liabilities 961 - 42 2,997 - 302 3,099 - 275
-------------------- --------- ------------ ---------------------- --------- ------------ ---------------------- --------- ------------ ----------------------
Entities under common control
j The balance of the investments available-for-sale 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 of the values
in the table above are related to fair value adjustments recorded
during the respective reporting periods. The shareholdings for all
investments remained unchanged during the periods disclosed above.
The balance of US$213 thousand as at 30 June 2014 related to the
investment in PJSC Stakhanov Railcar Company (30 June 2013: US$405
thousand; 31 December 2013: US$396 thousand).
k As at 30 June 2014, other non-current assets related to a
deposit of US$5,797 thousand with bank F&C (30 June 2013:
US$2,580 thousand; 31 December 2013: US$7,438 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 The balance as at 30 June 2014 includes prepayments of
US$8,743 thousand made in relation to rail cars purchased from PJSC
Stakhanov Railcar Company (30 June 2013: US$13,256 thousand; 31
December 2013: nil). The prepayments made as at 30 June 2014 are in
relation to 300 rail cars ordered and expected to be delivered
between July and December 2014 whereas those made as at 30 June
2013 are in relation to 267 rail cars ordered in 2013 and received
in full until August 2013. Prepayments of US$242 thousand were made
to OJSC Berdichev Machine-Building Plant Progress (30 June 2013:
US$72 thousand; 31 December 2013: US$1,397 thousand).
m As at 30 June 2014, trade and other receivables included
outstanding amounts of US$295 thousand due from Vorskla Steel Ltd.
(30 June 2013: US$335 thousand; 31 December 2013: US$387 thousand)
in relation to other sales and US$333 thousand (30 June 2013:
US$469 thousand; 31 December 2013: US$540 thousand) from Kislorod
PCC for the sale of power, steam and water.
Note 17: Related party disclosure continued
n Prepayments and other current assets relate include US$895
thousand made to OJSC Ukrzakordongeologia for gas (30 June 2013:
US$398 thousand; 31 December 2013: nil) and US$12 thousand for
spare parts from CJSC Kiev Shipbuilding and Ship Repair Plant
('KSRSSZ') (30 June 2013: US$202 thousand; 31 December 2013: US$9
thousand). Prepayments are in the normal course of business.
o As at 30 June 2014, cash and cash equivalents with Bank
F&C were US$155,416 thousand (30 June 2013: US$92,739 thousand;
31 December 2013: US$143,005 thousand). Further information is
provided under Transactional banking arrangements below.
p Trade and other payables amounting to US$507 thousand for
compressed air and oxygen purchased from Kislorod PCC (30 June
2013: US$592 thousand; 31 December 2013: US$639 thousand). US$118
thousand (30 June 2013: nil; 31 December 2013: US$215 thousand) are
due to AutoKraZ Holding Co., US$200 thousand (30 June 2013: US$78
thousand; 31 December 2013: US$113 thousand) to Valsa GTV Ltd. and
US$1 thousand (30 June 2013: US$110 thousand; 31 December 2013:
US$258 thousand) OJSC Berdichev Machine-Building Plant Progress for
the procurement of spare parts. The balance as at end of the
comparative period ended 30 June 2013 included an amount US$2,075
thousand for providing advertisement services from FC Vorskla (31
December 2013: nil). The balance as at end of the period ended 31
December 2013 included an amount US$1,690 thousand for procurement
of gas from OJSC Ukrzakordongeologia.
Associated companies
n Prepayments and other current assets relate to prepayments of
US$1,283 thousand (30 June 2013: US$2,278 thousand; 31 December
2013: US$1,172 thousand) made TIS Ruda LLC for transhipment
services.
Other related parties
p Trade and other payables amounting to US$42 thousand as at 30
June 2014 are in respect of distribution services provided by
Slavutich Ruda Ltd. (30 June 2013: US$302 thousand; 31 December
2013: US$275 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 35.
The Group had an uncommitted multicurrency revolving loan
facility agreement with Bank F&C which expired on 16 April
2013. The maximum limit of this facility amounted to UAH80 million
(30 June 2013: US$10,009 thousand; 31 December 2013: US$10,009
thousand) and the terms and conditions of the facility were subject
of an independent fair and reasonable confirmation at its inception
and renewal dates. The loan facility remained undrawn for the
entire period of time since its inception.
On 26 April 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 26
April 2016. The aggregate maximum limit of these facilities amounts
to UAH80 million (30 June 2014: US$6,766 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$5,601 thousand as of the date of the signing of the agreements.
The terms and conditions of both facilities were the subject of an
independent fair and reasonable confirmation.
US$ 000 As at 30.06.14 As at 30.06.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Loan facilities 6,766 10,009 10,009
Amount drawn - - -
Letter of credit facility outstanding - 1,869 153
Bank guarantee facility outstanding - - -
----------------------------------------- --------------- --------------- ---------------
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$5,797 thousand at Bank F&C as security (30 June 2013:
US$2,580 thousand; 31 December 2013: US$7,438 thousand). The
interest rate margin earned by Bank F&C covers the costs of
administrating the mortgages and loans. Detailed information on the
social loyalty programme is provided in the Corporate Social
Responsibility Review section of the Annual Report and Accounts
2013.
Cash and cash equivalent balances held with Bank F&C are in
the normal course of business and are held on call or from time to
time on overnight deposit. Interest is paid on balances held. The
interest rates received by the Group were in line with relevant
comparable market rates throughout the periods presented.
Note 18: Commitments and contingencies
Commitments
US$ 000 As at 30.06.14 As at 30.06.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Operating lease commitments 59,065 81,058 65,555
Capital commitments on purchase of PPE 113,168 121,027 102,958
------------------------------------------ --------------- --------------- ---------------
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 which was disclosed and, as appropriate,
updated in the Group's 2007 IPO prospectus and subsequent interim
and annual report and accounts as well as in its Eurobond
prospectuses.
In 2005, a former shareholder (the claimant) in OJSC Ferrexpo
Poltava Mining ('FPM') brought proceedings, in the Ukrainian
courts, seeking to invalidate the share sale and purchase
agreements pursuant to which a 40.19% stake in FPM was sold to
nominee companies that were previously ultimately controlled by
Kostyantin Zhevago, amongst other parties. This 40.19% stake has
subsequently been diluted to 14% following share issues by FPM.
Following various court rulings in favour of the defendant and
the claimant, on 10 April 2010 the High Commercial Court of Ukraine
granted the cassation complaint of the former shareholder and
invalidated the respective share sale and purchase agreements
without ruling on any consequences of such invalidity.
On 6 October 2011, the former shareholder filed a new claim in
Ukraine alleging that as a result of the invalidity of the share
sale and purchase agreements with respect to the 40.19% stake in
FPM, their rights were infringed by the capital increases approved
at FPM's general shareholder meeting on 20 November 2002 and all
other general meetings relating to changes to FPM's charter
capital. Accordingly, the claimants asked that the court invalidate
the decisions taken at FPM's general shareholder meetings and to
restore their status as 40.19% shareholders of FPM as at 20
November 2002 and to cancel all share issues that took place after
20 November 2002.
On 22 November 2011, Ferrexpo AG ('FAG') filed a claim against
the claimants at the High Court of Justice in London seeking a
confirmation of ownership in FPM shares. The claim was launched in
order to take an active step outside Ukraine to resolve the
long-running dispute. By a judgement dated 3 April 2012, the
proceedings in the UK were stayed while the case continues in
Ukraine.
On 26 March 2013 the Kyiv City Commercial Court issued an
injunction to suspend trading of FPM shares.
The case is currently being heard at the Kyiv City Commercial
Court and as at the date of the publication of these interim
financial statements for the period ended 30 June 2014, there has
been no decision passed. After having taken legal advice, the
management of the Group believes that risks related to these court
proceedings are remote. Neither the final decision by the High
Commercial Court of Ukraine nor any subsequent claims entitles
claimants to direct enforcement rights to the shares of FPM in the
form claimed by the claimants. In addition, the restitution of the
status quo ante of the shareholding position as sought by claimants
is not completely in line with Ukrainian law for various legal,
technical and practical reasons. It follows that no provision was
recorded for this dispute as at 30 June 2014. At the same time, in
the light of the risks surrounding the operation and independence
of Ukrainian courts, including the risks associated with the
Ukrainian legal system in general, the claimants may ultimately
prevail in this dispute and the Group's ownership of the relevant
interest in FPM may be successfully challenged in the future.
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 new 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$13,365 thousand (31 December
2013: US$101,977 thousand) outstanding at 30 June 2014 is in the
process of being considered by the Ukrainian court system in
several different cases. As the VAT is fully recoverable under the
relevant Ukrainian legislation, the Group expects to receive
positive court decisions for these ongoing court proceedings and
expect these amounts to be recovered in a further issuance of
bonds. Consequently, the VAT is recorded at its full amount in the
financial statements, net of an estimated discount to reflect the
expected difference to the bonds. See also disclosure made in note
12. No provision has been made for any related penalties and fines,
which would in the case of a final negative ruling become
payable.
Note 19: Financial instruments
Fair values
Set out below are the carrying amounts and fair values of the
Group's financial instruments that are carried in the interim
consolidated statement of financial position:
Carrying amount Fair Value
------------------------------------------------- -------------------------------------------------
As at 30.06.14 As at 30.06.13 As at 31.12.13 As at 30.06.14 As at 30.06.13 As at 31.12.13
US$ 000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Financial assets
Cash and cash
equivalent 359,441 446,430 390,491 359,441 446,430 390,491
Trade and other
receivables 102,539 152,800 102,498 102,539 152,800 102,498
Available-for-sale
investments 82,595 21,690 82,778 82,595 21,690 82,778
Other financial
assets 12,033 1,068 15,054 12,033 1,068 15,054
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
assets 556,608 621,988 590,821 556,608 621,988 590,821
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Financial
liabilities
Trade and other
payables 32,991 38,387 50,001 32,991 38,387 50,001
Accrued liabilities 27,756 39,678 32,015 27,756 39,678 32,015
Interest bearing
loans and
borrowings 1,052,960 1,012,754 1,029,239 1,055,118 880,504 1,035,933
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
liabilities 1,113,707 1,090,819 1,111,255 1,115,865 958,569 1,117,949
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
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.
As of 30 June 2014, the Group holds a 15.5% equity investment in
Ferrous Resources with a cost of acquisition amounting to US$82,382
thousand (30 June 2013: US$21,285 thousand; 31 December 2013:
US$82,382 thousand). The shares are not traded on an organised
financial market. The fair value of the investment as of 30 June
2014 was not materially different to its cost and, in the absence
of any substantial recent transactions in the period, has been
determined using a financial model which estimates the present
value of the expected post-tax cash flows plus an estimate of the
value of certain assets for which there are currently no detailed
development plans. The main assumptions used in the model were a
long-run iron ore price of US$90/t and pre-tax cost of capital of
12%. A reduction of the ore price by one percent would affect the
fair value by approximately US$9,600 thousand.
The available-for-sale equity investment in PJSC Stakhanov
Railcar Company in the amount of US$213 thousand (30 June 2013:
US$405 thousand; 31 December 2013: US$396 thousand) is fair value
based on the quoted market price for its shares on the Ukrainian
Stock exchange ('PFTS').
The fair values of interest bearing loans and borrowings are
based on the discounted cash flows using market rates except for
the fair value of the Eurobond issued, which is based on the market
price quotation at the reporting date.
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable.
Level 1: fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2: fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
US$ 000 As at 30.06.14 (unaudited)
Level 1 Level 2 Level 3 Total
Financial assets
Available-for-sale investments 213 - 82,382 82,595
---------------------------------- --------- --------- --------- -------
Total financial assets 213 - 82,382 82,595
---------------------------------- --------- --------- --------- -------
US$ 000 As at 30.06.13 (unaudited)
Level 1 Level 2 Level 3 Total
Financial assets
Available-for-sale investments 405 - 21,285 21,690
---------------------------------- --------- --------- --------- -------
Total financial assets 405 - 21,285 21,690
---------------------------------- --------- --------- --------- -------
Note 19: Financial instruments continued
US$ 000 As at 31.12.13 (audited)
Level 1 Level 2 Level 3 Total
Financial assets
Available-for-sale investments 396 - 82,382 82,778
---------------------------------- --------- -------- -------- -------
Total financial assets 396 - 82,382 82,778
---------------------------------- --------- -------- -------- -------
There were no transfers between the different levels during the
reporting period.
The decrease of the fair value of the investments in Level 1
amounting to US$183 thousand was recorded in other comprehensive
income as of 30 June 2014 (30 June 2013: loss of US$150 thousand;
31 December 2013: loss of US$138 thousand).
Reconciliation of recurring fair value measurements categorised
within Level 3 of the fair value hierarchy is shown in the table
below:
US$ 000 As at 30.06.14 As at 30.06.13 As at 31.12.13
(unaudited) (unaudited) (audited)
Opening balance 82,382 - -
Total gains or losses: - - -
- in profit or loss - - -
- in other comprehensive income - - -
Purchases - 21,285 82,382
Transfer out of Level 3 - - -
----------------------------------- --------------- --------------- ---------------
Closing balance 82,382 21,285 82,382
----------------------------------- --------------- --------------- ---------------
Note 20: Events after the reporting period
On 16 July 2014, the Group received bonds from the Ministry of
Finance to settle certain accumulated VAT liabilities of the
Ukrainian tax authorities. As a result, the VAT receivable balance
of US$115,464 thousand will be derecognised as a receivable and
recognised as a financial asset at the date of the receipt of the
bonds. As of 30 June 2014, the VAT receivable balance was fair
valued to reflect the market value of this financial instrument.
Further information is provided in note 12.
Other than disclosed above, no material adjusting or
non-adjusting events have occurred subsequent to the period
end.
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/GBP 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
The company news service from the London Stock Exchange
END
IR PFMATMBJMMTI
Ferrexpo (LSE:FXPO)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Ferrexpo (LSE:FXPO)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
