TIDMFXPO
RNS Number : 1116V
Ferrexpo PLC
05 August 2015
5 August 2015
FERREXPO plc
("Ferrexpo" or the "Group")
2015 Interim Results
Ferrexpo plc, a top four supplier of iron ore pellets to the
global steel industry, today announces interim results for the six
months ended 30 June 2015.
Michael Abrahams, Non-Executive Chairman, said:
"We are pleased to report a good set of results and an excellent
operational and marketing performance given the challenging
circumstances in both the iron ore industry and in Ukraine. We have
increased production and sales volumes, improved the quality of our
pellet output and benefited from a significantly reduced cost base.
Furthermore, we have reduced net debt and extended our debt
maturities.
"We remain cautious in the short to medium term, due to the
potential for further iron ore price weakness and the fragile state
of the Ukrainian economy."
1H 2015 Financial Summary:
US$ million (unless 6 months 6 months Change Year ended
otherwise stated) ended 30.06.15 ended 30.06.14 31.12.14
------------------------- ---------------- ---------------- ------- -----------
Total pellet production
(kt) 5,817 5,369 8% 11,021
------------------------- ---------------- ---------------- ------- -----------
Sales volumes (kt) 5,680 5,498 3% 11,167
------------------------- ---------------- ---------------- ------- -----------
Revenue 512 759 (33%) 1,388
------------------------- ---------------- ---------------- ------- -----------
EBITDA 176 321 (45%) 496
------------------------- ---------------- ---------------- ------- -----------
Profit before tax 143 248 (42%) 254
------------------------- ---------------- ---------------- ------- -----------
Diluted EPS (US
cents per share) 19.57 34.65 (44%) 30.39
------------------------- ---------------- ---------------- ------- -----------
Dividend (US cents
per share) 3.3 3.3 - 13.2[1]
------------------------- ---------------- ---------------- ------- -----------
Working capital
(increase) (28) (59) (53%) (15)
------------------------- ---------------- ---------------- ------- -----------
Net cash flow from
operating activities 88 138 (36%) 288
------------------------- ---------------- ---------------- ------- -----------
Capital investment 25 132 (81%) 235
------------------------- ---------------- ---------------- ------- -----------
Net debt (653) (694) (6%) (678)
------------------------- ---------------- ---------------- ------- -----------
Net debt to EBITDA
(last 12 months) 1.9x 1.2x 58% 1.4x
------------------------- ---------------- ---------------- ------- -----------
[1] This amount includes a special dividend of 6.6 US cents per
share.
1H 2015 Summary:
-- Production volumes grew 8% to a record 1H level of 5.8
million tonnes while at the same time output of the Group's 65% Fe
pellets increased 93% to 5.1 million tonnes
-- Customer demand remained strong throughout the period, sales
volume growth was impacted by the timing of shipments
-- Broadly stable pellet premiums, increased iron content in the
Group's pellets and lower freight rates reduced the impact of a 46%
decline in the iron ore price index compared to 1H 2014
-- The cash cost of production reduced by 30%, or US$14.4 per
tonne, to US$33.4 per tonne of pellets (1H 2014: US$47.8 per tonne)
as a result of local currency devaluation, lower oil prices and
increased operating efficiencies.
-- EBITDA US$176 million (1H 2014: US$321 million). This was
achieved in the light of significantly lower selling prices and
included a non-cash operating foreign exchange gain of US$15
million (1H 2014: US$47 million)
-- Ferrexpo received US$42 million for the sale of its 15.51%
stake in Ferrous Resources during the period.
-- Capital investment significantly reduced to US$25 million (1H
2014: US$132 million) due to the completion of Group's investment
programme to increase the quality and quantity of its pellet output
to 65% Fe and 12 million tonnes respectively.
-- Cash at 30 June 2015 US$471 million (31 December 2014: US$627
million) of which liquidity inside Ukraine was US$165 million (31
December 2014: US$161 million)
-- The Group successfully extended its 2016 Eurobond maturity to
2018 and 2019 including a prepayment of US$154 million[2]
-- Net debt as of 30 June 2015 was US$653 million (31 December
2014: US$678 million). Net debt to EBITDA of 1.9x as of 30 June
2015 (31 December 2014: 1.4x).
2 US$54 million prepaid as part of February Exchange offer,
US$100 million prepaid after period end as part of July Exchange
Offer. For more information see Financial Management on page 7.
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://edge.media-server.com/m/p/er65mekt
For further information contact:
Ferrexpo:
Ingrid McMahon +44 207 389 8304
Maitland:
Neil Bennett +44 207 379 5151
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets
in Ukraine and transport and sales operations throughout the world.
It has been mining and processing high quality iron ore pellets for
the global steel industry for over 35 years. Ferrexpo's resource
base is one of the largest iron ore deposits in the world. The
Group is the 4th largest supplier of pellets to the global steel
industry and the largest producer and exporter of pellets from the
Former Soviet Union. In 2014, it produced 11 million tonnes of
pellets, a 2% increase compared to 2013 and a record for the
Company. Ferrexpo has a diversified customer base supplying steel
mills in Austria, China, Japan, Germany as well as other European
and Asian countries. Ferrexpo is listed on the main market of the
London Stock Exchange under the ticker FXPO. For further
information, please visit www.ferrexpo.com
REVIEW OF 1H 2015
Following the successful completion of the four year investment
programme in 1Q 2015, Ferrexpo has been able to reduce the
financial impact of a 46% decline in the iron ore price index[3] in
the first half of 2015, compared to the first half of 2014. It has
achieved this through increasing the volume and quality of pellet
output to record levels, enabling an increase in sales volumes and
an improvement in price realisations. It has also reduced the cost
base by combining the mining plan of the new Yeristovo mine with
the Poltava mine while benefiting from production efficiencies as
well as a weaker local currency.
As a result, Ferrexpo is able to report an EBITDA margin of 34%
in 1H 2015 (1H 2014:42%) despite the average iron ore fines price
being US$50 per tonne lower compared to the first half of 2014
(average 1H 2015: US$61 per tonne vs. average 1H 2014: US$111 per
tonne). Overall, EBITDA in 1H 2015 was US$176 million compared to
US$321 million in 1H 2014.
Ferrexpo also extended US$346 million of the April 2016 Eurobond
maturity to April 2018 and April 2019 and disposed of its 15.5%
stake in Ferrous Resources for US$42 million, strengthening the
balance sheet in the current lower priced environment.
The Group's mining operations are in the Poltava region of
central Ukraine, 425 kilometres to the North West of the conflict
in the East of the country. To date, operations remain unaffected
by the conflict, however, the Directors note that the Ukrainian
economy and, in particular, the banking sector remains fragile.
Industry analysts forecast a surplus of iron ore fines in 2H
2015 and 2016 due to the completion of major supply projects,
particularly in Brazil and Australia, while growth in steel output,
notably in China, is expected to remain weak. This is likely to
result in continued industry price weakness in the short to medium
term.
In contrast to the increase in iron ore fines, an increase in
iron ore pellets should remain relatively limited reflecting the
highly capital intensive nature of installing beneficiation and
pelletising facilities. Long term demand from steel mills for
higher grade product, such as pellets, is expected to continue so
that mills can maintain the quality of their final product,
partially offsetting the increased supply of lower grade fines
material. Furthermore, growing demands for environmentally friendly
sources of iron ore, such as pellets, due to concerns regarding the
high emissions of sinter fines as well as ambitions to produce
higher value-added steel products should underpin demand for
pellets in China.
Ferrexpo is the fourth largest iron ore pellet exporter in the
world by volume with a long life asset, a competitive cost base and
a diversified high quality customer portfolio. As a testament to
the confidence in the future of the Group, during the period,
Ferrexpo built on its position as a key supplier to premium steel
mills around the world, notably to Germany, and it made its first
shipment to South Korea.
Financial Results
Revenue
Group revenue was US$512 million in 1H 2015, 33% lower than 1H
2014 (US$759 million) reflecting a weak iron ore price index which
fell on average by 46%(3) compared to the same period in 2014. The
Group's net realised FOB/DAP price outperformed the index price by
11% due to relatively stable pellet premiums, an increase in the
average iron content of the Group's pellets and lower freight
rates. In addition, Ferrexpo increased its sales volumes by 3% to
5.7 million tonnes (1H 2014: 5.5 million tonnes). For further
information see Market environment, iron ore and freight prices on
page 8.
3 Platts index price for 62% Fe iron ore fines, CFR China
Costs
C1 Cash Cost of Production
The Group's C1 cash cost of production reduced by US$14.4 per
tonne to US$33.4 per tonne compared to US$47.8 per tonne in 1H
2014. Of this 30% cost reduction, approximately US$3.7 per tonne
was driven by increased volume output and mining efficiency gains
(for further information see Production Costs on page 10), US$3.0
per tonne due to lower oil, and US$9.0 per tonne was due to the
Hryvnia devaluation while higher processing costs related to
increased production volumes of 65% Fe pellets increased the C1
cost by US$1.3 per tonne.
In 1H 2015, the average exchange rate of the UAH per US dollar
was 21.43 compared to 10.28 in 1H 2014. The higher rate in 1H 2015
reduced the C1 cost by 21% as approximately 45% of the Group's cost
to produce a pellet is in Hryvnia For further information on the
impact of the Hryvnia devaluation see Currency on page 5.
Local C1 cost inflation during the period was primarily driven
by wage inflation (+21% vs. average 1H 2014) and electricity price
increases (+43% vs. average 1H 2014) following the large
devaluation of the Hryvnia in February 2015. These costs, however,
are still significantly lower in US dollar terms than the prior
period. The table below shows the month on month change in CPI for
the first half of the year. Inflation rose strongly in March and
April following the devaluation in February and thereafter the rate
of increase started to slow. For further information see Update on
Risks: Inflation on page 12.
Ukrainian 2015 Month on Month CPI
January February March April May 2015 June 2015
2015 2015 2015 2015
--------- -------- --------- ------ ------ --------- ----------
Ukraine
CPI 103.1 105.3 110.8 114.0 102.2 100.4
--------- -------- --------- ------ ------ --------- ----------
Source: www.ukrstat.gov.ua
Selling and Distribution costs
Selling and distribution costs decreased by 32% to US$113
million (1H 2014: US$165 million) as a result of lower
international freight rates and devaluation of the local
currency.
Costs to transport the Group's pellets to border points for
international dispatch were US$57 million or US$10 per tonne (1H
2014: US$68 million or US$12 per tonne). The 24% reduction in rail
costs was mainly due to the Hryvnia depreciation against the US
dollar as 100% of rail costs are in local currency. Following the
devaluation, railway tariff inflation increased on average by 42%
compared to 1H 2014 although this rate of inflation is starting to
slow due to subdued economic activity within Ukraine and
corresponding lower usage of the rail infrastructure.
International freight costs reduced significantly to US$36
million in 1H 2015 compared to US$65 million in 1H 2014. This was
driven by lower oil prices and depressed market conditions in the
shipping industry. For further information see Market Environment,
Iron Ore and Freight Prices on page 8.
Currency
Ferrexpo prepares its accounts in US Dollars. The functional
currency of the Ukrainian operations is the Hryvnia. During 1H 2015
the Hryvnia devalued from UAH15.77 per US Dollar as of 1 January
2015 to UAH21.01 per US Dollar as of 30 June 2015. The average rate
for the period was UAH21.43 per US Dollar. Balances at 30 June 2015
are converted at the prevailing rate. The devaluation of the
currency since 31 December 2014 has resulted in a US$312 million
reduction in the net assets of the Group and has been reflected in
the translation reserve. Since 30 June 2015, the Hryvnia has
remained stable at a level of around UAH21 to UAH23 per US
Dollar.
Operating Profit from Continuing Operations before Adjusted
Items
Operating profit from continuing operations before adjusted
items was US$142 million in 1H 2015 compared to US$273 million in
1H 2014. This includes a non-cash operating foreign exchange gain
of US$15 million. (1H 2014: US$47 million).
EBITDA
EBITDA for the period was US$176 million compared to US$321
million in 1H 2014. The decline reflected the fall in iron ore
prices during the period offset by an improved sales mix, higher
sales volumes and significant cost reduction.
Ferrous Resources
As announced previously, in the 2H of 2014 Ferrexpo fully
impaired its 15.5% investment in Ferrous Resources due to
uncertainties, at the time, regarding its operational activities as
well as the future development of its mining operation, resulting
in a non-cash charge of US$82 million. During 1H 2015, Ferrexpo
disposed of its entire stake for US$42 million and as a result a
gain on disposal has been recognised in the income statement for
US$42 million.
Interest
Finance expense was US$37 million (1H 2014: US$33 million). The
average cost of debt for the period was 5.32% compared to an
average cost of 5.03% in 1H 2014 (FY 2014: 4.85%).The increase
reflected the amortisation of the Group's US$420 million pre-export
banking facility which commenced in 2H 2014 as well as higher
coupon payments on the Eurobond which were partially offset by a
lower principal amount outstanding.
As of 30 June 2015 gross debt was US$1.1 billion (31 December
2014: gross debt US$1.3 billion) and net debt stood at US$653
million (31 December 2014: US$678 million).
Tax
The income tax charge for 1H 2015 was US$27 million (1H 2014:
US$40 million) based on an expected tax rate of 19% for the
financial year 2015 (full year 2014: 28%). The rate reflects lower
non tax deductible charges in 2015. As in the prior year, the
majority of tax paid by the Group is inside Ukraine.
The requirement in Ukraine for exporters to prepay a certain
percentage of VAT refunds in the form of corporate profit tax
('CPT') has remained in place in 1H 2015. During the period, the
Group prepaid on average 10% of its VAT refunds as corporate profit
tax. CPT paid under this arrangement is in excess of the tax due,
resulting in a prepaid CPT balance. As of 30 June 2015, the prepaid
corporate profit tax balance was US$54 million (30 June 2014: US$89
million, 31 December 2014: US$74 million). Due to the Hryvnia
devaluation against the US dollar in 1H 2015 the balance was
reduced by US$18 million which is included in the translation
reserve. Further details on pre-paid corporate profit tax are
disclosed in note 11 to the accounts.
Cash Flows
Net debt as of 30 June 2015 reduced by US$25 million to US$653
million (31 December 2014: US$678 million) and by US$41 million
compared to 30 June 2014 (US$694 million).
Net cash flows from operating activities in 1H 2015 totalled
US$88 million compared to US$138 million in 1H 2014 principally
reflecting the lower iron ore price environment partly offset by
lower costs.
Capital expenditure decreased significantly to US$25 million (1H
2014: US$132 million) reflecting the low iron ore price environment
and the completion of the Group's investment programme to increase
the quality and volume of its pellets to 65% Fe and 12 million
tonnes per annum respectively. For further details see Capital
Investment below on page 6.
During the period the Group received US$42 million from the sale
of Ferrous Resources and repaid US$180 million of debt primarily
reflecting US$111 million of amortisation of its US$420 million
pre-export finance facility and the repayment of US$54 million of
2016 Eurobonds as part of the exchange offer. For further details
see Financial Management on page 7.
Capital Investment
In 1Q 2015, the Group commissioned the final sections of the new
floatation units allowing the production facilities to produce a
greater proportion of premium 65% Fe pellets while also increasing
overall production volumes. This was the final part of a four year
investment programme to modernise and increase the capacity and
quality of the Group's output. As such capital expenditure reduced
significantly in 1H 2015 to US$25 million (1H 2014: US$132
million).
Following these investments, Ferrexpo significantly reduced its
discretionary capital expenditure reflecting the current iron ore
price environment. Capital expenditure is expected to be at a level
of between US$50 million to US$100 million per annum in the current
environment. The actual amount of expenditure will be determined by
the iron ore price and the Group's cash generation ability as well
as Ferrexpo's aim to balance capital expenditure with dividend
payments and net debt reduction. The Group now has a well invested
asset base which is efficient and low cost.
Dividends
The Group's policy is to pay a modest but consistent dividend
throughout the economic cycle while ensuring adequate liquidity to
support the business, reducing net leverage and maintaining returns
to shareholders. As part of the extension of the Group's Eurobond
in February and July 2015 (see Financial Management below) Ferrexpo
agreed to restrict future dividend payments to reflect the higher
of either an annual payment of US$60 million or a 10% yield on the
market capitalisation of the equity for the year in question until
the 2019 bonds have been repaid.
The Directors recommend an interim dividend of 3.3 US cents per
Ordinary Share amounting to US$19 million (1H 2014: 3.3 US cents)
for payment on 18 September 2015 to shareholders on the register at
the close of business on 14 August 2015. The ex-dividend date will
be 13 August 2015. The dividend will be paid in UK Pounds Sterling,
with an election to receive in US Dollars.
Financial Management
Ferrexpo has maintained financial discipline notwithstanding the
prevailing environment. Key elements of its financial strategy
include funding capital expenditures out of operating cash flows
and maintaining sufficient liquidity to ensure operations are
shielded as far as practical from risk.
Net debt to EBITDA for the last 12 months was 1.9x as of 30 June
2015 (30 June 2014: 1.2x; 31 December 2014: 1.4x) which was within
the Group's net debt to EBITDA covenant of 3.0x. As of 30 June
2015, Ferrexpo had net debt of US$653 million (31 December 2014:
US$678 million) which included cash and cash equivalents of US$471
million (31 December 2014: US$627 million).
Due to the reduced iron ore price outlook for the coming years,
the Company is looking to better match the amortisation profile of
its debt facilities to the net cash flow generation of the business
taking into account operational and other risks. As part of this
ongoing process, on 23 February 2015, it extended US$160 million of
its US$500 million Eurobond due for repayment in April 2016 equally
into April 2018 and April 2019 in exchange for a prepayment of
US$54 million of the principal at par and an increase in the coupon
from 7.875% to 10.375%.
Following the period end, on 2 July 2015, the Company extended
US$186 million of the remaining April 2016 US$500 million Eurobond
equally to April 2018 and April 2019 for a prepayment of US$100
million of the liability at par, and as a result extinguished the
2016 debt in full.
The business requires a significant liquidity buffer to ensure
that it can continue to operate in a volatile commodity price and
country environment. See Update on Risks including Ukrainian
Banking Sector and Iron Ore Price on page 11. To ensure liquidity
remains strong in view of the current operating environment,
management of the Group's bank debt amortisation profile is
ongoing.
As a result of the forecast cash flows of the business, the
large reserve base and the competitive positioning of the business
on the global iron ore and pellet cost curves together with the
support already received from its bondholders, the accounts have
been drawn up on a going concern basis, however attention is drawn
to the risks facing the business on page 11.
Market Environment, Iron Ore and Freight Prices
The World Steel Association has reported that global crude steel
production declined 2.0% in 1H 2015 to 813 million tonnes compared
to 830 million tonnes in 1H 2014. Of this, Chinese steel production
declined 1.2% to 410 million tonnes compared to 415 million tonnes
in 1H 2014.
Meanwhile, the global supply of iron ore was 697 million tonnes
in line with 1H 2014 reflecting 5% growth from Australia and 7%
growth from Brazil, while supply from the rest of the world
declined[4].
In 1H 2015, the Platts index price[5] for 62% Fe iron ore fines,
CFR China, declined from US$72 per tonne as of 1 January 2015 to a
seven year low of US$48 per tonne in April before recovering to
US$60 per tonne as of 30 June 2015. The average price during the
period was US$61 per tonne compared to an average price of US$111
per tonne in 1H 2014 and average price of US$97 for the full year
2014.
In contrast to the decline in the iron ore fines price, the
market premium paid for pellets in 1H 2015 was relatively stable.
The long term contract pellet premium in the key markets of Western
Europe and North East Asia was set at US$32 to US$33 per tonne
compared to US$38 per tonne in 1H 2014. While on the Chinese spot
market, pellet premiums were in line with average 1H 2014 levels at
US$29 per tonne reflecting a strong 1Q 2015 before premiums
softened in 2Q 2015.
In general, the lower pellet premiums compared to 1H 2014
reflected an increase in supply of pellets from the two largest
pellet producers in Brazil as they commissioned their pellet
expansion projects at the end of 2014. In total these projects will
increase pellet supply by approximately 16 million tonnes per
annum. Ferrexpo believes that there is unlikely to be any new major
pellet supply into the seaborne market in 2H 2015 and 2016.
Ferrexpo's sales to non-traditional markets (47% of total sales
in 1H 2015) are in general based on CFR or similar delivered terms
with sales to traditional markets (53% of total sales in 1H 2015)
priced on a DAP or FOB barge basis. For those long term sales
contracts requiring calculation of a DAP or FOB equivalent price,
transparent capesize freight indices such as the Baltic Exchange C3
freight price (capesize route from Tubarao, Brazil to Qingdao,
China) were deducted from the CFR Platts 62% Fe Index adjusted for
the appropriate form and quality premiums. The average C3 freight
rate in 1H 2015 was US$11 per tonne which was significantly lower
than the average of US$21 per tonne in 1H 2014. This reflected
lower oil prices and depressed market conditions in the freight
market.
As a result, Ferrexpo's net realised FOB/DAP[6] pellet price for
the period declined by 35% compared to 1H 2014, 11% better than the
62% Fe fines price index for the same period. This performance was
as a result of broadly stable pellet premiums and increased iron
content in the Group's output (both of which demonstrate the
benefit of producing a premium iron ore product) and lower freight
rates.
4 Source: CRU Iron Ore Market Statistical Review July 2015
5 The Platts index iron ore fines price refers to the 62% Fe
iron ore fines price to China, CFR. Ferrexpo's received price for
its iron ore pellets is composed of this index price plus a pellet
premium, adjusted for Fe content and quality and less freight.
6 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.
Operational Review
Marketing
In 1H 2015, Ferrexpo increased sales volumes by 3% to 5.7
million tonnes of iron ore pellets compared to 5.5 million tonnes
in 1H 2014. The table below shows the breakdown of sales by key
market regions where sales mix remained broadly stable, however,
overall tonnages delivered to Europe increased on higher output and
strong demand. The increase in sales volumes were slightly behind
production volumes due to the timing of shipments.
Sales volume by market regions:
6 months 6 months
ended 30.06.15 ended 30.06.14
---------------- ----------------
Central Europe 53% 50%
---------------------- ---------------- ----------------
China 24% 23%
---------------------- ---------------- ----------------
Western Europe 9% 10%
---------------------- ---------------- ----------------
North East Asia 8% 10%
---------------------- ---------------- ----------------
Turkey, Middle East,
India 6% 7%
---------------------- ---------------- ----------------
Total sales volume
(million tonnes) 5,680 5,498
---------------------- ---------------- ----------------
The Group's long term contracts are all based on a spot index
price using various reference periods. The table below shows the
breakdown of sales by pricing terms.
Sales volume by pricing terms:
6 months 6 months
ended 30.06.15 ended 30.06.14
-------------------- ---------------- ----------------
Monthly spot index 82% 81%
-------------------- ---------------- ----------------
Current quarter
spot index 5% 6%
-------------------- ---------------- ----------------
Lagging 3 month
spot index 6% 6%
-------------------- ---------------- ----------------
Spot sales fixed
on day 7% 7%
-------------------- ---------------- ----------------
Total sales volume
(million tonnes) 5,680 5,498
-------------------- ---------------- ----------------
Production
Health and Safety
The Group is pleased to report that there have been no work
related fatalities at the Group's operations during the period (1H
2014: one). The lost-time injury frequency rate ('LTIFR') at FPM
was 0.63 per million man hours in 1H 2015 (1H 2014: 0.34 per
million man hours). This reflected five accidents in 1H 2015
compared to three in 1H 2014. The LTIFR at FYM was zero in line
with 1H 2014. Overall, Ferrexpo's total LTIFR in Ukraine (including
contractors) for 1H 2015 was 0.54 compared to 0.29 in 1H 2014 (FY
2014: 0.47). Given the rise in the LTIFR, the Group has increased
its supervision of critical activities within repairs and
maintenance. It is also undertaking an overall risk assessment of
the Group's operating environment including management training
programmes and the development and implementation of common safety
standards for all sites.
LTIFR for the Group's barging operation, DDSG, including leased
crews, was 1.91 per million man hours worked (1H 2014: 12.54 per
million man hours worked). The number of accidents declined to one
in 1H 2015 compared to six in 1H 2014.
LTIFR 1H 2015 1H 2014 2014
------------------- ------- ------- ----
Mining operations 0.54 0.29 0.47
------------------- ------- ------- ----
Barging operations 1.91 12.54 9.08
------------------- ------- ------- ----
Total Group 0.61 0.84 0.86
------------------- ------- ------- ----
Production Volumes and Quality
Production of pellets increased to a new record in 1H 2015,
growing 8.3% to 5.8 million tonnes of pellets (1H 2014: 5.4 million
tonnes of pellets). Concurrently, following the completion of the
Group's quality upgrade project in early 1Q 2015, the iron content
of the Group's output increased and production of Ferrexpo's
premium 65% Fe pellets[7] grew 93% to 5.1 million tonnes or 87% of
total production volumes (1H 2014:2.6 million tonnes of 65% Fe
pellets or 49% of total volume). The increase in iron content and
quality of the Group's pellets is in line with Ferrexpo's strategy
to supply premium product to high end steel producers.
The table below summarises production in 1H 2015 compared to 1H
2014.
Change
Production in tonnes 000 1H 2015 1H 2014 %
-------------------------------- --------- --------- --------
Pellet production from
own ore 5,503.94 5,212.88 5.6%
62%
Fe 750.44 2,741.90 (72.6%)
65%
Fe 4,753.49 2,470.98 92.4%
------------------------------- --------- --------- --------
Pellet production from
third party materials 312.77 155.72 100.9%
62%
Fe 5.96 0.00 -
65%
Fe 306.81 155.72 97.0%
------------------------------- --------- --------- --------
Total pellet production 5,816.70 5,368.60 8.3%
62%
Fe 756.40 2,741.90 (72.4%)
65%
Fe 5,060.30 2,626.70 92.6%
------------------------------- --------- --------- --------
7 Ferrexpo Premium Pellets, FPP, contain 65% Fe compared to
Ferrexpo Basic Pellet, FBP, which contain 62% Fe.
Production Costs
The Group's average C1 cash cost reduced by 30% to US$33.4 per
tonne in 1H 2015 compared to US$47.8 per tonne in 1H 2014 and by
27% when compared to US$45.9 per tonne for FY 2014. The decline was
driven by the depreciation of the Hryvnia as well as fixed cost
benefits from increased volume output and lower costs due to
optimisation of the Group's mining plan (see Costs and Currency on
page 5).
Ferrexpo has modified its overall mining plan to reduce costs,
taking advantage of lower cost ore from the new Yeristovo mine
whilst at the same time optimising repairs and maintenance as well
as shift patterns and changeovers. Since implementation in January
2015, this has resulted in a 34% decrease in the amount of waste
material moved compared to 1H 2014 and reduced the C1 cash cost by
approximately US$3.7 per tonne.
Other actions taken, in conjunction with the Business
Improvement Programme, include review of the Group's top twenty
supplier contracts as well as implementation of international
mining best practice. This includes standardising certain functions
across the business especially in drilling and blasting and
personal protective equipment. The Group believes these actions
should contribute towards a lower cost of production on a per tonne
basis.
Overall, Ferrexpo believes that its Business Improvement
Programme has reduced the C1 cash cost by US$5 per tonne, at
current prices, since its implementation in 2006. In addition, the
development of the FYM pit, and the expansion and modernisation of
FPM's production facilities since 2011 has reduced the average C1
cash cost by approximately US$4 per tonne on an ongoing basis after
accounting for increased processing costs associated with producing
a higher proportion of premium 65% Fe pellets.
Ferrexpo is a low cost and efficient pellet producer and is
competitively placed on the global benchmark cost curve for 62% Fe
iron ore fines after adjusting for the premium it receives relative
to the index fines price. This allows the Group to remain
profitable even in the current low iron ore price environment.
CSR
Ferrexpo is the largest employer in Komsomolsk, Ukraine
employing approximately one fifth of the population or 9,417
people. Due to Ukraine's weak public finances and fragile economy
as well as the ongoing conflict in the east of the country, the
Group increased its support for local and regional communities
during the period. As a result, community support donations
increased from US$10 million in 1H 2014 to US$16 million in 1H
2015. The majority of the spend is intended for local and regional
public organisations such as hospitals, schools and local
infrastructure.
Ukraine
Since the election of the pro-democracy government in Ukraine in
2014 and a new four-year loan of US$17.5 billion from the IMF in
March 2015, as part of a broader US$40 billion bailout programme,
the new authorities have shown commitment to tackling corruption,
increasing transparency and making economic reforms. To date
Ukraine has received US$6.7 billion of the US$17.5 billion IMF
package.
Ferrexpo's priority within this environment is to continue to
export all of its product to its first class customer base, as it
has done throughout its 40 year production history. The Group's
operations are in the Poltava region of central Ukraine, 425
kilometres to the North West of the conflict in the East of the
country.
For further information see Update on Risks: Political below on
page 11.
Board Changes
Having considered the criteria set out in paragraph B.1.1 of the
UK Corporate Governance Code and having noted that it is three
years since Mike Salamon retired from the board of New World
Resources plc and ceased to represent Ferrexpo's significant
shareholder CERCL holdings Limited (previously known as BXR Group
Limited), the Board has decided that Mike Salamon is independent
for the purposes of the UK Corporate Governance Code.
In addition the following announcements are made under Listing
Rule 9.6.11 (3):
- Mike Salamon will join the Remuneration Committee in November
2015 and will then succeed Oliver Baring (who will remain on the
Committee) as Chairman.
- Mary Reilly, who joined the Board on 27 May 2015, has been
appointed to the Audit Committee and will succeed Wolfram Kuoni
(who will remain on the Committee) as Chairman with effect from
November 2015.
Update on Risks
Since the publication of the 2014 annual results in March 2015,
the Group assesses that the risks facing the business, as
highlighted on pages 26 to 31 of the 2014 Annual Report and
Accounts, are still relevant for the Group. An update is provided
below on developments of key risks in 1H 2015.
-- Political
As part of the IMF US$17.5 billion loan package in March 2015,
Ukraine is required to reduce its public debt as a percentage of
GDP to more sustainable levels (in 2014 it was approximately 100%
of GDP). The government is in discussion with its private creditors
to reduce its debt burden by US$15.3 billion. These negotiations
are ongoing and if they do not succeed it could result in a
sovereign default which would impact the government's ability to
borrow additional funds and could also further hinder corporates,
including Ferrexpo, in obtaining funding from international capital
markets at competitive rates or at all. It may also result in
exchange controls, impacting the availability of operational
financial assets held in country, and it may result in a slowdown
of VAT repayments to local exporters or an increase in local taxes
reducing the Group's liquidity position.
-- Ukrainian banking sector
The Ukrainian banking sector is currently undergoing a series of
stress tests by the National Bank of Ukraine ('NBU'), as the recent
Hryvnia devaluation and the non-repayment of loans have severely
affected the sector's ability to operate. In March 2015, Ukraine's
fourth largest bank, Delta Bank, was declared insolvent, and
several other major banks were provided with emergency assistance.
The Company's transactional bank within Ukraine, where the vast
majority of its expenditures occur, remains Bank Finance and Credit
('Bank F&C'), which is a related party, and is ranked as the
tenth largest bank in Ukraine in terms of total assets. On 12 June
2015, Bank F&C received a two year stabilisation loan of UAH
750 million (US$36 million) from the NBU. Following stress tests by
the NBU, the bank's principal shareholder has increased its share
capital in June 2015 by UAH 1.97 billion (US$93 million). The bank
is currently undergoing further recapitalisation by the main
shareholder and large private depositors, which if unsuccessful
could result in the reclassification and or impairment of the cash
balances held with this institution. Should this cash be
unavailable, however, the Group believes it holds sufficient
liquidity outside Ukraine and on call to meet its operational
needs. For further information see Financial Management on page 7
and note 19 (related party transactions) in the accounts.
The Group regularly reviews its banking relationship in Ukraine
within the context of the overall banking sector and especially in
terms of stability, reliability and confidentiality. Under the
Company's treasury policy, it holds the equivalent of up to three
months' operating costs and sustaining capital expenditures within
Ukraine (up to US$180 million) as a liquidity buffer so that the
operations may withstand any unforeseen circumstances and continue
to operate in times of financial or operational stress.
-- Exchange Rate Risk
The Group receives all of its income in US dollars while
approximately half of its total cost base is denominated in
Ukrainian Hryvnia. The Hryvnia on average depreciated by 108%
against the US dollar in the first half of the year to UAH21.43 per
US dollar compared to UAH10.28 per US dollar in the first half of
2014. This has had a significant positive effect on the Group's
cost base and ensures that Ferrexpo is highly competitive at a time
when iron ore prices are trading near seven year lows.
The devaluation, however, 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. See notes 8,
12, 13, and 16 of the accounts for further information.
-- Ukrainian Inflation
Following the substantial devaluation of the Hryvnia in February
2015 inflation in 1H 2015 compared to 1H 2014 was 48%. For the full
year 2015, the IMF has indicated that they expect an inflation rate
of 46% compared to 2014. The areas of inflation that the Group is
most exposed to are wages, electricity and rail tariffs. The Group
looks to partly offset cost inflation through increases in mining
and production efficiencies. For further information see Costs on
page 5.
-- VAT
During 1H 2015, the Group received six VAT refunds and the
balance as of 30 June 2015 was US$55 million compared to US$74
million as of 31 December 2014. At the period end, VAT repayments
in respect of November 2014, February 2015 and March 2015 have not
been repaid. In total these amounted to UAH490 million or US$23
million which is expected to be refunded in 2H 2015.
The devaluation of the Hryvnia in 1H 2015 reduced the VAT
balance in US dollar terms by US$18 million which was reflected in
lower cash flow to the Group. The non or late repayment of VAT
remains a risk to the liquidity position of the Company. For
further information see Political risk update on page 11 and note
14 in the accounts.
-- Taxes
During the period, the Group prepaid on average 10% of its VAT
refunds as corporate profit tax ('CPT'). The requirement to pre-pay
CPT in return for VAT refunds reduces the cash flows of the Group
and its liquidity position. As of 30 June 2015, the Group had a
prepaid CPT balance, in excess of the corporate profit tax due, of
US$54 million compared to US$74 million as of 31 December 2014 (30
June 2014: US$89 million). The devaluation of the Hryvnia during 1H
2015 reduced the carrying value of this Hryvnia denominated asset
by US$18 million compared to 31 December 2014. This ongoing
requirement to prepay CPT in excess of tax due on the profits of
the business represents an ongoing risk to the liquidity of the
Group. For further information see note 11 in the accounts.
-- Energy supply
Following a brief disruption of electricity supply in December
2014, there have been no further energy supply disruptions to the
Group's operations to date. In 1H 2015, Ukraine further diversified
its sources of gas imports as well as the supply of electricity
within the country. Due to the current political and economic
situation, however, there remains a risk that gas and electricity
supplies may be disrupted again particularly in the colder winter
months when general demand is higher.
-- Iron Ore Price
The Group is fully exposed to the iron ore price which has been
both volatile and generally weak over the past two years. For the
six months ended 30 June 2015, the benchmark iron ore fines price
declined by 46% to US$61 per tonne compared to an average of US$111
per tonne in the first half of 2014. This has negatively impacted
Ferrexpo's profitability for the period although the Group has been
able to partly offset this due to the fixed price premium it
receives for the majority of its pellets.
Since 30 June 2015, the benchmark iron ore fines price has
continued to decline to a new seven year low of US$44 per tonne on
7 July 2015 before recovering to US$55 per tonne as of 31 July
2015, a 7% decrease compared to 30 June 2015 (US$60 per tonne).
Industry consensus as of 1 July 2015[8] for the 62% fines iron ore
price China CFR for 2015 is approximately US$54 per tonne which
implies an average price of US$47 per tonne in 2H 2015 compared to
the average price of US$61 per tonne in 1H 2015. For further
information see Market environment, iron ore and freight prices on
page 8.
-- Pellet Premium
Ferrexpo earns a substantial proportion of its current profits
from the pellet premium steel mills pay above the underlying iron
ore fines price. Compared to the 62% Fe iron ore fines price index
which has declined materially over the past two years, the pellet
premium has remained relatively stable. As a result, the pellet
premium now represents a historically high proportion of the
underlying iron ore fines price. This is due to limited new pellet
supply compared to the increase in iron ore fines (especially of
low iron content). This may ultimately prove to be unsustainable if
steel mill profitability continues to deteriorate due to lower
global steel demand. For further information see Market
environment, iron ore and freight prices on page 8.
-- Global Freight
Ferrexpo is exposed to international freight rates as all of its
long term contracts are priced with reference to transparent
indices such as the Baltic Exchange C3 freight price (capesize
route from Tubarao, Brazil to Qingdao, China). Fronthaul capesize
voyage rates are currently trading at three year lows, with the
reductions driven by low oil prices and overcapacity. As a result,
the shipping industry is experiencing financial hardship which has
led to the scrapping and retirement of fleet, and the resulting
loss of capacity may lead to increased daily charter rates going
forward. An increase in freight rates would directly reduce the
Group's received net back price on the proportion of the Group's
sales agreed on a DAP/FOB basis. For further information see Market
environment, iron ore and freight prices on page 8.
8 Compiled by Deutsche Bank industrials team using 15 sell side
analyst Iron Ore price forecasts
Going Concern
The Group continues to generate positive free cash flow under
the lower iron ore price environment, but is exposed to various
risk factors such as changes in the global iron ore market, local
inflation in Ukraine and international freight costs. An update of
the Group's key business activities and risk factors likely to
affect its future development, performance and position since 31
December 2014 are set out on pages 4 to 13 of this report. The full
disclosure of the Group's business activities and risk factors are
disclosed in the 2014 Annual Report and Accounts. The financial
position of the Company as of 30 June 2015 including its cash
flows, liquidity position and debt facilities are described on
pages 4 to 7 of this report. Note 30 of the 2014 Annual Report and
Accounts, on pages 114 to 123, sets out the Group's objectives,
policies and processes for managing its capital, its financial risk
management objectives and details of its financial instruments; its
exposure 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 various risk factors, as disclosed in the
update on risks on page 11 of this report and the principal risks
included in the Annual Report and Accounts 2014 on page 26, show
that Ferrexpo has adequate financial resources to continue in
operational existence for the foreseeable future and as such the
Directors are of the view that the Group is a going concern and the
interim consolidated financial statements have been drawn up on
this basis.
Outlook
As a result of the continued instability in Ukraine and the weak
iron ore price environment, Ferrexpo remains cautious over the near
term outlook. Ferrexpo is a competitive producer of high quality
pellets, with a long reserve life, selling to premium steel mills
around the world. The volume and quality of its production
continues to increase. These factors should ensure that it is able
to operate successfully even through low points of the commodities
cycles as it has demonstrated in the past.
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 half-yearly financial report for the
six months ended 30 June 2015 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
22. We have read the other information contained in the half yearly
financial 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 half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial 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 IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial 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 half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "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 half-yearly financial report for the six months ended 30
June 2015 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
4 August 2015
Interim Consolidated Income Statement
6 months ended Year ended
US$'000 Notes 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Revenue 4 511,881 758,913 1,388,285
Cost of sales 3/5 (235,801) (333,102) (647,960)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Gross profit 276,080 425,811 740,325
----------------------------------------------------- ------- --------------- ------------------------ -----------
Selling and distribution expenses (112,934) (164,761) (311,514)
General and administrative expenses 6 (20,495) (23,683) (48,642)
Other income 3,031 4,246 9,094
Other expenses 7 (18,180) (15,699) (57,014)
Operating foreign exchange gains 8 14,865 47,445 76,372
----------------------------------------------------- ------- --------------- ------------------------ -----------
Operating profit from continuing operations before
adjusted items 142,367 273,359 408,621
----------------------------------------------------- ------- --------------- ------------------------ -----------
Under recovery and write-down of VAT receivable 14 - (5,866) (6,790)
Write-offs and impairment losses 9 (981) (1,362) (83,534)
Gain on disposal of available-for-sale investment 9 / 21 41,767 - -
Share of profit from associates 4,014 3,212 4,878
Losses on disposal of property, plant and equipment (2,698) (3,015) (4,825)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Profit before tax and finance from continuing
operations 184,469 266,328 318,350
----------------------------------------------------- ------- --------------- ------------------------ -----------
Finance income 10/14 1,671 17,643 19,250
Finance expense 10 (36,587) (33,265) (68,472)
Non-operating foreign exchange losses 8 (6,181) (3,062) (14,846)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Profit before tax 143,372 247,644 254,282
----------------------------------------------------- ------- --------------- ------------------------ -----------
Income tax expense 11 (27,223) (39,623) (70,442)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Profit for the period/year from continuing
operations 116,149 208,021 183,840
----------------------------------------------------- ------- --------------- ------------------------ -----------
Attributable to:
Equity shareholders of Ferrexpo plc 114,832 203,256 178,316
Non-controlling interests 1,317 4,765 5,524
----------------------------------------------------- ------- --------------- ------------------------ -----------
116,149 208,021 183,840
----------------------------------------------------- ------- --------------- ------------------------ -----------
Earnings per share:
Basic (US cents) 12 19.61 34.72 30.46
Diluted (US cents) 12 19.57 34.65 30.39
Interim Consolidated Statement of Comprehensive Income
6 months ended Year ended
US$ 000 Notes 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Profit for the period/year 116,149 208,021 183,840
Items that may subsequently be reclassified to
profit or loss:
Exchange differences on translating foreign
operations (335,332) (760,526) (1,205,667)
Income tax effect 23,115 47,568 80,394
Net gains/(losses) on available-for-sale
financial assets 21 41,767 (183) -
Income tax effect - 42 -
------------------------------------------------- ------ --------------- ------------------------ ------------
Net other comprehensive loss before
reclassification of items to profit and loss (270,450) (713,099) (1,125,273)
------------------------------------------------- ------ --------------- ------------------------ ------------
Reclassification to profit or loss relating to
available-for-sale investments sold or
impaired 21 (41,767) - (712)
------------------------------------------------- ------ --------------- ------------------------ ------------
Net other comprehensive loss to be reclassified
to profit or loss in subsequent periods (312,217) (713,099) (1,125,985)
------------------------------------------------- ------ --------------- ------------------------ ------------
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement (losses)/gains on defined
benefit pension liability (249) (2,485) 1,649
Income tax effect 24 294 (195)
------------------------------------------------- ------ --------------- ------------------------ ------------
Net other comprehensive (loss)/gain not being
reclassified to profit or loss in subsequent
periods (225) (2,191) 1,454
------------------------------------------------- ------ --------------- ------------------------ ------------
Other comprehensive loss for the period/year,
net of tax (312,442) (715,290) (1,124,531)
------------------------------------------------- ------ --------------- ------------------------ ------------
Total comprehensive loss for the period/year,
net of tax (196,293) (507,269) (940,691)
------------------------------------------------- ------ --------------- ------------------------ ------------
Total comprehensive loss attributable to:
Equity shareholders of Ferrexpo plc (192,199) (499,351) (926,422)
Non-controlling interests (4,094) (7,918) (14,269)
------------------------------------------------- ------ --------------- ------------------------ ------------
(196,293) (507,269) (940,691)
------------------------------------------------- ------ --------------- ------------------------ ------------
Interim Consolidated Statement of Financial Position
As at As at
US$'000 Notes 30.06.15 30.06.14 As at 31.12.14
(unaudited) (unaudited) (audited)
Assets
Property, plant and equipment 13 717,001 1,137,167 926,433
Goodwill and other intangible assets 45,524 81,118 60,468
Investments in associates 9,392 9,278 8,569
Available-for-sale financial assets 21 23 82,595 46
Inventories 15 80,369 63,810 81,987
Other non-current assets 12,455 43,211 18,211
Income taxes recoverable and prepaid 11 53,902 55,207 73,782
Other taxes recoverable and prepaid 14 1,182 - 1,519
Deferred tax assets 36,515 32,370 32,358
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total non-current assets 956,363 1,504,756 1,203,373
------------------------------------------------------------ ------ ------------ ------------ ---------------
Inventories 15 112,038 134,747 124,722
Trade and other receivables 64,846 102,539 87,226
Prepayments and other current assets 28,752 25,629 21,057
Income taxes recoverable and prepaid 11 - 33,347 -
Other taxes recoverable and prepaid 14 54,181 184,700 71,982
Cash and cash equivalents 3/16 470,535 359,441 626,509
------------------------------------------------------------ ------ ------------ ------------ ---------------
730,352 840,403 931,496
------------------------------------------------------------ ------ ------------ ------------ ---------------
Assets classified as held for sale - 1,003 26
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total current assets 730,352 841,406 931,522
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total assets 1,686,715 2,346,162 2,134,895
------------------------------------------------------------ ------ ------------ ------------ ---------------
Equity and liabilities
Share capital 17 121,628 121,628 121,628
Share premium 185,112 185,112 185,112
Other reserves 17 (1,759,538) (1,047,552) (1,452,988)
Retained earnings 1,912,333 1,896,283 1,855,690
------------------------------------------------------------ ------ ------------ ------------ ---------------
Equity attributable to equity shareholders of the parent 459,535 1,155,471 709,442
------------------------------------------------------------ ------ ------------ ------------ ---------------
Non-controlling interest 4,065 14,510 8,159
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total equity 463,600 1,169,981 717,601
------------------------------------------------------------ ------ ------------ ------------ ---------------
Interest-bearing loans and borrowings 3/18 597,447 840,977 1,056,253
Defined benefit pension liability 24,781 40,373 28,557
Provision for site restoration 1,814 2,037 2,345
Deferred tax liability 419 1,585 841
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total non-current liabilities 624,461 884,972 1,087,996
------------------------------------------------------------ ------ ------------ ------------ ---------------
Interest-bearing loans and borrowings 3/18 525,643 211,983 248,374
Trade and other payables 25,826 32,991 32,351
Accrued liabilities and deferred income 27,974 30,429 34,191
Income taxes payable 9,869 4,086 5,898
Other taxes payable 9,342 11,720 8,484
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total current liabilities 598,654 291,209 329,298
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total liabilities 1,223,115 1,176,181 1,417,294
------------------------------------------------------------ ------ ------------ ------------ ---------------
Total equity and liabilities 1,686,715 2,346,162 2,134,895
------------------------------------------------------------ ------ ------------ ------------ ---------------
The financial statements were approved by the Board of Directors
on the 4 August 2015.
Kostyantin Zhevago Christopher Mawe
Chief Executive Officer Chief Financial Officer
Interim Consolidated Statement of Cash Flows
6 months ended Year ended
US$'000 Notes 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Profit before tax 143,372 247,644 254,282
Adjustments for:
Depreciation of property, plant and equipment
and amortisation of intangible assets 29,328 44,315 82,269
Interest expense 35,064 30,798 64,166
Under recovery and write-down of VAT receivable 14 - 5,866 6,790
Interest income 10 (1,671) (17,643) (19,250)
Share of profit from associates (4,014) (3,212) (4,878)
Movement in allowance for doubtful receivables (29) (254) 8,011
Losses on disposal of property, plant and
equipment 2,698 3,015 4,825
Gain on disposal of available-for-sale
investment 9 / 21 (41,767) - -
Write-offs and impairment losses 9 981 1,362 83,534
Site restoration provision 53 142 1,180
Employee benefits 3,754 3,632 6,531
Share based payments 256 190 530
Operating foreign exchange gains 2 / 8 (14,865) (47,445) (76,372)
Non-operating foreign exchange losses 2 / 8 6,181 3,062 14,846
----------------------------------------------------- ------- --------------- ------------------------ -----------
Operating cash flow before working capital changes 159,341 271,472 426,464
----------------------------------------------------- ------- --------------- ------------------------ -----------
Changes in working capital:
Decrease/(increase) in trade and other
receivables 14,160 (10,671) 5,395
Increase in inventories (36,807) (33,084) (96,554)
Decrease in trade and other accounts payable (7,771) (14,511) (11,083)
Decrease/(increase) in VAT and other taxes
recoverable and payable (1) 2,184 (448) 86,950
----------------------------------------------------- ------- --------------- ------------------------ -----------
Cash generated from operating activities 131,107 212,758 411,172
----------------------------------------------------- ------- --------------- ------------------------ -----------
Interest paid (34,017) (28,101) (61,307)
Income tax paid (8,131) (45,048) (58,077)
Post-employment benefits paid (926) (1,911) (3,340)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Net cash flows from operating activities 88,033 137,698 288,448
----------------------------------------------------- ------- --------------- ------------------------ -----------
Cash flows from investing activities
Purchase of property, plant and equipment (24,610) (130,513) (232,809)
Proceeds from disposal of property, plant and
equipment 174 764 5,322
Purchase of intangible assets (330) (1,121) (1,711)
Purchase of available-for-sale investment - (17) (17)
Proceeds from sale of available-for-sale 41,767 - -
investment
Interest received 1,602 972 2,376
Dividends from associates - 2,755 2,755
----------------------------------------------------- ------- --------------- ------------------------ -----------
Net cash flows used in investing activities 18,603 (127,160) (224,084)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Cash flows from financing activities
Proceeds from borrowings and finance - 40,015 392,515
Repayment of borrowings and finance (179,944) (15,268) (119,009)
Arrangement fees paid (4,416) (3,578) (3,580)
Dividends paid to equity shareholders of
Ferrexpo plc (58,184) (57,893) (76,904)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Net cash flows used in financing activities (242,544) (36,724) 193,022
----------------------------------------------------- ------- --------------- ------------------------ -----------
Net (decrease)/increase in cash and cash
equivalents (135,908) (26,186) 257,386
Cash and cash equivalents at the beginning of
the period/year 626,509 390,491 390,491
Effect of exchange rate changes on cash and
cash equivalents (20,066) (4,864) (21,368)
----------------------------------------------------- ------- --------------- ------------------------ -----------
Cash and cash equivalents at the end of the
period/year 16 470,535 359,441 626,509
----------------------------------------------------- ------- --------------- ------------------------ -----------
(1) The movement in the comparative period ended 31 December
2014 includes the effect of a VAT receivable balance amounting to
US$97,067 thousand recovered through VAT
bonds. See also note 14
Interim Consolidated Statement of Changes in Equity
For the financial year
2014 and the six months
ended 30 June 2015 Attributable to equity shareholders of the parent
---------------------------------------------------------------------------------------------------
Uniting Employee Net
of Treasury Benefit unreali-sed
interest share Trust gains Translation Total
Issued Share reserve reserve reserve reserve reserve Retained capital and Non-controlling Total
US$ 000 capital premium (note 17) (note 17) (note 17) (note 17) (note 17) earnings reserves interests equity
At 1 January
2014 121,628 185,112 31,780 (77,260) (6,542) 712 (296,016) 1,753,200 1,712,614 22,428 1,735,042
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ------------
Profit for the
period - - - - - - - 178,316 178,316 5,524 183,840
Other
comprehensive
loss - - - - - (712) (1,105,480) 1,454 (1,104,738) (19,793) (1,124,531)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ------------
Total
comprehensive
loss for the
period - - - - - (712) (1,105,480) 179,770 (926,422) (14,269) (940,691)
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - - (77,280) (77,280) - (77,280)
Share-based
payments - - - - 530 - - - 530 - 530
At 31 December
2014
(audited) 121,628 185,112 31,780 (77,260) (6,012) - (1,401,496) 1,855,690 709,442 8,159 717,601
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ------------
Profit for the
period - - - - - - - 114,832 114,832 1,317 116,149
Other
comprehensive
loss - - - - - - (306,806) (225) (307,031) (5,411) (312,442)
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ------------
Total
comprehensive
loss for the
period - - - - - - (306,806) 114,607 (192,199) (4,094) (196,293)
Equity
dividends
paid to
shareholders
of Ferrexpo
plc - - - - - - - (57,964) (57,964) - (57,964)
Share-based
payments - - - - 256 - - - 256 - 256
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ------------
At 30 June
2015
(unaudited) 121,628 185,112 31,780 (77,260) (5,756) - (1,708,302) 1,912,333 459,535 4,065 463,600
--------------- ---------- -------- ---------- ---------- ---------- ------------ ------------ ---------- ------------- ---------------- ------------
For 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
Issued Share reserve reserve reserve reserve reserve Retained Total capital Non-controlling Total
US$ 000 capital premium (note 17) (note 17) (note 17) (note 17) (note 17) earnings and reserves interests equity
At 1 January
2014 121,628 185,112 31,780 (77,260) (6,542) 712 (296,016) 1,753,200 1,712,614 22,428 1,735,042
--------------- -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Profit for the
period - - - - - - - 203,256 203,256 4,765 208,021
Other
comprehensive
loss - - - - - (141) (700,275) (2,191) (702,607) (12,683) (715,290)
--------------- -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Total
comprehensive
loss 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
--------------- -------- -------- ---------- ---------- ---------- ------------ ------------ ---------- -------------- ---------------- ----------
Notes to the Interim Condensed Consolidated Financial
Statements
Note 1: Corporate information
Organisation and operation
Ferrexpo plc (the "Company") is incorporated in the United
Kingdom, which is considered to be the country of domicile, with
its registered office at 2-4 King Street, London, SW1Y 6QL, UK.
Ferrexpo plc and its subsidiaries (the "Group") operate two mines
and a processing plant near Kremenchug in Ukraine, an interest in a
port in Odessa and sales and marketing activities around the world
including offices in Switzerland, Dubai, Japan, China, Singapore
and Ukraine. The Group also owns logistics assets in Austria which
operates a fleet of vessels operating on the Rhine and Danube
waterways and an ocean going vessel which provides top off services
and operates on international sea routes. The Group's operations
are vertically integrated from iron ore mining through to iron ore
concentrate and pellet production and subsequent logistics. The
Group's mineral properties lie within the Kremenchug Magnetic
Anomaly and are currently being extracted at the
Gorishne-Plavninskoye and Lavrikovskoye ("GPL ") and Yeristovskoye
deposits.
The majority shareholder of the Group is Fevamotinico S.a.r.l.
("Fevamotinico"), a company incorporated in Luxembourg and
ultimately owned by The Minco Trust, of which Kostyantin Zhevago,
the Group's Chief Executive Officer, is a beneficiary. At the time
this report was published, Fevamotinico held 50.3% (30 June 2014:
50.3%; 31 December 2014: 50.3%) of Ferrexpo plc's issued share
capital.
The Group comprises of Ferrexpo plc and its consolidated
subsidiaries as set out below:
Equity interest owned
-------------------------------
Name Country of incorporation Principal activity 30.06.15 30.06.14 31.12.14
% % %
OJSC Ferrexpo Poltava
Mining Ukraine Iron ore mining 97.3 97.3 97.3
Ferrexpo AG Switzerland Sale of iron ore pellets 100.0 100.0 100.0
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 (1) Austria Barging company 100.0 100.0 100.0
DDSG Mahart Kft. Hungary Barging company 100.0 100.0 100.0
Pancar Kft. Hungary Barging company 100.0 100.0 100.0
Ferrexpo Port Services
GmbH Austria Port services 100.0 100.0 100.0
Ferrexpo Shipping
International Ltd. Marshall Islands Holding company 100.0 100.0 100.0
Iron Destiny Ltd. Marshall Islands Holding company 100.0 100.0 100.0
Transcanal SRL Romania Port services 77.6 77.6 77.6
Helogistics Asset Leasing
Kft. Hungary Asset holding company 100.0 100.0 100.0
Universal Services Group
Ltd. Ukraine Asset holding company 100.0 100.0 100.0
LLC DDSG Ukraine Holding Ukraine Holding company 100.0 100.0 100.0
LLC DDSG Invest Ukraine Asset holding company 100.0 100.0 100.0
LLC DDSG Ukraine Shipping
Management Ukraine Barging company 100.0 100.0 100.0
LLC DDSG Ukraine Shipping Ukraine Asset holding company 100.0 100.0 100.0
Arlington Ltd. (2) Guernsey Holding company 100.0 100.0 100.0
--------------------------- -------------------------- ---------------------------- --------- --------- ---------
(1) Formerly Helogistics Transport GmbH
(2) The entity was acquired in February 2014
The Group's interests in the entities listed above are held
indirectly by the Company.
At 30 June 2015, the Group also holds through OJSC Ferrexpo
Poltava Mining an interest of 48.6% (30 June 2014: 48.6%; 31
December 2014: 48.6%) in TIS Ruda, a Ukrainian port located on the
Black Sea. As this is an associate, it is accounted for using the
equity method of accounting.
Note 2: Summary of significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the
six month period ended 30 June 2015 have been prepared in
accordance with International Accounting Standard ('IAS') 34
Interim Financial Reporting. The interim condensed consolidated
financial statements do not include all of the information and
disclosures required in the annual financial statements, and should
be read in conjunction with the Group's annual financial statements
for the year ended 31 December 2014.
The interim condensed consolidated financial statements do not
constitute statutory accounts as defined in section 435 of the
Companies Act 2006. The financial information for the full year is
based on the statutory accounts for the financial year ended 31
December 2014. A copy of the statutory accounts for that year,
which were prepared in accordance with International Financial
Reporting Standards ('IFRS') issued by the International Accounting
Standard Board ('IASB'), as adopted by the European Union as they
apply to financial statements of the Group for the year ended 31
December 2014, have been delivered to the Register of Companies
before the required filing deadline. The auditors' report under
section 495 of the Companies Act 2006 in relation to those accounts
was unqualified and did not contain a statement under 498(2) or
498(3) of the Companies Act 2006.
During the period ended 30 June 2015, the Ukrainian Hryvnia has
devalued by approximately 33% compared to the US Dollar; from
15.769 as at 31 December 2014 to 21.015 as at the end of this
reporting period. As a result of this devaluation, the total equity
decreased by US$312,217 thousand as of 30 June 2015 due the
exchange differences on translating foreign operations, which is
reflected in the translation reserve. Further details are provided
in note 8 and note 17.
Accounting policies adopted
The accounting policies and methods of computation adopted in
the preparation of the interim condensed consolidated financial
statements are the same as those followed in the preparation of the
Group's annual financial statements for the year ended 31 December
2014.
The following new standards and interpretations have been
applied from 1 January 2015, with no effect on reported results,
financial position or disclosure in the interim financial
statements:
Annual Improvements to IFRSs - 2010-2012 Cycle
Annual Improvements to IFRSs - 2011-2013 Cycle
IFRIC 21 Levies
Seasonality
The Group's operations are not affected by seasonality.
Note 3: Segment information
The Group is managed as a single entity, which produces,
develops and markets its principal product, iron ore pellets, for
sale to the metallurgical industry. While the revenue generated by
the Group is monitored at a more detailed level, there are no
separate measures of profit reported to the Group's Chief Operating
Decision-Maker ('CODM'). In accordance with IFRS 8 Operating
Segments, the Group presents its results in a single segment, which
are disclosed in the income statement for the Group. The management
monitors the operating result of the Group based on a number of
measures including EBITDA, C1 costs and the net financial
indebtedness.
EBITDA
The Group presents EBITDA because it believes that EBITDA is a
useful measure for evaluating its ability to generate cash and its
operating performance. The Group's full definition of EBITDA is
disclosed in the Glossary on page 40.
6 months ended Year ended
US$ 000 Notes 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Profit before tax and finance 184,469 266,328 318,350
Under recovery and write-down of VAT receivable 14 - 5,866 6,790
Write-offs and impairment losses 9 981 1,362 83,534
Gain on disposal of available-for-sale investment 9 / 21 (41,767) - -
Share based payments 256 190 530
Losses on disposal of PPE 2,698 3,015 4,825
Depreciation and amortisation 29,328 44,315 82,269
----------------------------------------------------- ------- --------------- ------------------------ -----------
EBITDA 175,965 321,076 496,298
----------------------------------------------------- ------- --------------- ------------------------ -----------
Note 3: Segment information continued
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.
6 months ended Year ended
US$'000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Cost of sales - pellet production 5 215,679 307,878 586,653
Depreciation and amortisation 5 (22,249) (34,753) (64,137)
Purchased concentrate and other items for resale 5 (15,571) (16,139) (27,110)
Inventory movements 5 12,546 2,345 10,127
Other (6,463) (10,073) (15,546)
---------------------------------------------------- --------------- ------------------------ -----------
C1 cost 183,942 249,258 489,987
---------------------------------------------------- --------------- ------------------------ -----------
Own ore produced (tonnes) 5,503,932 5,212,877 10,670,445
---------------------------------------------------- --------------- ------------------------ -----------
C1 cash cost per tonne US$ 33.4 47.8 45.9
---------------------------------------------------- --------------- ------------------------ -----------
Net financial indebtedness
Net financial indebtedness as defined by the Group comprises
cash and cash equivalents, short-term deposits less interest
bearing loans and borrowings.
US$ 000 Notes As at 30.06.15 As at 30.06.14 As at 31.12.14
(unaudited) (unaudited) (audited)
Cash and cash equivalents 16 470,535 359,441 626,509
Interest bearing loans and borrowings - current 18 (525,643) (211,983) (248,374)
Interest bearing loans and borrowings - non-current 18 (597,447) (840,977) (1,056,253)
------------------------------------------------------- ------ --------------- --------------- ---------------
Net financial indebtedness (652,555) (693,519) (678,118)
------------------------------------------------------- ------ --------------- --------------- ---------------
Note 4: Revenue
Revenue for the six month period ended 30 June 2015 consisted of
the following:
6 months ended Year ended
US$ 000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Revenue from sales of ore pellets:
Export 477,081 715,951 1,290,695
------------------------------------------------------------ --------------- ------------------------ -----------
Total revenue from sale of iron ore pellets and
concentrate 477,081 715,951 1,290,695
------------------------------------------------------------ --------------- ------------------------ -----------
Revenue from logistics and bunker business 32,766 39,763 90,661
Revenue from other sales and services provided 2,034 3,199 6,929
Total revenue 511,881 758,913 1,388,285
------------------------------------------------------------ --------------- ------------------------ -----------
No sales were made in Ukraine during the periods presented.
Export sales of iron ore pellets and concentrate by geographical
destination were as follows:
6 months ended Year ended
US$'000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Traditional Market 246,808 351,550 594,045
Growth Market 160,152 255,983 493,964
Natural Market 70,121 108,418 202,686
Total export revenue 477,081 715,951 1,290,695
------------------------- --------------- ------------------------ -----------
Information about the composition of the markets is provided in
the Glossary.
Note 5: Cost of sales
Cost of sales for the six month period ended 30 June 2015
consisted of the following:
6 months ended Year ended
US$ 000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Energy 98,331 135,457 262,936
Personnel 17,399 27,277 50,851
Materials 35,255 41,604 85,043
Repairs and maintenance 18,562 30,307 59,780
Depreciation and amortisation 22,249 34,753 64,137
Royalties and levies 9,797 11,848 22,801
Purchased concentrate and other items for resale 15,571 16,139 27,110
Inventory movements (12,546) (2,345) (10,127)
Logistics and bunker business 20,122 25,224 61,307
Other 11,061 12,838 24,122
Total cost of sales 235,801 333,102 647,960
----------------------------------------------------- --------------- ------------------------ -----------
Thereof for pellet production 215,679 307,878 586,653
Thereof for logistics and bunker business 20,122 25,224 61,307
----------------------------------------------------- --------------- ------------------------ -----------
Note 6: General and administrative expenses
General and administrative expenses for the six month period
ended 30 June 2015 consisted of the following:
6 months ended Year ended
US$ 000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Personnel 10,967 14,707 28,406
Office, maintenance and security 2,422 3,159 6,780
Professional fees 4,392 2,963 6,990
Audit fees 785 822 1,593
Non-audit fees 9 74 418
Depreciation and amortisation 825 997 2,084
Other 1,095 961 2,371
Total general and administrative expenses 20,495 23,683 48,642
---------------------------------------------- --------------- ------------------------ -----------
Non-audit services totalling US$430 thousand in relation to
assurance services provided for liability management activities of
the Group has been capitalised as prepaid arrangement fees for the
six month period ended 30 June 2015 and are not included in the
table above.
Note 7: Other expenses
Other expenses for the period ended 30 June 2015 consisted of
the following:
6 months ended Year ended
US$ 000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Community support donations 15,527 10,441 39,077
Movements in allowance for doubtful receivables and
prepayments made (29) (254) 8,011
Other personnel costs 652 882 1,601
Other 2,030 4,630 8,325
Total other expenses 18,180 15,699 57,014
------------------------------------------------------------ --------------- ------------------------ -----------
Information on the Group's community support donations is
provided in the Corporate Social Responsibility paragraph on page
10 of this report as well as in the Corporate Social Responsibility
section of the Annual Report and Accounts 2014 on page 32.
The vast majority of the movements in allowance for doubtful
receivables and prepayments for the period ended 31 December 2014
is related to an allowance recorded for prepayments made for 300
rail cars ordered, but not yet fully delivered due to the ongoing
conflict in the eastern part of Ukraine. See also note 19 of this
report.
Note 8: Foreign exchange gains and losses
Foreign exchange gains and losses for the six month period ended
30 June 2015 consisted of the following:
6 months ended Year ended
US$ 000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Operating foreign exchange gains
Revaluation of trade receivables 14,685 48,388 78,827
Revaluation of trade payables 150 (985) (2,265)
Others 30 42 (190)
------------------------------------------------ --------------- ------------------------ -----------
Total operating foreign exchange gains 14,865 47,445 76,372
------------------------------------------------ --------------- ------------------------ -----------
Non-operating foreign exchange losses
Revaluation of interest-bearing loans (27,160) (33,598) (76,517)
Revaluation of cash and cash equivalents 17,667 49,018 81,192
Others 3,312 (18,482) (19,521)
------------------------------------------------ --------------- ------------------------ -----------
Total non-operating foreign exchange losses (6,181) (3,062) (14,846)
------------------------------------------------ --------------- ------------------------ -----------
Total foreign exchange gains 8,684 44,383 61,526
------------------------------------------------ --------------- ------------------------ -----------
Operating foreign exchange gains and losses are those items that
are directly related to the production and sale of pellets (e.g.
trade receivables, trade payables on operating expenditure).
Non-operating gains and losses are those associated with the
Group's financing and treasury activities and with local income tax
payables.
During the period ended 30 June 2015, the Ukrainian Hryvnia has
devalued by approximately 33% compared to the US Dollar; from
15.769 as at 31 December 2014 to 21.015 as at the end of this
reporting period resulting in translation differences of balances
denominated in Hryvnia, such as property plant and equipment (note
13), income taxes recoverable and prepaid and other taxes
recoverable and prepaid (note 14), with the effects recognised in
the translation reserve (see note 17).
Note 9: Write-offs and impairment losses
Impairment losses relate to adjustments made to the carrying
value of assets where this is higher than the recoverable amount.
Write-offs and impairment losses for the six month period ended 30
June 2015 consisted of the following:
6 months ended Year ended
US$ 000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Write-off of VAT receivables - 1,351 1,351
Write-off of inventories 1 - 48
Write-off of property, plant and equipment 969 11 47
Impairment of available-for-sale investments, net of
amounts reclassified from other comprehensive
income - - (294)
Impairment of available-for-sale investments 11 - 82,382
Total write-offs and impairment losses 981 1,362 83,534
------------------------------------------------------------ --------------- ------------------------ -----------
The impairment loss on available-for-sale financial assets shown
for the comparative period ended 31 December 2014 is related to the
15.5% equity investment in Ferrous Resources. As of 9 June 2015,
this investment was disposed for a cash consideration totalling
US$41,767 thousand resulting in a gain in this amount realised in
the period ended 30 June 2015. Further information is provided in
note 21.
Note 10: Finance income and expense
Finance income and expense for the six month period ended 30
June 2015 consisted of the following:
6 months ended Year ended
US$000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Finance income
Interest income 1,099 949 2,299
Other finance income 572 16,694 16,951
Total finance income 1,671 17,643 19,250
------------------------------------------------------------ --------------- ------------------------ -----------
Finance expense
Interest expense on financial liabilities measured at
amortised cost (32,055) (26,925) (58,371)
Effect from capitalised borrowing costs 2,546 4,991 8,748
Interest on defined benefit plans (1,523) (2,480) (4,306)
Bank charges (5,465) (7,476) (13,490)
Other finance costs (90) (1,375) (1,053)
------------------------------------------------------------ --------------- ------------------------ -----------
Total finance expense (36,587) (33,265) (68,472)
------------------------------------------------------------ --------------- ------------------------ -----------
Net finance expense (34,916) (15,622) (49,222)
------------------------------------------------------------ --------------- ------------------------ -----------
Other finance income for the comparative periods ended 30 June
2014 and 31 December 2014 includes a US$16,497 thousand release of
a discount recorded in the prior years to reflect changes in the
estimated timing of receipts for VAT receivable balances in dispute
that were previously expected to be recovered over a protracted
period of time. Further information is provided in note 14.
The discount was built up in periods prior to those presented in
these interim consolidated financial statements and was recorded as
finance cost as reflecting the time value of money of these VAT
receivable balances at the respective end of the reporting
periods.
Note 11: Taxation
The Group pays corporate profit tax in a number of jurisdictions
and its tax rate is influenced by the mix of profits primarily
between Ukraine, Switzerland, the United Kingdom and Dubai, as well
as the level of non-deductible expenses for tax purposes in each of
these jurisdictions. For the period ended 30 June 2015, the income
tax expense was based on an expected tax rate of 19% for the
financial year 2015, which is below the effective tax rate of 27.7%
for the financial year 2014.
The lower expected tax rate for the period ended 30 June 2015
compared to the effective tax rate for the financial year 2014 is
mainly a result of lower non-deductible expenses expected during
the financial year 2015. The effective tax rate for the financial
year 2014 included significant non-deductible expenses in Ukraine
and Switzerland including the discount recorded on the VAT bonds
sold prior to their maturity and the impairment loss recorded on an
equity investment (see note 21 for further details).
During the last three financial years, current VAT receivable
balances in Ukraine were mainly recovered in exchange for
prepayments of corporate profit tax resulting in a substantial
balance of outstanding prepaid corporate profit tax. This balance
decreased to US$73,782 thousand during the financial year 2014 as a
result of the Ukrainian Hryvnia devaluation compared to the US
Dollar (30 June 2014: US$88,554 thousand) and a reduction of the
percentage of the corporate profit tax to be prepaid in respect of
VAT refunds. During the six month period ended 30 June 2015, the
Hryvnia further devalued from 15.769 at the beginning of the year
to 21.015 as at the end of this reporting period resulting in a
further decrease of the outstanding balance to US$53,902
thousand.
It is management's view that the balance of prepaid corporate
profit tax will be either offset with future profits or recovered
through an issuance of bonds by the Ministry of Finance, which are
expected to trade with a discount to face value, as happened during
the financial year 2014 for overdue VAT receivable balances (see
note 14). As at the date of the preparation of these consolidated
interim financial statements, there is an uncertainty as to the
timing of the recovery of this balance. In light of this
uncertainty, it was considered most appropriate to classify the
entire balance as non-current in the consolidated statement of
financial position.
Note 12: 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.
6 months ended Year ended
30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Profit for the period / year attributable to equity
shareholders:
Basic earnings per share (US cents) 19.61 34.72 30.46
Diluted earnings per share (US cents) 19.57 34.65 30.39
------------------------------------------------------------ --------------- ------------------------ -----------
Note 12: Earnings per share and dividends paid and proposed
continued
The calculation of the basic and diluted earnings per share is
based on the following data:
6 months ended Year ended
Thousands 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Weighted average number of shares
Basic number of ordinary shares outstanding 585,462 585,383 585,413
Effect of dilutive potential ordinary shares 1,347 1,225 1,258
-------------------------------------------------- --------------- ------------------------ -----------
Diluted number of ordinary shares outstanding 586,809 586,608 586,671
-------------------------------------------------- --------------- ------------------------ -----------
The basic number of ordinary shares is calculated by subtracting
the shares held in treasury from the total number of ordinary
shares in issue.
Dividends
6 months ended Year ended
US$000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Dividend proposed
Interim dividend for 2015: 3.3 US cents 19,320 - -
Final dividend for 2014: 3.3 US cents - - 19,320
Special dividend for 2014: 6.6 US cents - - 38,640
Interim dividend for 2014: 3.3 US cents - 19,319 -
Total dividends proposed 19,320 19,319 57,960
-------------------------------------------- --------------- ------------------------ -----------
6 months ended Year ended
US$000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Paid per ordinary share
Final dividend for 2014: 3.3 US cents 19,517
Special dividend for 2014: 6.6 US cents 38,667 - -
Interim dividend for 2014: 3.3 US cents - - 19,011
Final dividend for 2013: 3.3 US cents - 19,279 19,279
Special dividend for 2013: 6.6 US cents - 38,614 38,614
Total dividends paid during the period 58,184 57,893 76,904
-------------------------------------------- --------------- ------------------------ -----------
Note 13: Property, plant and equipment
During the six month period ended 30 June 2015, the Group
acquired property, plant and equipment with a cost of US$36,233
thousand (30 June 2014: US$130,090 thousand; 31 December 2014:
US$262,252 thousand) and disposed of property, plant and equipment
with original costs of US$8,944 thousand (30 June 2014: US$11,244
thousand; 31 December 2014: US$30,683 thousand). The total
depreciation charge for the period was US$29,693 thousand (30 June
2014: US$44,315 thousand; 31 December 2014: US$97,901
thousand).
During the reporting period, the Ukrainian Hryvnia has devalued
compared to the US Dollar from 15.769 as of 31 December 2014 to
21.015 as of 30 June 2015 reducing property, plant and equipment by
US$207,029 thousand. This effect is reflected in the translation
reserve included in shareholder's equity. See also note 17.
The carrying value of property, plant and equipment includes
capitalised borrowing costs on qualifying assets of US$11,996
thousand (30 June 2014: US$12,515 thousand; 31 December 2014:
US$13,162 thousand).
Note 14: Other taxes recoverable and prepaid
As at 30 June 2015 taxes recoverable and prepaid comprised:
US$000 As at 30.06.15 As at 30.06.14 As at 31.12.14
(unaudited) (unaudited) (audited)
VAT receivable 54,073 184,585 71,859
Other taxes prepaid 108 115 123
------------------------------------------------------------ --------------- --------------- ---------------
Total other taxes recoverable and prepaid - current 54,181 184,700 71,982
------------------------------------------------------------ --------------- --------------- ---------------
VAT receivable 1,182 - 1,519
------------------------------------------------------------ --------------- --------------- ---------------
Total other taxes recoverable and prepaid - non-current 1,182 - 1,519
------------------------------------------------------------ --------------- --------------- ---------------
Total other taxes recoverable and prepaid 55,363 184,700 73,501
------------------------------------------------------------ --------------- --------------- ---------------
Note 14: Other taxes recoverable and prepaid continued
As at 30 June 2015, US$53,286 thousand of the VAT receivable
relates to the Group's Ukrainian business operations (30 June 2014:
US$181,361 thousand; 31 December 2014: US$71,127 thousand). The
table below provides a reconciliation of the VAT receivable
balances in Ukraine:
6 months ended Year ended
US$000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Opening balance 72,837 318,213 318,213
Net VAT incurred 46,700 77,986 153,345
VAT received in cash (45,975) (81,066) (141,126)
VAT recovered through sale of VAT bonds - - (97,067)
Discount on sale of VAT bonds - - (29,333)
VAT write-off through the income statement - (1,351) (1,351)
VAT write-off capitalised - (3,430) (3,430)
Translation difference (18,566) (98,501) (126,414)
Closing balance, gross 54,996 211,851 72,837
----------------------------------------------- --------------- ------------------------ -----------
Discount (1,710) (30,490) (1,710)
Closing balance, net 53,286 181,361 71,127
----------------------------------------------- --------------- ------------------------ -----------
The Ukrainian Hryvnia devalued compared to the US Dollar from
15.769 as at 31 December 2014 to 21.015 as at 30 June 2015 reducing
the outstanding VAT balances expressed in US Dollar by US$18,566
thousand, which is reflected in the translation reserve. See also
note 17.
During the second half of the financial year 2014, bonds were
received by the Group with a face value of UAH1,607,101 thousand
(US$135,573 thousand at the exchange rate at the date of issuance)
in settlement for VAT due of the same amount. The bonds were issued
by the Ministry of Finance to settle certain accumulated VAT
liabilities and the Group had sold all VAT bonds prior to the end
of the financial year 2014 with an average discount of 21.8%
resulting in net proceeds totalling UAH1,256,800 thousand
(US$97,067 thousand at the exchange rate at the date of sale).
During the financial year 2014, management expected certain
overdue receivable balances to be recovered through the issuance of
bonds trading at a discount to face value (see above) and a
discount was recorded. The adjustment of the recorded discount at
the end of the comparative periods ended 30 June 2014 and 31
December 2014 resulted in charges of US$5,866 thousand and US$6,790
thousand, respectively.
Note 15: Inventories
Inventories are held at the lower of cost or net realisable
value. As at 30 June 2015 ore stockpiles amounting to US$80,369
thousand (30 June 2014: US$63,810 thousand; 31 December 2014:
US$81,987 thousand) were classified as non-current as this ore is
not planned to be processed within one year.
Note 16: Cash and cash equivalents
As at 30 June 2015 the Group held cash and cash equivalents of
US$470,535 thousand (30 June 2014: US$359,441 thousand; 31 December
2014: US$626,509 thousand).
Subsequent to the end of the period ended 30 June 2015, the
Group repaid US$100,005 thousand to the bondholders in respect of a
bond exchange and consent solicitation completed. See note 18 for
further information.
The Group's exposure to liquidity, counterparty and interest
rate risk as well as a sensitivity analysis for financial assets
and liabilities are disclosed in note 30 of the Annual Report and
Accounts 2014. See also note 19 of these interim condensed
consolidated financial statements for further information in
respect of related party transactional banking arrangements.
Note 17: Share capital and reserves
The share capital of Ferrexpo plc at 30 June 2015 was
613,967,956 (30 June 2014: 613,967,956; 31 December 2014:
613,967,956) Ordinary Shares at par value of GBP0.10 paid for cash,
resulting in share capital of US$121,628 thousand, which is
unchanged since the Group's Initial Public Offering in June 2007.
This balance includes 25,343,814 shares (30 June 2014: 25,343,814
shares; 31 December 2014: 25,343,814 shares), which are held in
treasury, resulting from a share buyback that was undertaken in
September 2008, and 3,162,399 shares held in the employee benefit
trust reserve (30 June 2014: 3,193,201 shares; 31 December 2014:
3,162,399 shares).
The translation reserve includes the effect from the exchange
differences arising on translation of non-US Dollar functional
currency operations (mainly in Ukrainian Hryvnia). During the
period ended 30 June 2015, the Ukrainian Hryvnia devalued from
15.769 as at the beginning of the year to 21.015 as at 30 June 2015
and the exchange differences arising on translation of the Group's
foreign operations are initially recognised in other comprehensive
income. See also the Interim Consolidated Statement of
Comprehensive Income on page 18 of these interim condensed
financial statements for further details.
Note 17: Share capital and reserves continued
As at 30 June 2015 other reserves attributable to equity
shareholders of Ferrexpo plc comprised.
For the
financial year
2014 and the
six months
ended 30 June
2015
Uniting of Employee Net
interest Treasury share Benefit Trust unreali-sed Translation Total other
US$ 000 reserve reserve reserve gains reserve reserve reserves
At 1 January
2014 31,780 (77,260) (6,542) 712 (296,016) (347,326)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Foreign
currency
translation
differences - - - - (1,185,874) (1,185,874)
Transfer to
profit and
loss - - - (712) - (712)
Tax effect - - - - 80,394 80,394
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
comprehensive
loss for the
period - - - (712) (1,105,480) (1,106,192)
Share based
payments - - 530 - - 530
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December
2014 (audited) 31,780 (77,260) (6,012) - (1,401,496) (1,452,988)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Foreign
currency
translation
differences - - - - (329,921) (329,921)
Tax effect - - - - 23,115 23,115
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
comprehensive
loss for the
period - - - - (306,806) (306,806)
Share based
payments - - 256 - - 256
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 30 June 2015
(unaudited) 31,780 (77,260) (5,756) - (1,708,302) (1,759,538)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
For 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 2014 31,780 (77,260) (6,542) 712 (296,016) (347,326)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Foreign currency
translation
differences - - - - (747,843) (747,843)
Gain on
available-for-sale
financial assets - - - (183) - (183)
Tax effect - - - 42 47,568 47,610
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Total comprehensive
loss 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)
-------------------- -------------- -------------- -------------- -------------- --------------- ---------------
Note 18: 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 30.06.15 As at 30.06.14 As at 31.12.14
(unaudited) (unaudited) (audited)
Current
Eurobond issued 284,411 - -
Syndicated bank loans - secured 204,000 175,000 210,000
Other bank loans - secured 21,193 22,761 22,906
Other bank loans - unsecured 1,499 - -
Obligations under finance leases 3,912 4,515 4,644
Interest accrued 10,628 9,707 10,824
----------------------------------------------------------- --------------- --------------- ---------------
Total current interest bearing loans and borrowings 3 525,643 211,983 248,374
----------------------------------------------------------- --------------- --------------- ---------------
Non-current
Eurobond issued 156,074 495,074 496,392
Syndicated bank loans - secured 367,500 245,000 472,500
Other bank loans - secured 54,946 85,564 73,736
Other bank loans - unsecured 7,487 - -
Obligations under finance leases 11,440 15,339 13,625
----------------------------------------------------------- --------------- --------------- ---------------
Total non-current interest bearing loans and borrowings 3 597,447 840,977 1,056,253
----------------------------------------------------------- --------------- --------------- ---------------
Total interest bearing loans and borrowings 1,123,090 1,052,960 1,304,627
----------------------------------------------------------- --------------- --------------- ---------------
As at 30 June 2015, the Group has a syndicated US$420,000
thousand pre-export finance facility, of which US$198,500 thousand
was amortised resulting in a remaining available and drawn balance
of US$221,500 thousand for this facility, and a fully drawn
syndicated US$350,000 thousand pre-export finance facility. Both
are revolving facilities with amortisation over the final 24 months
to the final maturity dates of 31 July 2016 and 8 August 2018
respectively.
Note 18: Interest bearing loans and borrowings continued
As at 30 June 2015, the major bank debt facilities were
guaranteed and secured as follows:
-- Ferrexpo AG and Ferrexpo Middle East FZE assigned the rights
to revenue from certain sales contracts;
-- OJSC Ferrexpo Poltava Mining assigned all of its rights of
certain export contracts for the pellets sales to Ferrexpo AG and
Ferrexpo Middle East FZE; and
-- the Group pledged bank accounts of Ferrexpo AG and Ferrexpo
Middle East FZE into which all proceeds from the sale of certain
iron ore pellet contracts are received.
In addition to the Group's major bank debt facilities listed
above, an unsecured US$500,000 thousand Eurobond was issued on 7
April 2011, of which the Group exchanged and cancelled US$214,331
thousand and issued new notes with a par value totalling US$160,724
thousand and repaid US$53,607 thousand in cash on 24 February
2015.
Subsequent to the reporting period ended 30 June 2015, the Group
exchanged the remaining US$285,669 thousand of its US$500 million
Eurobond against 35% cash repayment totalling US$100,005 thousand
and issued new notes in the amount of US$185,664 thousand. As a
result of the two exchanges completed in February and July 2015,
the tenor of the notes outstanding was extended from April 2016 to
April 2019 with two equal instalments of US$173,194 thousand
falling due on 7 April 2018 and 2019, respectively. The new notes
have a 10.375% interest coupon payable semi-annually, compared to
7.875% for the initially issued notes in April 2011.
Further information on the Group's exposure to interest rate,
foreign currency and liquidity risk is provided in note 30 of the
Annual Report and Accounts 2014.
Note 19: Related party disclosure
During the periods presented the Group entered into arm's length
transactions with entities under the common control of the majority
owner of the Group, Kostyantin Zhevago and with associated
companies and with other related parties. Management considers that
the Group has appropriate procedures in place to identify and
properly disclose transactions with the related parties.
Entities under common control are those under the control of
Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in
which the Group holds an interest of 48.6%. This is the only
associated company of the Group. Other related parties are
principally those entities controlled by Anatoly Trefilov who is a
member of the supervisory board of OJSC Ferrexpo Poltava Mining.
Related party transactions entered into by the Group during the
periods presented are summarised in the tables on the following
pages.
During the period ended 30 June 2015, the Ukrainian Hryvnia has
devalued by approximately 33% compared to the US Dollar; from
15.769 as at 31 December 2014 to 21.015 as at the end of this
reporting period. This devaluation had an effect on the totals of
the transactions and the balances denominated in Hryvnia when
translating into US Dollar.
Note 19: Related party disclosure continued
Revenue, expenses, finance income and finance expenses
6 months ended 30.06.15 (unaudited) 6 months ended 30.06.14 Year ended 31.12.14 (audited)
(unaudited)
------------------------------------- -------------------------------- ------------------------------
Entities Asso-ciated Other Entities Asso- Other Entities Asso- Other
under compa- nies related under ciated related under ciated related
common parties common compa- parties common compa- parties
US$ 000 control control nies control nies
Other sales (a) 168 - 377 318 - 289 696 - 524
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
party
transactions
within revenue 168 - 377 318 - 289 696 - 524
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Materials (b) 3,269 - 6 6,570 - 95 12,334 - 26
Purchased
concentrate
and other
items for
resale (c) 277 - - - - - 769 - -
Spare parts and
consumables
(d) 513 - 2 1,292 - 1 2,423 - 2
Gas (e) 21,750 - - 19,102 - - 39,259 - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
parties
transactions
within cost of
sales 25,809 - 8 26,964 - 96 54,785 - 28
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Selling and
distribution
expenses (f) 5,456 11,024 3,796 5,539 11,850 3,512 11,201 24,130 5,984
General and
administration
expenses (g) 397 - 320 666 - - 1,267 - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total related
parties
transactions
within
expenses 31,662 11,024 4,124 33,169 11,850 3,608 67,253 24,130 6,012
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Finance income
(h) 1,343 - - 847 - - 1,804 - -
Finance
expenses (h) (30) - - (27) - - (99) - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Net finance
income 1,313 - - 820 - - 1,705 - -
---------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Entities under common control
The Group entered into various related party transactions with
entities under common control. A description of the most material
transactions, which are in aggregate over US$200 thousand (on an
expected annualised basis) in the current or comparative periods is
given below. All transactions were carried out on an arm's length
basis in the normal course of business.
(a) Sales of power, steam and water and other materials for
US$43 thousand (30 June 2014: US$80 thousand; 31 December 2014:
US$160 thousand) and income from premises leased to Kislorod PCC of
US$75 thousand (30 June 2014: US$134 thousand; 31 December 2014:
US$258 thousand).
(b) Purchases of compressed air, oxygen and metal scrap from
Kislorod PCC for US$1,906 thousand (30 June 2014: US$2,753
thousand; 31 December 2014: US$5,347 thousand); and
(b) Purchases of cast iron balls from AutoKraZ Holding Co. for
US$659 thousand (30 June 2014: US$3,262 thousand; 31 December 2014:
US$5,530 thousand).
(b) Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas
for US$652 thousand (30 June 2014: US$406 thousand; 31 December
2014: US$1,209 thousand).
(c) Purchases of concentrate and other items for resale from
Vostok Ruda Ltd for US$277 thousand (30 June 2014: nil; 31 December
2014: US$769 thousand).
(d) Purchases of spare parts from CJSC Kiev Shipbuilding and
Ship Repair Plant ('KSRSSZ') in the amount of US$107 thousand (30
June 2014: US$355 thousand; 31 December 2014: US$821 thousand);
(d) Purchases of spare parts from Valsa GTV of US$52 thousand
(30 June 2014: US$511 thousand; 31 December 2014: US$749
thousand);
(d) Purchases of ferromanganese from Raw & Refined
Commodities AG for US$209 thousand (30 June 2014: US$284 thousand;
31 December 2014: US$512 thousand).
(e) Procurement of gas from OJSC Ukrzakordongeologia for
US$21,750 thousand (30 June 2014: US$19,102 thousand; 31 December
2014: US$39,259 thousand).
(f) Purchases of advertisement, marketing and general public
relations services from FC Vorskla for US$5,436 thousand (30 June
2014: US$5,503 thousand; 31 December 2014: US$11,137 thousand).
(g) Insurance premiums paid to ASK Omega for workmen's insurance
and general cover of US$213 thousand (30 June 2014: US$328
thousand; 31 December 2014: US$574 thousand);
(g) Fees paid to Bank Finance & Credit (Bank F&C) for
bank services of US$147 thousand (30 June 2014: US$209 thousand; 31
December 2014: US$ 439 thousand).
(h) Transactional banking services are provided to certain
subsidiaries of the Group by Bank Finance & Credit (Bank
F&C) Finance income and expenses relate to these transactional
banking services. Further information is provided under
transactional banking arrangements on page 35.
Note 19: Related party disclosure continued
Associated companies
The Group entered into related party transactions with its
associated company TIS Ruda LLC, which were carried out on an arm's
length basis in the normal course of business for the members of
the Group (see note 1). A description of the most material
transactions which are in aggregate over US$200 thousand (on an
expected annualised basis) in the current or comparative periods is
given below:
(f) Purchases of logistics services in the amount of US$11,024
thousand (30 June 2014: US$11,850 thousand; 31 December 2014:
US$24,130 thousand) relating to port operations, including port
charges, handling costs, agent commissions and storage costs.
Other related parties
The Group entered into various transactions with other related
parties. A description of the most material transactions which are
in aggregate over US$200 thousand (on an expected annualised basis)
in the current or comparative periods is given below:
(a) Sales of material and services to Slavutich Ruda Ltd. for
US$364 thousand (30 June 2014: US$281 thousand; 31 December 2014:
US$508 thousand).
(f) Purchases of logistics management services from Slavutich
Ruda Ltd. relating to customs clearance services and the
coordination of rail transit. Total billings amounted to US$3,796
thousand (30 June 2014: US$3,512 thousand; 31 December 2014:
US$5,984 thousand). Slavutich Ruda Ltd. earned commission income of
US$226 thousand on these services (30 June 2014: US$324 thousand;
31 December 2014: US$1,350 thousand).
(g) Consulting fees paid to Nage Capital Management AG of US$320
thousand (30 June 2014: nil; 31 December 2014: nil) controlled by a
former member of the board of directors of Ferrexpo plc who
resigned in August 2014. The Group entered into this transaction
within one year of his resignation and therefore considered it to
be a transaction with a related party.
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature
which were undertaken between Group companies and entities under
common control, associated companies and other related parties
during the periods presented.
6 months ended 30.06.15 (unaudited) 6 months ended 30.06.14 Year ended 31.12.14 (audited)
(unaudited)
------------------------------------- -------------------------------- ------------------------------
US$ 000 Entities Asso-ciated Other Entities Asso- Other Entities Asso- Other
under compa-nies related under ciated related under ciated related
common parties common compa- parties common compa- parties
control control nies control nies
Purchases - - - - - - 458 - -
with
independent
confirmation
Purchases
with
shareholder
approval 842 - - - - - 887 - -
Purchases in
the ordinary
course of
business 1,195 - - 1,742 - 4 2,724 - 5
-------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total
purchases of
property,
plant and
equipment
(i) 2,037 - - 1,742 - 4 4,069 - 5
-------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Entities under common control
Individual transactions of a capital nature which exceeded
US$200 thousand are described below.
Current period
i During the first six month period ended 30 June 2015, the
Group entered in various transactions of a capital nature with
related parties totalling US$1,195 thousand. These transactions
were in the ordinary course of business. Individual transactions of
a capital nature which exceeded US$200 thousand are listed
below.
-- The Group procured a filter in the amount of US$958 thousand
from OJSC Berdichev Machine-Building Plant Progress for the quality
upgrade of the pelletising
plant at Ferrexpo Poltava Mining and design documentation
services from OJSC DIOS totalling US$231 thousand.
In April 2015 the Group received an additional 27 rail cars
totalling US$1,431 thousand (US$842 thousand at the prevailing
exchange rate at delivery), which were ordered in February 2014
under the authority of a shareholder approval obtained on 24 May
2012. See below for further information.
Prior periods:
i During the financial year 2014, the Group entered into various
transactions of a capital nature with related parties totalling to
US$2,724 thousand, which were in the ordinary course of
business.
-- The Group procured goods and services totalling US$1,807
thousand from OJSC Berdichev Machine-Building Plant Progress for
various ongoing projects and
design documentation services from OJSC DIOS totalling US$597
thousand.
In August 2014, the Group acquired in two separate transactions
a railway line and an associated power line from LLC Vorskla Steel
totalling US$458 thousand. The transaction was not considered to be
in the ordinary course of business and an independent confirmation
was obtained and an announcement made in accordance with the UK
Listing Rules.
Note 19: Related party disclosure continued
In February 2014, the Group ordered 300 rail cars from PJSC
Stakhanov Railcar Company, of which 233 rail cars amounting to
US$12,349 thousand were under the authority of the shareholder
approval obtained on 24 May 2012 obtained under the listing rules
applicable at that time and an additional 67 rail cars amounting to
US$3,551 thousand were ordered in the ordinary course of business.
A total prepayment of US$11,925 thousand (US$4,920 thousand at
current exchange rate) was made in relation to these rail cars. The
rail cars were scheduled for delivery in the second half of the
financial year 2014. As a consequence of the ongoing conflict in
the eastern part of Ukraine, 25 rail cars totalling US$1,325
thousand (US$887 thousand at the prevailing exchange rate at
delivery) were delivered during the financial year 2014. See
footnote (l) below for further information.
Balances with related parties
The outstanding balances, as a result of transactions with
related parties, for the periods presented are shown in the table
below:
6 months ended 30.06.15 (unaudited) 6 months ended 30.06.14 Year ended 31.12.14 (audited)
(unaudited)
------------------------------------- -------------------------------- ------------------------------
Entities Asso-ciated Other Entities Asso- Other Entities Asso- Other
under compa-nies related under ciated related under ciated related
common parties common compa- parties common compa- parties
US$ 000 control control nies control nies
Available-for-sale
financial assets
(j) 23 - - 213 - - 46 - -
Other non-current
assets (k) 3,546 - - 5,797 - - 4,726 - -
Prepayments for
property, plant
and equipment (l) 44 - - 9,161 - - 604 - -
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total non-current
assets 3,613 - - 15,171 - - 5,376 - -
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Trade and other
receivables (m) 685 - 52 806 - 15 712 - 91
Prepayments and
other current
assets (n) 2,501 - 30 1,118 1,283 - 164 - 595
Cash and cash
equivalents (o) 165,381 - - 155,416 - - 161,473 - -
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Total current
assets 168,567 - 82 157,340 1,283 15 162,349 - 686
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Trade and other
payables (p) 1,246 578 66 961 - 42 1,429 151 490
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
Current liabilities 1,246 578 66 961 - 42 1,429 151 490
-------------------- --------- ------------ ------------ --------- ------- ------------ --------- ------- ----------
A description of the most material balances which are over
US$200 thousand in the current or comparative periods is given
below:
Entities under common control
j The balance of the available-for-sale financial assets
comprised shareholdings in PJSC Stakhanov Railcar Company (1.1%)
and Vostok Ruda Ltd. (1.1%). The ultimate beneficial owner of these
companies is Kostyantin Zhevago. PJSC Stakhanov Railcar Company is
further listed on the Ukrainian stock exchange. The changes in
value in the table above relate to fair value adjustments recorded
during the respective reporting periods. The shareholdings for all
available-for-sale financial assets remained unchanged during the
periods disclosed above. The balance of US$23 thousand as at 30
June 2015 related to the investment in PJSC Stakhanov Railcar
Company (30 June 2014: US$213 thousand; 31 December 2014: US$46
thousand). The investment in Vostok Ruda Ltd. was fully impaired in
a previous period.
k As at 30 June 2015, other non-current assets related to a
deposit of US$3,546 thousand with bank F&C (30 June 2014:
US$5,797 thousand; 31 December 2014: US$4,726 thousand) as a
security in respect of loans made to employees under the Group's
social loyalty programme. Further information is provided under
transactional banking arrangements below.
l As at 30 June 2015, a prepayment of US$4,063 thousand (at
current exchange rate) remained in connection with an advance
payment made in February 2014 for 300 rail cars ordered from PJSC
Stakhanov Railcar Company (30 June 2014: US$8,743 thousand; 31
December 2014: US$6,007 thousand). As at 30 June 2015, the Group
received 52 rail cars of the total 300 rail cars ordered in
February 2014. Due to continued uncertainty surrounding the
delivery of the remaining number of rail cars or recovery of the
prepayment, the Group recorded an allowance for the full
outstanding amount as at 30 June 2015 and 31 December 2014 (see
section Purchases of property, plant, equipment and investments
above for further details). No prepayments were made to OJSC
Berdichev Machine-Building Plant Progress as at 30 June 2015 (30
June 2014: US$242 thousand; 31 December 2014: US$527 thousand).
m As at 30 June 2015, trade and other receivables included
outstanding amounts of US$200 thousand due from Vorskla Steel Ltd.
(30 June 2014: US$295 thousand; 31 December 2014: US$244 thousand)
in relation to other sales and US$385 thousand (30 June 2014:
US$333 thousand; 31 December 2014: US$317 thousand) from Kislorod
PCC for the sale of power, steam and water.
n Prepayments and other current assets include US$1,748 thousand
(30 June 2014: US$895 thousand; 31 December 2014: nil) made to OJSC
Ukrzakordongeologia for gas as well as US$659 thousand (30 June
2014: nil; 31 December 2014: nil) for concentrate made to Vostok
Ruda.
o As at 30 June 2015, cash and cash equivalents with Bank
F&C were US$165,381 thousand (30 June 2014: US$155,416
thousand; 31 December 2014: US$161,473 thousand). Further
information is provided under Transactional banking arrangements
below.
Note 19: Related party disclosure continued
p Trade and other payables amounting to US$494 thousand for
compressed air and oxygen purchased from Kislorod PCC (30 June
2014: US$507 thousand; 31 December 2014: US$483 thousand) and
US$289 thousand due to Nage Capital Management AG (30 June 2014:
nil; 31 December 2014: nil). The balance as at the end of the
period ended 30 June 2014 included an amount of US$200 thousand (31
December 2014: US$92 thousand) due to Valsa GTV. The balance as at
the end of the period ended 31 December 2014 included an amount of
US$397 thousand payable to PJSC Stakhanov Railcar Company, no
amounts were due as at 30 June 2015 and 30 June 2014.
Associated companies
n The balance as at the end of the comparative period ended 30
June 2014 includes Prepayments and other current assets of US$1,283
thousand made to TIS Ruda LLC for transhipment services. No amounts
were prepaid as at 30 June 2015 and 31 December 2014.
Other related parties
n Prepayments and other current assets relate to prepayments of
US$30 thousand for distribution services made to Slavutich Ruda
Ltd. (30 June 2014: nil; 31 December 2014: US$595 thousand).
p Trade and other payables amounting to US$66 thousand as at 30
June 2015 are in respect of distribution services provided by
Slavutich Ruda Ltd. (30 June 2014: US$42 thousand; 31 December
2014: US$490 thousand).
Transactional banking arrangements
The Group has transactional banking arrangements with Bank
Finance & Credit ('Bank F&C') in Ukraine which is under
common control of the majority shareholder of Ferrexpo plc. Finance
income and expenses are disclosed in the table on page 32.
On 25 May 2013, the Group entered into a new uncommitted
multicurrency revolving loan facility agreement and a documentary
credit facility agreement with Bank F&C which will expire on 29
May 2016. The aggregate maximum limit of these facilities amounts
to UAH80 million (30 June 2015: US$3,807 thousand; 30 June 2014:
US$6,766 thousand; 31 December 2014: US$5,073 thousand) and, as
required under Ukrainian legislation, fixed assets are pledged. The
total value of pledges under the terms of the loan facility
agreements is US$2,864 thousand as at 30 June 2015. The terms and
conditions of both facilities were the subject of an independent
confirmation. No amounts are drawn and no letters of credit are
outstanding under this facility as at 30 June 2015 (30 June 2014:
nil; 31 December 2014: nil).
Bank F&C provides mortgages and loans to employees of the
Group for the acquisition, construction and renovation of
apartments in Ukraine. This is part of a social loyalty programme
started by the Group in December 2011 allowing certain employees of
the Group to borrow at preferential interest rates. OJSC Ferrexpo
Poltava Mining and LLC Ferrexpo Yeristovo GOK act as guarantors for
the bank's loans to the employees of the Group and have deposited
US$3,546 thousand at Bank F&C as security (30 June 2014:
US$5,797 thousand; 31 December 2014: US$4,726 thousand). The
interest rate margin earned by Bank F&C covers the costs of
administrating the mortgages and loans. Detailed information on the
social loyalty programme is provided in the Corporate Social
Responsibility Review section of the Annual Report and Accounts
2014.
Cash and cash equivalent balances held with Bank F&C are in
the normal course of business in Ukraine and are held on call or
from time to time on overnight deposit. Interest is paid on
balances held. The interest rates received by the Group were in
line with relevant comparable market rates throughout the periods
presented.
Note 20: Commitments and contingencies
Commitments
US$ 000 As at 30.06.15 As at 30.06.14 As at 31.12.14
(unaudited) (unaudited) (audited)
Operating lease commitments 30,371 59,065 40,738
Capital commitments on purchase of PPE 91,015 113,168 108,763
------------------------------------------- --------------- --------------- ---------------
Legal
In the ordinary course of business, the Group is subject to
legal actions and complaints. Management believes that the ultimate
liability, if any, arising from such actions or complaints will not
have a material adverse effect on the financial condition or the
results of future operations of the Group.
The Group is currently involved in a share dispute which
commenced in 2005 and has been disclosed in its various public
documents since IPO in 2007. The main chronology of the dispute is
below:
On 21 April 2010, the Higher Commercial Court of Ukraine
invalidated the share sale and purchase agreement ('SPA') pursuant
to which a 40.19% stake in OJSC Ferrexpo Poltava Mining ('FPM') was
sold on 18 November 2002 to nominee companies that were previously
ultimately controlled by Kostyantin Zhevago, which ultimately sold
the shares to Ferrexpo AG.
On 2 December 2014, the Supreme Court of Ukraine set aside the
judgement of the Higher Commercial Court of Ukraine delivered in
April 2010 and remitted the case for review to the Higher
Commercial Court of Ukraine. On 16 February 2015, the Higher
Commercial Court of Ukraine confirmed the decisions of the lower
courts which dismissed the claim for invalidation of the SPA. As at
the date of the publication of these interim financial statements
for the period ended 30 June 2015, the original SPA of 18 November
2002 is valid.
In October 2011, the claimants commenced further proceedings for
the restoration of their shareholding in FPM. On 20 October 2014,
the Kyiv City Commercial Court dismissed the claim in full. This
judgment was confirmed by the Kyiv Appeal Commercial Court and the
Higher Commercial Court of Ukraine on 28 January 2015 and 14 April
2015, respectively.
Note 20: Commitments and contingencies continued
After having taken legal advice, the management of the Group
believes that risks related to further court proceedings in respect
of this case are remote. In light of the risks surrounding the
operation and independence of Ukrainian courts, including those
associated with the Ukrainian legal system in general, however the
claimants may ultimately prevail in this dispute and the Group's
ownership of the relevant interest in FPM may be successfully
challenged.
Tax and other regulatory compliance
Ukrainian legislation and regulations regarding taxation and
customs continue to evolve. Legislation and regulations are not
always clearly written and are subject to varying interpretations
and inconsistent enforcement by local, regional and national
authorities, and other governmental bodies. Instances of
inconsistent interpretations are not unusual. The uncertainty of
application and the evolution of Ukrainian tax laws, including
those affecting cross-border transactions, create a risk of
additional tax payments having to be made by the Group, which could
have a material effect on the Group's financial position and
results of operations. This includes also a transfer pricing law
which significantly increased the power of the tax authorities. The
Group does not believe that these risks are any more significant
than those of similar enterprises in Ukraine.
Recoverable VAT amounting to US$2,491 thousand (30 June 2014:
US$13,365 thousand; 31 December 2014: US$3,587 thousand)
outstanding at 30 June 2015 and US$3,886 thousand already refunded
by the tax authorities during the financial year 2014 are currently
in the process of being considered by the Ukrainian court system in
several different cases. As the VAT is fully recoverable under the
relevant Ukrainian legislation, the Group expects to receive
positive court decisions for these ongoing court proceedings and
expect these amounts to be recovered in a further issuance of
bonds. Consequently, the VAT is recorded at its full amount in the
financial statements, net of an estimated discount to reflect the
expected difference to the bonds. See also disclosure made in note
14. No provision has been made for any related penalties and fines,
which would in the case of a final negative ruling become
payable.
Note 21: Financial instruments
Fair values
Set out below are the carrying amounts and fair values of the
Group's financial instruments that are carried in the interim
consolidated statement of financial position:
Carrying amount Fair Value
------------------------------------------------- -------------------------------------------------
As at 30.06.15 As at 30.06.14 As at 31.12.14 As at 30.06.15 As at 30.06.14 As at 31.12.14
US$ 000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Financial assets
Cash and cash
equivalents 470,535 359,441 626,509 470,535 359,441 626,509
Trade and other
receivables 64,846 102,539 87,226 64,846 102,539 87,226
Available-for-sale
financial assets 23 82,595 46 23 82,595 46
Other financial
assets 12,278 12,033 8,944 12,278 12,033 8,944
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
assets 547,682 556,608 722,725 547,682 556,608 722,725
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Financial
liabilities
Trade and other
payables 25,826 32,991 32,351 25,826 32,991 32,351
Accrued liabilities 24,826 27,756 30,497 24,826 27,756 30,497
Interest bearing
loans and
borrowings 1,123,090 1,052,960 1,304,627 1,079,801 1,055,118 1,204,836
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total financial
liabilities 1,173,742 1,113,707 1,367,475 1,130,453 1,115,865 1,267,684
---------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Other financial assets
The fair values of cash and cash equivalents, trade and other
receivables and payables are approximately equal to their carrying
amounts due to their short maturity.
Interest bearing loans and borrowings
The fair values of interest-bearing loans and borrowings are
based on the discounted cash flows using market interest rates
except for the fair value of the Eurobond issued, which is based on
the market price quotation at the reporting date.
Available-for-sale financial assets
As at 9 June 2015, the Group disposed its 15.5%
available-for-sale equity investment in Ferrous Resources Limited
("Ferrous") for a total cash consideration of US$41,767 thousand
resulting in a gain in this amount realised in the period ended 30
June 2015. This investment was acquired during the financial year
2013 with total transaction costs of US$82,382 thousand and fully
impaired as at 30 September 2014 due to uncertainties in respect of
the operational activity and the future development of the mining
operation at this point of time. In the period ended 31 March 2015,
the investment was revalued to US$41,800 thousand based on an
irrevocable tender and support agreement signed on 29 April 2015
for the disposal of the stake in Ferrous for a cash consideration
of US$41,800 thousand, which was considered to be the fair value of
the investment at the end of this reporting period and the gain
from this revaluation was recognised in the statement of other
comprehensive income. This gain was reclassified to profit or loss
at the point of time of the completion of the disposal.
Note 21: Financial instruments continued
The available-for-sale equity investment in PJSC Stakhanov
Railcar Company in the amount of US$23 thousand (30 June 2014:
US$213 thousand; 31 December 2014: US$46 thousand) is measured at
its fair value based on the quoted market price for its shares on
the Ukrainian Stock exchange ('PFTS').
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable.
Level 1: fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2: fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
US$ 000 As at 30.06.15 (unaudited)
Level 1 Level 2 Level 3 Total
Financial assets
Available-for-sale financial assets 23 - - 23
---------------------------------------- --------- --------- --------- ------
Total financial assets 23 - - 23
---------------------------------------- --------- --------- --------- ------
US$ 000 As at 30.06.14 (unaudited)
Level 1 Level 2 Level 3 Total
Financial assets
Available-for-sale financial assets 213 - 82,382 82,595
---------------------------------------- --------- --------- --------- -------
Total financial assets 213 - 82,382 82,595
---------------------------------------- --------- --------- --------- -------
US$ 000 As at 31.12.14 (audited)
Level 1 Level 2 Level 3 Total
Financial assets
Available-for-sale financial assets 46 - - 46
---------------------------------------- --------- -------- -------- ------
Total financial assets 46 - - 46
---------------------------------------- --------- -------- -------- ------
There were no transfers between the different levels during the
reporting period.
As of 30 June 2015, the fair value of the available-for-sale
financial assets in Level 1 decreased by US$23 thousand including a
translation and impairment loss (30 June 2014: decrease of US$183
thousand; 31 December 2014: decrease of US$350 thousand). The loss
at the end of the comparative period ended 30 June 2014 was
initially included in other comprehensive income. As at 31 December
2014, the investment was considered to be impaired and the total
effect included in other comprehensive income was reclassified to
the income statement.
Reconciliation of recurring fair value measurements categorised
within Level 3 of the fair value hierarchy is shown in the table
below:
6 months ended Year ended
US$ 000 30.06.15 6 months ended 30.06.14 31.12.14
(unaudited) (unaudited) (audited)
Opening balance - 82,382 82,382
Total gains or losses:
- in profit or loss 41,767 - (82,382)
- in other comprehensive income - - -
Disposal (41,767) - -
Transfer out of Level 3 - - -
------------------------------------ --------------- ------------------------ -----------
Closing balance - 82,382 -
------------------------------------ --------------- ------------------------ -----------
Further information on the Group's exposure to interest rate,
foreign currency and liquidity risk is provided in note 30 of the
Annual Report and Accounts 2014.
Note 22: Events after the reporting period
On 6 July 2015, the Group exchanged the remaining US$285,669
thousand of its US$500 million Eurobond against 35% cash repayment
totalling US$100,005 thousand and issued new notes in the amount of
US$185,664 thousand in order to extend the tenor to April 2018 and
April 2019. See note 18 for further details.
Other than disclosed above, no material adjusting or
non-adjusting events occurred.
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 A number of processes whereby the mineral
Process 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 Fine iron ore screened to -6.3mm
fines
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 Non-executive Directors of the Company
Directors
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
[1] This amount includes a special dividend of 6.6 US cents per
share.
[2] US$54 million prepaid as part of February Exchange offer,
US$100 million prepaid after period end as part of July Exchange
Offer. For more information see Financial Management on page 7.
3 Platts index price for 62% Fe iron ore fines, CFR China
[4] Source: CRU Iron Ore Market Statistical Review July 2015
[5] The Platts index iron ore fines price refers to the 62% Fe
iron ore fines price to China, CFR. Ferrexpo's received price for
its iron ore pellets is composed of this index price plus a pellet
premium, adjusted for Fe content and quality and less freight.
[6] 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.
[7] Ferrexpo Premium Pellets, FPP, contain 65% Fe compared to
Ferrexpo Basic Pellet, FBP, which contain 62% Fe.
[8] Compiled by Deutsche Bank industrials team using 15 sell
side analyst Iron Ore price forecasts
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PKQDQFBKDOFK
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