TIDMFXPO
RNS Number : 5255H
Ferrexpo PLC
04 August 2021
4 August 2021
Ferrexpo plc
("Ferrexpo", the "Group" or the "Company")
Interim Results for the six months ended 30 June 2021
Investment in high grade pellets enables strong financial
performance, with further growth ahead
Financial Highlights
-- Revenues rise by 74% to US$1,353 million, reflecting market
conditions and investments in increasing pellet quality.
-- Underlying EBITDA(A) increases by 147% to US$868 million (1H 2020: US$352 million).
-- Profit after tax of US$661 million, representing an increase
of 165% (1H 2020: US$250 million).
-- Net cash(A) position of US$213 million (31 December 2020: US$4 million).
-- Capital investment increases to US$142 million (1H 2020: US$96 million).
-- Interim dividend of 39.6 US cents per share (1H 2020: 13.2 US
cents per share) in respect of strong performance in 1H 2021.
Lucio Genovese, Non-executive Chair, said:
"Today's strong interim financial results reflect our multi-year
investment programme in our assets, which has enabled us to not
only take full advantage of the current strength of the iron ore
market through our high grade iron ore products, but also deliver
these results alongside excellent safety performance and continued
progress in cutting carbon emissions.
The Group has shown resilience throughout the global COVID-19
pandemic, and we remain vigilant in our approach to protect our
workforce and local communities from the spread of this virus. We
continue to deliver growth, in terms of our operations, marketing
and financial results, culminating in underlying EBITDA(A) of
US$868 million for the first half of 2021, an increase of 147%.
This strong all-round performance has enabled the Group to repay
its pre-export finance facility early, whilst also investing for
the future, as the Group grows from one phase of growth to another.
We are also pleased to announce today an interim dividend of 39.6
US cents per share, reflecting the Group's healthy balance sheet
and strong performance to date in 2021.
Looking ahead, we are at an exciting time in the Group's
development. We are currently undertaking expansion work that will
deliver growth in the near-term, having invested US$93 million in
growth capex in the first half, and we are already looking ahead to
our next phase of growth. On product quality, we have secured our
first long-term contract for our latest product offering,
high-grade (67% Fe) direct reduction pellets, which represent the
future of global steel production as economies worldwide seek to
decarbonise, and we also continue to cut our own carbon emissions.
Finally, on corporate governance, we welcomed Ann-Christin Andersen
as a further Independent Non-executive Director during the
period.
I would like to conclude by thanking our workforce for
delivering the interim results presented here, and to all
stakeholders for their continued support in our business going
forward."
Financial Summary:
US$ million (unless otherwise stated) 6 months 6 months Year ended
ended 30.06.21 ended 30.06.20 Change 31.12.20
Total pellet production (kt) 5,563 5,598 (1%) 11,218
--------------- --------------- -------------- ----------
Sales volumes (kt) 5,567 6,107 (9%) 12,062
--------------- --------------- -------------- ----------
Average Platts 62% Fe iron ore fines
price (US$/t) 184 91 +102% 109
--------------- --------------- -------------- ----------
Average Platts 65% Fe iron ore fines
price (US$/t) 212 106 +100% 122
--------------- --------------- -------------- ----------
Revenue 1,353 776 +74% 1,700
--------------- --------------- -------------- ----------
Average C1 cash cost of production
A (US$/t) 46.6 40.9 +14% 41.5
--------------- --------------- -------------- ----------
Underlying EBITDA A 868 352 +147% 859
--------------- --------------- -------------- ----------
Profit after tax for the period 661 250 +165% 635
--------------- --------------- -------------- ----------
Diluted EPS (US cents) 112.3 42.4 +165% 107.9
--------------- --------------- -------------- ----------
Dividends per share declared (US
cents) 39.6 13.2 + 200 % 85.8
--------------- --------------- -------------- ----------
Net cash flow from operating activities 661 258 +156% 687
--------------- --------------- -------------- ----------
Capital investment A 142 96 +48% 206
--------------- --------------- -------------- ----------
Closing net cash / (net debt) 213 (174) +387 4
--------------- --------------- -------------- ----------
Closing cash and cash equivalents 235 169 +39% 270
--------------- --------------- -------------- ----------
Health and Safety
-- Solid safety performance continues, with no work related
fatalities in 1H 2021 (FY2020: one), and a lost time injury
frequency rate ("LTIFR") of 0.37, which continues to remain below
the Group's five-year trailing full-year average LTIFR[1]. This
also compares favourably against LTIFR for iron ore miners in
Western Australia, which was 1.60 for 2019-20 (most recent data
available)[2].
-- COVID-19 update: The Group's facilities continue to operate
with minimal impact on operations to date, and the Group continues
to closely monitor its workforce. The infection rate in the local
communities surrounding the Group's operations remains low.
Operational Highlights
-- Pellet production of 5.6 million tonnes in 1H 2021,
representing a level in line with 1H 2020, despite pelletiser
upgrade work during the period.
-- An additional 149 kilotonnes of commercial high grade (67%
Fe) concentrate was shipped in the period (1H 2020: none),
correlating to periods of pelletiser upgrade work.
-- Sales volumes decreased by 9% compared to 1H 2020, relating
to stockpile drawdown process completed in the prior period.
-- Market balance for pellet sales returning to historic levels,
following temporary shift in sales to China in 2020.
-- C1 cash cost of production(A) of US$46.6 per tonne,
increasing by US$5.7 compared to 1H 2020, reflecting higher
commodity prices and plant maintenance costs.
-- Capital investment(A) of US$142 million in 1H 2021 (1H 2020:
US$96 million), reflecting pellet line upgrade work and increased
waste stripping activities ahead of further growth phase.
-- Pelletiser upgrade work completed on three out of four lines,
with final line to be completed in 3Q 2021. Once complete, this
project will add a 0.5-1.0 million tonnes per annum of pelletiser
capacity.
-- First long-term contract signed for Group's high grade (67%
Fe) direct reduction ("DR") pellets.
Market Environment
-- High grade (65% Fe) iron ore prices as assessed by S&P
Global Platts increased significantly during 1H 2021 compared to 1H
2020.
-- Tight market conditions for global iron ore pellet supply,
combined with increasing demand for pellets as steelmakers seek to
increase productivity and lower emissions, resulted in the S&P
Global Platts Atlantic pellet premium rising to US$54 per tonne in
1H 2021 (compared to US$30 per tonne in 1H 2020).
-- C3 freight rates[3] rose by 72%, or the equivalent of US$9,
to an average of US$22 per tonne in 1H 2021 as a result of higher
oil prices and an increase in demand for vessels.
Board of Directors and Corporate Governance
-- Ann-Christin Andersen appointed as an Independent
Non-executive Director of the Board of Directors in March 2021.
-- Appointment of Nikolay Kladiev as Group Chief Financial Officer with effect from today.
Environment, Social and Governance ("ESG")
-- Release of annual Responsible Business Report on the Group's
website today, covering ESG activities in 2020.
-- Carbon emissions footprint decreases 6% in 1H 2021 against FY2020, on a per tonne basis.[4]
Alternative performance measures
Words with the symbol A are defined in the Alternative
Performance Measures section on pages 38 and 39.
Conference call and webcast
Ferrexpo will host a presentation today (4 August 2021) via a
video webcast that will start at 9:00am (UK).
To join the webcast, and view the live presentation, please use
the following link:
https://webcasting.brrmedia.co.uk/broadcast/60eef3c20166921ec8acea58
You will be able to ask questions via the link above. If,
however, you wish to join this conference call via telephone,
please see following dial in details and instructions:
10 minutes prior to the start of the call, dial the dial in
shown below and provide the confirmation code when prompted.
Note: due to regional restrictions some participants may receive
operator assistance when joining this conference call and may not
be automatically connected .
Event Title: Ferrexpo PLC - Interim Results
Participant dial in numbers:
-- United Kingdom (local): +44 (0)330 336 9126
-- Switzerland (Geneva): +41 (0)22 567 5729
-- Switzerland (Zurich): +41 (0)44 580 7206
-- Ukraine: 0800 503 441
-- United States of America: +1 929-477-0324
Confirmation Code: 1881856
Ferrexpo:
Rob Simmons r.simmons@ferrexpo.ch +44 207 389 8305
Tavistock:
Jos Simson +44 207 920 3150
Gareth Tredway ferrexpo@tavistock.co.uk +44 7785 974 264
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets
in Ukraine. It has been mining, processing and selling high quality
iron ore pellets to the global steel industry for over 40 years. In
2020, the Group produced 11.2 Mt of iron ore pellets, a 7% increase
on the prior year. The Company is ranked as the world's 3(rd)
largest exporter of pellets to the global steel industry with a
market share of approximately 9%. Ferrexpo has a diversified
customer base supplying steel mills in Austria, Germany, Japan,
South Korea, Taiwan, China, Slovakia, the Czech Republic, Turkey,
Vietnam and America. Ferrexpo has a premium listing on the main
market of the London Stock Exchange under the ticker FXPO. For
further information, please visit www.ferrexpo.com .
Introduction
The Group continues to make good progress on embedding a strong
culture of safety at both its operations in Ukraine and logistics
business in central Europe ("First-DDSG"), with three out of the
Group's four main operating entities registering no lost time
injuries during the period. As a result, the Group's LTIFR fell to
0.37 in 1H 2021 (FY2020: 0.79) and the Group had no fatalities at
its operations (FY2020: one).
The Group remains vigilant with safeguards to protect both its
workforce and local communities from the global COVID-19 pandemic,
and to date operations have experienced minimal disruption as a
result of this virus. Infection rates in local communities remain
low, and to date the Group has approved US$3.5 million of direct
funding through its COVID-19 Response Fund to help fight the spread
of the virus locally.
The financial performance of the Group remained strong in 1H
2021, reflecting strong market conditions and recent investments
that have enabled the Group to take full advantage of the increased
demand for high grade iron ore products, particularly those that
offer steelmakers the opportunity to lower carbon emissions, such
as iron ore pellets. Pellet production volumes remained in line in
1H 2021, with high grade products (65% Fe and above) representing
100% of output (1H 2020: 99%). The Group's underlying EBITDA(A)
result of US$868 million for the period reflects strong market
conditions, the Group's production of high grade (65% Fe and above)
iron ore pellets, combined with rigorous cost control measures. For
further details of the Group's financial performance, please see
the Financial Review Section on page 6.
The Group continues to invest and develop its assets, with a
focus on growth in product volume and quality, whilst also seeking
to lower carbon emissions through early adoption of modern
technology in its production processes. During the period, the
Group signed agreements for the supply of equipment for its
crushing and beneficiation plant, which will form the foundation
for delivering the Group's next milestone in growing output by a
further three million tonnes per annum. Further details of this
latest phase of investment in growth are provided in the
Operational Review Section (Capital investment for future growth)
on page 11.
Shareholder returns
Through strong cash generation, the Group is now in a net cash
position, with the Group's net cash increasing to US$213 million as
of 30 June 2021 (31 December 2020: US$4 million), including a cash
position of US$235 million. In light of the current strength of the
Group's balance sheet, the Board of Directors (the "Board") is
pleased to announce an interim dividend of 39.6 US cents per
Ordinary Share payable on 26 August 2021 to shareholders on the
register at the close of business on 13 August 2021. The
ex-dividend date will be 12 August 2021. All dividends are paid in
UK Pounds Sterling, with an election to receive in US Dollars.
Board membership and executive management
The Board of Ferrexpo remains committed to maintaining strong
levels of corporate governance practices and transparency
throughout the Group.
In March 2021, Ann-Christin Andersen was announced as an
Independent Non-executive Director of the Group, taking the total
number of independent directors of the Group to four out of six
directors, in addition to the Group's Chair.
As previously communicated in the Group's Annual Report and
Accounts for 2020, the Nominations Committee is looking to make a
further appointment of an Independent Non-executive Director to
strengthen the Board.
With effect from today, and as announced on 7 July 2021, the
Group has appointed Nikolay Kladiev as Group Chief Financial
Officer ("CFO"). Nikolay has been the CFO of the Group's main
operating entity in Ukraine - Ferrexpo Poltava Mining, since 2007,
whilst also serving on the Group's Executive Committee during this
time, and has been directly responsible for maintaining the Group's
position as a low cost pellet producer.
Iron ore market review
Iron ore pricing
The following market review focuses on the high grade fines
index (65% Fe), as published by S&P Global Platts ("Platts") as
this is the basis for pricing Ferrexpo's iron ore products, 100% of
which graded 65% Fe or higher in 1H 2021.
Demand for high grade iron ore increased significantly during
the period, rising from an average of US$106 per tonne during 1H
2020 to an average of US$212 per tonne in 1H 2021, as assessed by
Platts. The key driver for this increase in demand in iron ore in
1H 2021 relates to governments around the world providing economic
stimulus packages in response to the global COVID-19 pandemic,
which in turn has driven end-user demand for a range of steel
products. The supply-side response to this increase in demand has
seen a 10% increase in apparent iron ore production in 1H 2021 on a
global basis[5] (versus 1H 2020), the equivalent of approximately
110 million tonnes of additional iron ore. Approximately 90% of
this additional supply in 1H 2021 has come from three geographic
locations - China, Australia and Brazil[6], representing the three
main centres of global iron ore production.
Further to the increase seen in the iron ore fines price in 1H
2021, increased demand for high grade iron ore has driven the
premium paid for high grade 65% Fe material higher, rising 91% to
an average of US$28 per tonne in 1H 2021 (1H 2020: US$15 per
tonne). Through the Group's growth programme of investments in its
operations, which have enabled a pivot to 100% high grade
production in recent years, the Group is able to take full
advantage of this shift. The principal drivers for this increase in
demand of high grade products relate to both short term and longer
term factors. In the short term, steelmakers have been seeking to
utilise high grade ores to increase blast furnace productivity at a
time when steel margins remain at the present elevated levels. In
the longer term, a structural shift is underway towards higher
grade iron ores, as increasing environmental controls drive
steelmakers towards input materials that reduce carbon emissions.
High grade ores contain fewer impurities and therefore require less
heat to convert to steel, with this heat typically generated
through the combustion of coal in the blast furnace method of
steelmaking.
In tandem with increasing demand for higher grade iron ores, the
demand for iron ore pellets has also increased, reflecting the
additional blast furnace productivity that is provided for by
steelmakers utilising iron ore pellets over sinter fines. In
addition, pellets generate lower emissions in the steelmaking
process compared to sinter fines, as the latter need to be
sintered, which is a process requiring additional coal before prior
to the addition of material to the blast furnace. By contrast,
pellets are a direct charge material and therefore do not require
sintering. As a result of this increased demand, the Platts
Atlantic pellet premium rose to average US$54 for 1H 2021 (1H 2020:
US$30 per tonne). During the course of 1H 2021, the S&P Global
Platts China pellet premium tracked the Atlantic pellet premium,
and averaged US$57 per tonne for the period (1H 2020: US$27 per
tonne).
Freight
The C3 freight rate[7], which is principally used as a freight
reference in the pricing of the Group's sales contracts, averaged
US$22 per tonne in 1H 2021 (1H 2020: US$13 per tonne), with this
72% increase reflecting higher oil prices and reduced shipping
activity in the Atlantic basin.
Iron ore fines supply
Published sales data for the major iron ore producers in 1H 2021
indicates that iron ore shipments from the Pilbara Region of
Western Australia remained in line in 1H 2021 relative to 1H 2020,
whereas published sales data for a major iron ore fines producer in
Brazil shows an increase of approximately 15%, or the equivalent of
approximately 20 million tonnes. This limited supply-side response
to rising demand from steelmakers, particularly for high-grade iron
ore, is a key factor in the recent strength of iron ore prices.
Expectations for the remainder of 2021 are that additional iron
ore fines supply will enter the market, with projects in India and
Australia expected to add approximately 40 million tonnes of
material into the global market(3) . Expectations are that scrap
supply in China will also increase in 2H 2021, with steelmakers
currently showing a heightened preference for scrap substitution
during the current period of elevated iron ore prices.
Iron ore pellet supply
Global pellet export volumes have remained in line in 1H 2021 on
a year on year basis[8], reflecting reduced pellet supply from
pellet producers in Brazil and Canada, which have been
counterbalanced by increasing supply from producers in the CIS
region and India. Whilst overall pellet volumes have remained in
line, the above shift in supply balance in 1H 2021 has resulted in
an overall shortage of high quality iron ore pellets. The return of
a major iron ore pellet producer in Brazil in late 2020, following
a tailings dam breach in 2015, has resulted in partial reduction in
the overall shortfall of Brazilian pellet supply.
It is expected that the current global shortage of iron ore
pellets will ease during the remainder of the year, with pellet
supply recovering and global steel demand easing.
Iron ore pellet demand
The Group exports its iron ore pellets to steelmakers throughout
the world, with Europe and North East Asia being the traditional
destinations for exported blast furnace iron ore pellets, and China
has become an increasingly active buyer in more recent years. In
2020, overall iron ore pellet trade volumes shifted to Chinese
steelmakers, owing to this country's rapid response to the global
COVID-19 pandemic. The timing of each country's response to the
pandemic has varied between locations, and as such, the subsequent
timing and speed of recovery in demand for iron ore pellets has
varied between regions.
The Group has seen a strong recovery in demand for pellets in
Europe in 1H 2021, with demand in North East Asia flat
year-on-year. Demand for iron ore pellets from steelmakers in China
remains strong, despite the global market balance reverting to its
historic sales patterns. In 1H 2021, global pellet exports to China
have averaged approximately 2.1 million tonnes a month, which
represents a level in line with 2019 (2019 average: 2.4 million
tonnes a month) and significantly ahead of the average of 1.1
million tonnes a month seen during 2018[9]. This longer term
increase in Chinese demand for iron ore pellet imports reflects a
shift towards stronger environmental controls and efforts to reduce
steelmakers' emissions. With China representing approximately 73%
of the global consumption of iron ore fines in 2021 (equivalent to
999 million tonnes)[10], any increase in pellet demand from this
destination will likely have a material impact on global iron ore
pellet export trade, which is much smaller than the global export
trade in iron ore fines[11].
The Group has recently commenced production and sales of
commercial volumes of DR pellets, which are typically utilised by
steelmakers in the Middle East and North America. These two
geographic regions collectively represent approximately a third of
global pellet exports and therefore represent significant new
markets for the Group to develop new customer relationships.
Overall demand for iron ore pellets has remained strong in these
two regions in 1H 2021, with exports up 9% and 7% to the Middle
East and Americas respectively(1) .
Global steel production
In April 2021, the World Steel Association reported that global
crude steel production had risen to 1,878 million tonnes in 2020,
up from 1,874 million tonnes a year earlier, with this growth
coming despite the global COVID-19 pandemic restricting economies
around the world. This growth in production in 2020 is symptomatic
to the robust global response to the pandemic, which has stimulated
demand throughout the steel value chain.
Further to the increase seen in 2020, global steel production
has seen a further increase in 2021, rising by 14% for the first
six months of 2021, including a 14% and 18% increase in steel
output from Asia/Oceania and Europe (EU-27) respectively, which are
regions typically associated with customers buying blast furnace
iron ore pellets[12]. Regions that are typically associated with
purchasing DR pellets, such as the Middle East and North America,
have also seen growth in steel output in 1H 2021.
Looking further ahead, the World Steel Association expects that
the growth in global steel demand will slow during the remainder of
the year, with demand increasing by 6% for the full year 2021
([13]) . Global steel demand is forecast to increase by a further
3% in 2022(5) .
In the longer term, the Group expects that tighter emissions
controls and government regulation, particularly in the EU, will
result in additional demand for high grade, low impurity pellets in
the future. Independent research by CRU has demonstrated the
advantage of lower CO(2) emissions from using additional pellets in
the blast furnace burden instead of sinter fines, primarily as a
result of higher pellet rates having a lower requirement for coke
(a product derived from coal), and also as a consequence of steel
producers not needing to sinter material before it enters the blast
furnace (which is a process that typically requires coal). This
research estimates that steel mills produce approximately 40% less
CO(2) for each tonne of Ferrexpo's high grade iron ore pellets used
in place of sinter fines.
Financial review
Through its investments to grow production and product quality,
the Group has been able to deliver strong financial performance in
1H 2021, translating strong spot pricing through to the Group's
profitability. Iron ore pellet quality was 100% high grade pellets
in 1H 2021 (grading 65% Fe and above). Despite iron ore sales
volumes decreasing 9% in 1H 2021, as a result of the stockpile
drawdown process completed in the comparative period, revenues
increased by 74% in 1H 2021 due to an increase in high grade iron
ore prices and an increase in the Platts Atlantic pellet premium,
offset by lower sales volumes, in addition to higher C1 cash costs
and freight costs. Through this increase in market indices, strong
operational performance and robust cost control of C1 cash costs in
1H 2021, profit after tax rose to US$661 million (1H 2020: US$250
million). In turn, this profitability enabled funding early
repayment of the Group's pre-export finance ('PXF') facility,
shareholder returns and increased levels of capital investment
during the period.
Revenue
Revenues in 1H 2021 benefited from higher iron ore pricing and
pellet premiums, offset by higher international freight costs, and
as a result, increased significantly to US$1,353 million in 1H 2021
(1H 2020: US$776 million). This positive movement was partially
offset by a 9% reduction in sales volumes to 5.6 million tonnes (1H
2020: 6.1 million tonnes), after a destocking process was completed
in 2020.
Headline pricing 1H 2021 vs. 1H 2020
US$ per tonne 1H 2021 1H 2020 Change
Average Platts 62% Fe iron ore fines price 184 91 +102%
------- ------- ------
Average Platts 65% Fe iron ore fines price 212 106 +100%
------- ------- ------
Average high grade premium (Platts) 28 15 +91%
------- ------- ------
Average Platts Atlantic blast furnace pellet premium 54 30 +82%
------- ------- ------
Average Platts direct reduction pellet premium 70 41 +69%
------- ------- ------
In 1H 2020, the Group noted a considerable shift in sales
towards China, which was a shift in demand related to the global
COVID-19 pandemic. Since this time, iron ore markets have shown a
gradual return to the historic balance of demand, and in 1H 2021,
the Group's sales distribution was in line with previous years. In
1H 2021, the Group has seen 13 and 10 percentage-point increases in
sales to Central Europe and Western Europe respectively, reflecting
the recovery of these markets following the disruption seen in
2020. The Group has also seen a significant increase in demand from
Turkey, along with shipments to new customers in the Middle East
and North Africa, with sales to these markets collectively
accounting for 13% of exports in 1H 2021, compared to 2% in the
prior period. For further information, see sections Iron Ore Market
Review Section (Iron ore pricing), and Operational Review Section
(Marketing).
Higher freight rates during 1H 2021, as the Baltic Dry C3 Index
averaged US$22 per tonne (1H 2020: US$13 per tonne), negatively
impacted the Group's revenue net of freight. For further
information, see section titled Iron Ore Market Review Section
(Iron ore pricing).
Costs
C1 cash cost of production(A)
The Group's average C1 cash cost of production(A) increased to
US$46.6 per tonne in 1H 2021 compared with US$40.9 per tonne in 1H
2020, with this movement in costs reflecting a recovery in input
costs with industrial activity resuming as the global COVID-19
pandemic eases in 2021. The Group's production costs increased in
1H 2021 as a result of higher energy prices, including the cost of
fuel (including diesel), natural gas and electricity, which
collectively account for approximately 40% of the Group's C1 cash
costs of production(A) . The prices for fuel (including diesel) and
natural gas were affected by the increase of prices on the global
market during the first half of 2021 whereas costs for electricity
were affected by an increase of the tariffs in Ukraine. Higher
prices for fuel (including diesel) and natural gas negatively
impacted the Group's C1 cash cost of production(A) by US$0.5 per
tonne and US$2.2 per tonne respectively, compared to 1H 2020. The
impact of higher tariffs for electricity was US$0.9 per tonne.
It is expected that the Group's production costs in 2H 2021
remain subject to fluctuations in the local currency (Ukrainian
Hryvnia) exchange rate, and further inflationary pressure on
commodity input prices.
The table below shows the composition of the Group's C1 cash
cost of production(A) :
US$ per tonne % of C1 % of C1 % Change
cost cost
1H 2021 1H 2020
Electricity 23% 23% 0%
-------- -------- --------
Natural gas and sunflower husks 10% 7% +43%
-------- -------- --------
Fuel (including diesel) 7% 7% 0%
-------- -------- --------
Materials 10% 13% (23%)
-------- -------- --------
Spare parts 11% 11% 0%
-------- -------- --------
Personnel 9% 12% (25%)
-------- -------- --------
Maintenance and repairs 12% 10% +20%
-------- -------- --------
Grinding media 9% 8% +13%
-------- -------- --------
Royalties 7% 7% 0%
-------- -------- --------
Explosives 2% 2% 0%
-------- -------- --------
Please note: figures in table above may not add up to 100% due
to rounding. The Group's C1 cash cost of production(A) represents
the cash costs of production of iron pellets from own ore (to the
mine gate), divided by production volume from own ore, and excludes
non-cash costs such as depreciation, pension costs and inventory
movements, also the costs of purchased ore, concentrate and
gravel.
Selling and distribution costs
Total selling and distribution costs were US$152 million (1H
2020: US$162 million). This decrease was primarily driven by a
decreased proportion of sales to China under CFR terms,
counterbalanced by higher international freight costs, with the C3
freight rate[14] rising by 72% to US$22 per tonne in 1H 2021.
General, administrative and other operating expenses
General and administrative and other operating expenses
increased by US$4 million to US$54 million. The increase is caused
by higher losses on the disposal and liquidation of property, plant
and equipment, and write-offs of property, plant and equipment and
intangible assets in relation to a mining licence, totalling US$6
million as of 30 June 2021 (1H 2020: US$1 million). For further
details, please see the Operational Review Section (Exploration
projects) on page 11.
Currency
Ferrexpo prepares its consolidated accounts in US Dollars. The
functional currency of the Group's Ukrainian operations is the
Hryvnia ("UAH") and approximately half of the Group's operating
costs are in local currency. In 1H 2021, the Hryvnia appreciated
from UAH28.275 per US Dollar on 1 January to UAH27.176 per US
Dollar as of 30 June 2021, whereas the local currency depreciated
during the comparative period ended 30 June 2020. For further
information, see section titled Costs (C1 cash cost of
production(A) ). The total operating forex losses of US$38 million
in 1H 2021 predominantly resulted from the conversion of US Dollar
denominated assets in Ukraine, compared to a gain of US$36 million
in 1H 2020.
Ukrainian Hryvnia vs. US Dollar
Spot 30.07.2021 Opening Closing Average Average
rate rate 1H 2021 1H 2020
01.01.2021 30.06.2021
UAH per US$ 26.887 28.275 27.176 27.779 25.979
--------------- ----------- ----------- -------- --------
Source: National Bank of Ukraine
Underlying EBITDA(A)
Underlying EBITDA(A) in 1H 2021 increased to US$868 million
compared to US$352 million in 1H 2020, with this increase driven by
higher iron ore prices and pellet premiums, offset by lower sales
volumes and a higher C1 cash cost of production(A) .
Interest
The Group's interest expense declined by 25% to US$6 million
compared to US$8 million in 1H 2020 due to a lower outstanding debt
balance. The average cost of debt for the period ended 30 June 2021
was 4.7% (average 1H 2020: 5.6%).
Further details on finance expense are disclosed in Note 7 Net
finance expense of the accounts.
Tax
The income tax expense for 1H 2021 of US$135 million increased
by 207% compared to US$44 million in 1H 2020, based on an expected
weighted average tax rate for the full year 2021 of 17.0%. The
increase of the expected tax rate is primarily due to the change of
the profit split between the Group's major subsidiaries. The Group
operates across a number of jurisdictions and its effective tax
rate is subject to various factors outside of the Group's control.
This includes the volatility in the global iron ore pellet market
and foreign exchange rate movements, primarily between the
Ukrainian Hryvnia and the US Dollar. The effective tax rate of the
financial year 2020 was 15.1%.
Further details on taxation are disclosed in Note 8 Taxation and
Note 17 Commitments, contingencies and legal disputes of the
accounts in respect of ongoing tax-related court proceedings.
Profit for the period
Profit for the period was US$661 million, compared with US$250
million in 1H 2020, reflecting the net effect of the higher
underlying EBITDA(A) .
Cash flows
The net cash flow from operating activities was US$661 million
(1H 2020: US$258 million), with this increase driven by higher
prices for iron ore products in the first half of 2021. Working
capital reflected a net outflow of US$126 million (1H 2020: US$25
million), which is as a result of higher trade receivables due to
the high prices, and an increase of inventories due to inflation of
purchase prices, including raw materials, spare parts and finished
goods.
During 1H 2021, dividend payments totalled US$310 million,
compared to US$58 million in 1H 2020. A further dividend payment of
US$78 million, the equivalent of 13.2 US cents per share, was made
on 1 July 2021, following approval of the final dividend for 2020
at the Group's AGM in May 2021. In addition, in respect of the
robust performance of the Group in 2021 and continue strong balance
sheet metrics, the Group's Board has approved an interim dividend
for 2021 of 39.6 US cents per share on 3 August 2021 .
Capital investment(A)
Capital investment(A) in 1H 2021 was US$142 million, compared to
US$96 million in 1H 2020. During 1H 2021, US$49 million was spent
on sustaining and US$93 million spent on development capital
investments. In terms of the major development projects, the Group
spent US$29 million on stripping activities for future production
growth, US$21 million on the new press filtration plant and US$20
million on the pelletiser upgrade project. Further expenditure was
made during the period in relation to the Group's concentrate
expansion programme, including the concentrate stockyard (US$6
million), further development of the Bilanivske pit (US$6 million),
solar power pilot project (US$3 million) and fleet automation (US$2
million) in addition to smaller business improvement projects.
Debt
At the end of 2020, the Group announced that it had entered into
a net cash position of US$4 million, and following continued strong
operational and financial performance during 1H 2021, the Group
elected to repay its pre-export finance facility ("PXF facility")
on 30 June 2021 in full. The Group's PXF facility was previously
scheduled to be repayable in quarterly installments between 2020
and 2022, and had a total amount outstanding as of the end of 2020
of US$257 million. Following repayment of the PXF facility in 1H
2021, the Group has low levels of overall debt, with remaining debt
primarily relating to trade financing arrangements, amounting to a
gross debt balance of US$22 million as of 30 June 2021 (30 June
2020: US$343 million). As at 30 June 2021, the Group had a cash
balance of US$235 million, following the repayment of the Group's
PXF facility, compared to a cash balance of US$270 million as of 31
December 2020. The Group's net cash position as of 30 June 2021 was
therefore US$213 million (31 December 2020: net cash positon of
US$4 million).
Following a period of deleveraging of the Group's balance sheet,
it is the Group's intention to maintain strong balance sheet
metrics whilst continuing to invest in the next phase of the
Group's organic growth programme, in addition to maintaining a
suitable level of shareholder returns.
Related party transactions
Related party transactions are disclosed in Note 19 Related
party disclosure to the accounts.
Operational review
Health and safety
The Group recorded strong safety performance in 1H 2021, with no
fatalities during the period (FY2020: one), and a lost time injury
frequency of 0.37, which continues to track materially below the
Group's five-year trailing full-year average LTIFR of 0.98.
LTIFR 1H 2021 1H 2020[15] 2020
- FPM 0.48 0.94 0.95
------- ----------- ----
- FYM - 0.82 0.39
------- ----------- ----
- FBM - - -
------- ----------- ----
Ukraine 0.39 0.92 0.83
------- ----------- ----
- Barging - - -
------- ----------- ----
Group 0.37 0.87 0.79
------- ----------- ----
Pellet production and pellet quality
The Group's production facilities continue to operate with
minimal impact from COVID-19 to date, and the Group continues to
closely monitor its workforce. In addition, the infection rate in
the local communities surrounding the Group's operations remains
low.
The Group's pellet production was 5.6 million tonnes in 1H 2021,
with pellet production falling by just 0.8% despite pelletiser
upgrade work being completed on two out of four pelletiser lines
during the period. In addition, the Group is now able to ship
additional high grade (67% Fe) commercial concentrate during times
of pelletiser downtime, with 149 kilotonnes of this product shipped
during the period. Work has now been completed on three out of the
Group's four pelletiser lines as of the end of June 2021, with work
on one final pelletiser line planned for 3Q 2021. Once fully
completed, this work will collectively provide an additional 0.5 to
1.0 million tonnes of pelletiser capacity on an annual basis.
Furthermore, as a result of this work nearing completion, pellet
production in 2H 2021 is expected to be higher than 1H 2021.
Overall pellet quality continues to increase as investments
throughout the Group's operations are completed, with high grade
pellets, grading 65% Fe and above, representing 100% of 1H 2021
production (1H 2020: 99%). The Group continues to develop its DR
pellet offering, which are higher grade (67% Fe), lower impurity
pellets, and the Group produced 135 kilotonnes of this product in
1H 2021 (1H 2020: 187 kilotonnes) for trial cargoes with potential
long-term customers. The Group has also secured its first long-term
contract for its DR pellets, marking a key milestone in developing
new relationships within this segment of the global pellet export
market. DR pellets represent approximately a third of the global
pellet export market, and are therefore a key growth market for the
Group to market its products into.
For more information on DR pellets, and how this product type
will lower the Group's future Scope 3 emissions, please see
Responsible Business activities section on pages 12 and 13.
Iron ore production
000' tonnes
(Note: all production from
own ore) Product Grade 1H 2021 1H 2020 Change
Total commercial production
(comprising pellets and concentrate) 5,712 5,598 +2%
Total pellet production 5,563 5,598 (0.6%)
Pellet production comprised
of:
- Direct Reduction pellets 67% Fe 135 187 (28%)
- Ferrexpo Premium Pellets 65% Fe 5,428 5,313 +2%
- Ferrexpo Basic Pellets 62% Fe - 98 (100%)
Total concentrate production 67% Fe 149 - N/A
----------------------------------------- -------------- --------- --------- ------
The Group is currently undertaking an investment programme to
upgrade capacity on each of its four pelletiser lines, with this
work set to increase the overall nameplate capacity of the Group's
pelletiser by 0.5 to 1.0 million tonnes per annum once completed.
As of the end of the period, upgrade work on three out of four
pelletiser lines was completed, with work on the fourth and final
line to be undertaken in 3Q 2021.
Technology and innovation
The Group continues to progress its project to deploy autonomous
haul trucks at Yeristovo, which were the first large scale haul
trucks to be deployed in Europe when they were introduced in 2020.
The Group is pleased to report that it now has five CAT 793D
operating in production areas in autonomous mode, with the
conversion of the Group's remaining CAT 793D trucks planned as this
project advances. Fleet automation represents a significant
advancement in modern mining techniques, removing individuals from
potentially hazardous production areas, whilst also providing
benefits in terms of productivity and maintenance.
Exploration projects
During the period, the Group was made aware of a formal notice
on the President of Ukraine's website, whereby one of the Group's
licences for a project in the exploration phase, Galeschynske, had
been revoked. The Galeschynske deposit lies to the north of the
Group's existing mining operations, has a JORC-Compliant Mineral
Resource of 326 million tonnes, representing 5% of the Group's
JORC-compliant Mineral Resources, and does not yet have an Ore
Reserve estimate. It is a hematite deposit at depth that has the
potential for exploitation via underground mining methods, but
owing to the early stage nature of this project, and difference in
mineralogy of this deposit to the Group's active mines, it does not
currently feature in any of the Group's long-term mine plans. The
Group's mining and pellet production activities remain unaffected
by this decision, and the Group is currently reviewing its options
for appealing this decision.
Capital investment(A) during 1H 2021
A summary of current projects under execution in 1H 2021 is
shown in the table below. For further information on capital
investment made during the period, please see Financial Review
Section (Capital investment(A) ) on page 9.
Projects to Description Status Expected completion Total cost Spend in Remaining
reach 12MTPA 1H 2021 spend
Concentrate Decoupling of Produces concentrate 2H 2021 US$ 42.2 US$ 2 .7 US$4.1M
stockyard concentrator since February M M
& pellet plant 2021.
by providing Works on the
concentrate improvement
storage capacity of loading
complex are
underway
---------------------- ---------------------- ------------------- ---------- -------- ---------
Further Growth Projects
Press filtration Replacement Construction To be completed US$115M US$21.1M US$26.3M
plant of disc filtration & assembly in 3 phases
to reduce moisture works underway of 6MTPA in
in balling plant 2024. Partial
ramp up end
of 2021, phase
1 to complete
in 1H 2022.
---------------------- ---------------------- ------------------- ---------- -------- ---------
Medium-and 2 new tracts Construction 4Q 2021 US$40M US$2.8M US$7.1M
Fine Crushing with average & assembly
(MFC-2) capacity of works underway
800t/h each
---------------------- ---------------------- ------------------- ---------- -------- ---------
Wave 1 Expansion 3 MTPA of additional Utilities relocation 2024 US$181M US$1.8M US$178.2M
(pelletiser) pellets & equipment
procurement
---------------------- ---------------------- ------------------- ---------- -------- ---------
Wave 1 Expansion 4.1 MTPA of Design & main 2024 US$240M US$0.6M US$235.9M
(concentrator) additional concentrate equipment procurement
for delivery
to pelletiser
---------------------- ---------------------- ------------------- ---------- -------- ---------
Logistics
Rail cars Increasing number No wagons were N/A - - -
of Ferrexpo-owned purchased in
railcars, minimising 1H 2021.
reliance on
state railcars.
---------------------- ---------------------- ------------------- ---------- -------- ---------
Capital investment for future growth ("Wave 1 Expansion")
The Group successfully added concentrator capacity in 2020, and
is now undertaking a pelletiser expansion project to ensure that
the Group has sufficient pelletiser capacity to pelletise all of
the concentrate that it produces.
Beyond this current phase of growth, the Group is undertaking
further investments to grow overall production volumes and provide
operational flexibility to produce a greater proportion of higher
grade (67% Fe) DR pellets. In order to achieve this growth, the
Group has begun signing preliminary agreements with equipment
suppliers for increasing concentrator capacity from the existing
run rate of 30-35 million tonnes of raw ore processing per annum to
over 50 million tonnes per annum. This will facilitate the next
module of incremental growth, which will ultimately deliver an
additional three million tonnes of pellet production per annum once
completed, and is the first of several waves providing incremental
growth.
Marketing
Ferrexpo's sales volumes for 1H 2021 decreased by 9% to 5.6
million tonnes (1H 2020: 6.1 million tonnes), with this decrease
reflecting the destocking process undertaken in 1H 2020, following
a build up of inventories in late 2019.
Ferrexpo benefits from a diversified sales portfolio with
leading steel mills throughout the world, with a central geographic
location and logistics capacity that enabled the Group to pivot
sales between markets to match global demand. This flexibility
proved to be crucial in 2020, with the Group matching a shift in
demand in the face of the global COVID-19 pandemic, and in 2021 the
Group has noted that global pellet export markets are reverting
back to the overall balance seen prior to the pandemic. This
overall shift in sales in 1H 2021 can be seen in the table below,
which shows a strong recovery in demand from Ferrexpo's traditional
customer base in Europe, in addition to a recovery being seen in
the North East Asia region.
As shown in the table below, sales to customers in Western and
Central Europe increased by 10 and 13 percentage points
respectively in 1H 2021. Sales to customers in Europe collectively
accounted for 48% of sales in 1H 2021, which represents a return to
the level seen in FY2019, when sales to these regions collectively
amounted to 49%. Additionally, strong demand for pellets has been
seen from longstanding customers in Turkey, alongside new demand
for Ferrexpo pellets in the Middle East and North Africa, with
these regions collectively seeing its proportion of sales rise from
2% in 1H 2020 to 13% in 1H 2021. The Middle East and North Africa
are key growth areas for Ferrexpo as the Group develops its
offering of DR pellets, which is the primary type of pellet used in
these two regions. Turkey represents a long and valued destination
for the Group's sales, which is located in close proximity to the
Group's operations across the Black Sea.
The table below shows the breakdown of sales by key market
regions. Sales to China and South East Asia include sales to
Vietnam and Taiwan.
Table: sales volume by market regions
Movement (percentage
1H 2021 1H 2020 points)
Central Europe 34% 21% +13pp
------- ------- --------------------
Western Europe 14% 4% +10pp
------- ------- --------------------
North East Asia 8% 3% +5pp
------- ------- --------------------
China and South East Asia 29% 68%[16] (39pp)
------- ------- --------------------
Turkey, Middle East and North Africa 13% 2% +12pp
------- ------- --------------------
North America 2% 3% (1pp)
------- ------- --------------------
Total sales volume (thousand tonnes) 5,567 6,107 -
------- ------- --------------------
For further information on iron ore prices and freight see Iron
Ore Market Review Section.
Responsible Business activities
Responsible Business Report 2020
The Group is proud to report the publication of its 6(th) annual
Responsible Business Report, which is published in accordance with
the Global Reporting Initiative framework and is available on the
Group's website at the following address:
https://www.ferrexpo.com/investor-relations/news/results-reports-presentations
Safety
The Group is pleased to report that there were no fatalities at
its operations in 1H 2021, and operations continue to perform
materially below the Group's five-year trailing average for its
lost time injury frequency rate. For further information, please
see page 10 (Operational Review Section, Health and safety).
Pathway to low carbon production
Scope 1 and 2 emissions continue to fall on a per tonne basis
across the Group's operations in Ukraine and logistics business in
central Europe, as the Group implements a range of initiatives
across its business to improve productivity, modernise equipment
and reduce consumption rates. In 1H 2021, the Group achieved a 6%
reduction year to date in Scope 1 and 2 emissions combined.
Following upgrade work on the pelletiser in 1H 2021, the Group
expects production volumes to increase in 2H 2021 and as a result
the Group expects a further reduction in the Group's CO(2) e
footprint on a per tonne basis as a result.
The Group has a number of key initiatives that are being
implemented, which will have a positive impact in helping to
further lower the Group's carbon footprint:
-- 5MW solar power project: during 1H 2021, the Group has
constructed a 5MW solar power project at its operations in Ukraine,
to trial the effectiveness of this form of power generation at its
geographic location, ahead of potentially utilising solar power on
a larger scale. Commissioning of this facility took place in July
2021.
-- Mining electrification: the Group expects to make a decision
in 2H 2021 regarding the selection of a provider for the
installation of pantograph network in the Group's mines, which
represents a network an overhead power cables that will enable haul
trucks to ascend from the Group's open pit mines using electricity
rather than diesel fuel. This technology is expected to provide a
significant reduction in each truck's diesel consumption whilst
driving up haul ramps, which will directly reduce the Group's Scope
1 emissions footprint per tonne.
-- Clean electricity purchasing: in 1H 2021 the Group continued
to selectively purchase clean forms of electricity, comprising
electricity from hydroelectric and nuclear sources, directly from
producers located in Ukraine. This move follows changes to
Ukrainian legislation in 2019 that has enabled selective purchasing
to take place. Clean electricity purchasing represented 41% of
total electricity consumption in 1H 2021 (FY2020: 22%).
-- Biofuel (sunflower husk) consumption: the Group continues to
utilise sunflower husks in its pelletiser as a substitute for
natural gas, with sunflower husks an abundant byproduct of
Ukraine's sizeable sunflower oil industry. In 1H 2021, the Group's
consumption of sunflower husks fell to 16% (FY2020: 25%) as a
result of test work around the Group increasing its output of high
grade, direct reduction ("DR") pellets. The Group is currently
trialing production of this pellet type and therefore utilises less
sunflower husk whilst trials are being conducted, to ensure pellet
quality is not negatively impacted. Longer term, the Group intends
to increase consumption of sunflower husks above the level seen in
1H 2021.
As part of the steel value chain, the Group understands the
importance of the shift in thinking towards Green Steel, which is
the carbon-free production of steel. Whilst the projects outlined
above will reduce the Group's carbon footprint on a per tonne basis
for Scope 1 and 2 emissions, over 90% of the Group's overall carbon
footprint per tonne relates to Scope 3 emissions, which
predominantly relate to the conversion of iron ore to steel. In the
short term, steelmakers are incentivised to use iron ore pellets as
they offer blast furnace steelmakers the opportunity to lower their
carbon emissions by 40% for every tonne of sinter fines
substituted, but this is an existing benefit that will not
materially affect the Group's Scope 3 emissions. Longer term, the
Group is planning to lower its Scope 3 emissions by producing more
DR pellets, which are typically converted to steel using either
electricity or natural gas in the conversion process, and therefore
have a materially lower carbon footprint.
Update on principal risks
The Group considers that the principal risks facing the
business, as highlighted on pages 48 to 60 of the 2020 Annual
Report and Accounts (published in April 2021), remain relevant. An
update on material developments that relate to the Group's
principal risks during the first half of 2021 is provided
below.
COVID-19 pandemic update and going concern
Update on 1H 2021
The safety and wellbeing of our employees is paramount and the
Group took appropriate precautions to mitigate the risk of
infection from the COVID-19 virus at its mining and processing
operations in Ukraine, and also at its other jurisdictions where
employees are based. Ferrexpo has followed, and will continue to
follow, the advice from health authorities in its different
jurisdictions.
The Group continues to monitor developments both locally within
Ukraine, where its main operating base is located, and on a broader
global perspective in locations where corporate, marketing and
logistics employees, as well as customers, are situated. The Group
responded quickly to the global COVID-19 pandemic in all locations
where it is located and a number of these measures continue to
remain in place, with the Group exercising vigilance around further
waves of infection in individual locations. Through these measures,
and the continued cooperation of the Group's workforce, the Group
is able to continue to operate with minimal impact from COVID-19 on
production volumes, C1 cash costs of production(A) and the Group's
ability to distribute its pellets globally.
The Group notes that variants of the original COVID-19 virus
continue to appear and therefore the situation with regards to the
global COVID-19 pandemic continues to evolve. As such, the Group
continues to review its policies and procedures with regards to
protecting its workforce and continuing to operate, and has the
ability to re-introduce measures previously implemented during the
course of the pandemic.
Regional demand for iron ore pellets was impacted in 2020 by the
COVID-19 pandemic, with the Group able to effectively reschedule
its sales portfolio to meet rising demand for its products in
China, whilst economies in Europe and Asia (excluding China)
contracted. In 1H 2021, the Group has seen a gradual unwinding of
this impact, with a strong recovery in demand seen in Europe in
particular. The Group continues to monitor regional outbreaks of
COVID-19 and how this may potentially affect customers and demand
for iron ore pellets.
Consideration of significant judgements and material
uncertainties
The key judgements for the Group's going concern assessment are
still related to the expected prices for iron ore pellets and their
demand in the Group's key markets. The Group has successfully
navigated through the COVID-19 outbreak in 2020 and remained highly
cash generative in 2020 as well as in the first half of 2021.
However, the Board appreciates that the continued spread of
COVID-19 and the appearances of new variants in some countries
could pose a significant threat to the recovery of the global
economy seen earlier this year.
As of the date of the approval of these interim condensed
consolidated financial statements, the Board considers the risk of
material uncertainties that may cast significant doubt upon the
Group's ability to continue as a going concern to be low, but will
continue to monitor future developments. Following repayment of the
PXF facility in 1H 2021, the Group has a very low level of overall
debt, which was taken into consideration by the Board when forming
its conclusion. This conclusion is further based on the Group's
successful immediate response to the COVID-19 outbreak and later
throughout the pandemic, its continued high cash generation and the
forecasted available balance of cash and cash equivalents. The
mitigating factors identified in the past, such as working capital
measures, the timing of development capital expenditures and
shareholder distributions, remain available to the Group and are
considered to be sufficient to address any significant adverse
changes.
The Group's Board has concluded that the COVID-19 pandemic does
not represent an indicator of impairment for any of the Group's
assets, as of the date of the approval of the interim condensed
consolidated financial statements for the half year period ended 30
June 2021. This conclusion is supported by the very strong cash
generation in 1H 2021, strong production performance since the
beginning of the pandemic, and the Group's continued ability to
deliver high quality pellets and the expected realisation of firm
cash flows in 2H 2021 and beyond. Consequently, no significant
judgement has been applied in this respect.
Stress testing and going concern assessment
Considering the fact that the Group operates in an industry with
a history of a high price volatility and the currently very high
prices for iron ore products, the risk in respect of the Group's
future price realisations has been thoroughly addressed in its
going concern assessment. The Group's current going concern
assessment is based on its latest long-term model covering the
years 2021 to 2025, which was updated in June 2021 in order to
reflect latest price and cost assumptions. As in the past, various
sensitivity scenarios for lower realised prices, higher production
costs and lower production and sales volumes have been performed in
addition to the base case scenario. Additionally, in light of the
uncertainties in terms of recovery of the global economy due to the
ongoing COVID-19 pandemic, the Group performed reverse stress tests
addressing more severe demand disruptions in the Group's key
markets and adverse price changes for the period to be covered by
the going concern assessment.
The spike of the prices for iron ore products in the second half
of 2020 and the first half of 2021 is seen as an indication that
the Group produces and markets a product that is high in demand
with a positive effect on Group's long-term viability. In addition
to the demand and prospects of the Group's products on the global
market, the projected cash flow generation for the period of the
going concern assessment, the debt repayment profile and the
balance of cash and cash equivalents available as well as any
mitigating factors available to react to possible adverse
developments was considered to assess the Group's resilience to
adverse changes.
The Group's going concern assessment did also cover a period of
5 months beyond the 12 months from the approval of these interim
condensed consolidated financial statements. As of 30 June 2021,
the Group had available cash and cash equivalents totalling US$235
million and was in a Net Cash position of US$213 million with no
significant debt repayments within the next 12 months. The Group
does further have access to uncommitted trade finance facilities of
US$140 million, of which US$15 million were used as of 30 June
2021. Although the Group does currently not have any committed
undrawn bank debt facilities available, the Directors concluded
that the Group has sufficient liquidity to meet its present
obligations and cover working capital needs for the period to be
covered by the going concern assessment. Consequently, it is the
Directors' view that the Group is resilient to the current
uncertainties in the global economy, and as a result, the Group
continues to adopt the going concern basis of accounting for the
preparation of these interim condensed consolidated financial
statements.
Following the repayment of the Group's major debt facility as of
30 June 2021, there are no debt covenants, such as Net Debt to
EBITDA or covenants that relate to distributable reserves, which
are relevant to the Group going forward.
Outlook
Even with the experience of having successfully navigated
through the COVID-19 pandemic, it is still extremely difficult to
predict its future development and its impact on the global
economy. It is the Group's view the associated uncertainties will
persist for a prolonged period, resulting in a certain volatility
in the global market that might require swift reactions and
decisions. The Group expects to be able to rely on the experience
gained since the beginning of the pandemic when it was able to
redirect its pellet sales in order to benefit from favourable
demand dynamics in the respective markets.
To date, iron ore fines prices have remained strong throughout
the majority of the global COVID-19 pandemic, which relates to a
direct response by sovereign governments to stimulate economies and
counter the financial effects of measures taken to stem the spread
of COVID-19. The Group expects the influence of these fiscal
policies to ease in the second half of the year, with demand for
iron ore declining from the record levels being seen at present. As
of July 2021, the consensus forecast for iron ore prices (62% Fe)
in 2021, based on a grouping of 11 investment banks, was US$170 per
tonne for the full year, implying a decrease in the average iron
ore price by approximately US$15 per tonne in 2H 2021 from the
level seen in 1H 2021. Iron ore futures contracts also indicate a
fall in iron ore pricing in the second half of 2021, with contracts
for delivery of iron ore (62% Fe) December 2021 priced at US$180
per tonne as of 28 July 2021[17], compared to a spot iron ore price
of US$201 per tonne as of the same date[18].
For further information, please see Iron Ore Market Review
Section on page 4 as well as the Going Concern Statement on page
24.
Ukraine country risk
The Group's mining and processing operations are located in
Ukraine, which is a country exposed to regional geopolitical risks,
with an ongoing territorial dispute with a neighbouring country.
During 1H 2021, the Group notes that there have been periods of
heightened tension between sovereign states in the region in which
the Group operates and the Group continues to monitor the situation
closely.
The independence of the judicial system, and its immunity from
economic and political influences in Ukraine, remains questionable,
and the stability of existing legal frameworks may weaken further
with future political changes in Ukraine. As a result, the Group is
still exposed to an unclear fiscal and legal system in Ukraine
affecting the risks around the Group's tax position, including
risks relating to policies applied relating to transfer pricing,
the timely return of VAT refunds and the independence of the legal
system for any cases heard by the courts.
As referenced in the Group's 2020 Annual Report and Accounts,
there are outstanding matters in Ukraine relating to the Group's
controlling shareholder that remain unresolved, and there is a risk
that assets owned or controlled (or alleged to be owned or
controlled) by him may be subject to restrictions, in Ukraine or
elsewhere, or that the Group may be impacted by or become involved
in legal proceedings relating to these matters, in Ukraine or
elsewhere.
As at the date of approval of these interim condensed
consolidated financial statements, the share dispute lodged by four
claimants to invalidate a share sale and purchase agreement
concluded in 2002 remains ongoing. Following a statement of defence
filed by FAG earlier in 2021, the relevant court in Ukraine ruled
on 27 May 2021 in favour of FAG. The opposing parties filed their
appeals in June 2021 and the next hearing is expected to take place
in September 2021.
For further information on ongoing legal disputes, please see
Note 17 Commitments, contingences and legal disputes.
The Group is currently also engaged in discussions with the
Government of Ukraine following the cancellation of the licence for
Galeschynske in July 2021, which is a project in the exploration
phase that is situated to the north of the Group's active mining
operations. The legal reason for this decision remains unclear, as
the government had only recently confirmed the validity and good
standing of this licence, and the Group is seeking to engage with
the Government of Ukraine to determine the next steps that the
Group will take in respect of restoring this project's licence.
Whilst the Group is focused on returning this licence to its
previous state, there can be no guarantees as to a successful
outcome to this process. For further details of the Galeschynske
deposit, please see the Operational Review Section (Exploration
projects) on page 11.
Global steel demand and realised prices for iron ore pellets
The Group's realised price is principally impacted by demand for
iron ore which is highly correlated to global demand for steel and
steel mill profitability. Steel prices have risen in 1H 2021, with
hot rolled coil pricing increases of 61%, 99% and 201% seen in
China, Europe and ASEAN markets respectively, protecting margins
for steelmakers. As mentioned in the section titled 'COVID-19
pandemic update and going concern', the Group expects a gradual
unwinding of fiscal measures implemented by sovereign governments
in 2H 2021, and as a result, a gradual lowering of demand for iron
ore and steel products. With this reduction in demand, prices are
expected to decrease, with lower iron ore fines prices reducing the
Group's realised price for iron ore pellets and the Group's overall
profitability. For further information, see Iron ore market review
on page 4.
Pellet premiums
Historically, pellet premiums have been correlated to steel mill
profitability as they are the most productive source of iron in a
blast furnace and thus trade at a price premium to other types of
iron ores. When steel producer profitability is under pressure the
reduction in usage of higher cost raw materials could lead to lower
demand for iron ore pellets and or a fall in pellet premiums, which
in turn will lower profitability.
Market mix
In 1H 2021, the Platts China pellet premium averaged US$57 per
tonne compared with the average Platts Atlantic blast furnace
pellet premium of US$54 per tonne, with the pellet premium to China
typically reflective of spot sales rather than sales under
long-term contract. A temporary change in sales mix with more
volume sold under short-term spot contracts and less under
long-term contracts could have an impact on the average realised
price and the Group profitability.
Freight rates
The Group's received price is subject to freight market
volatility with higher freight rates reducing the Group's realised
price returns. In 1H 2021, the Baltic Exchange C3 freight index[19]
increased by 72%, or the equivalent of US$9 per tonne, to an
average of US$22 per tonne compared to 1H 2020. Freight rates are
largely influenced by the price of oil and demand for seagoing
vessels from bulk commodity producers. As of 27 July 2021, C3
freight rates have risen to US$28 per tonne, representing a level
that is a further US$6 above the average for 1H 2021. An increase
in freight rates will reduce the Group's received price and its
profitability.
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 preparation of the Interim Report for the six months
ended 30 June 2021 in accordance with applicable laws, regulations
and accounting standards is the responsibility of, and has been
approved by, the Directors.
We confirm that to the best of our knowledge:
-- the condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 as contained in UK adopted
IFRS.
-- the Interim Management Report includes a fair review of the
important events that have occurred during the first six months of
the financial year and their impact on the condensed financial
statements, and description of the principal risks and
uncertainties for the remaining six months of the financial year,
as required by DTR4.2.7R; and
-- the Interim Management Report includes a fair review of
disclosures of material related party transactions that have
occurred in the first six months of the financial year and of
material changes in the related party transactions described in the
2020 Annual Report, as required by DTR 4.2.8R.
The Directors are also responsible for the maintenance and
integrity of the Ferrexpo plc website.
A list of current Directors is maintained on the Ferrexpo plc
website which can be found at www.ferrexpo.com.
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
Lucio Genovese
Non-executive Chair
Jim North
Interim Chief Executive Officer and Executive Director
3 August 2021
Independent Review Report to Ferrexpo Plc
Introduction
We have been engaged by Ferrexpo plc (the 'Company) to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2021 which
comprises the Interim Consolidated Income Statement, the Interim
Consolidated Statement of Comprehensive Income, the Interim
Consolidated Statement of Financial Position, the Interim
Consolidated Statement of Cash Flows, the Interim Consolidated
Statement of Changes in Equity, and the related notes 1 to 20. 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 for 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 Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the financial statements for the year
ended 31 December 2020 were prepared in accordance with
International Financial Reporting Standards ('IFRSs') issued by the
International Accounting Standard Board ('IASB'), as adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and with the Companies Act 2006.
The financial statements for the year ended 31 December 2021
will be prepared in accordance with UK-adopted International
Financial Reporting Standards.
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 for use in the United Kingdom.
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 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 2021 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted for use in the
United Kingdom and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
MHA MacIntyre Hudson
Statutory Auditor
London
Interim Consolidated Income Statement
US$000 Notes Year-ended
6 months ended 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Revenue 3/4 1,352,656 775,831 1,700,321
Operating expenses 5 (513,850) (516,236) (1,018,109)
Other operating income 4,421 2,019 5,432
Operating foreign exchange (losses)/gains 6 (38,022) 35,773 61,023
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Operating profit 805,205 297,387 748,667
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Share of profit from associates 1,368 2,476 5,624
Profit before tax and finance 806,573 299,863 754,291
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Net finance expense 7 (6,243) (7,504) (11,733)
Non-operating foreign exchange
(losses)/gains 6 (3,431) 1,635 5,302
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Profit before tax 796,899 293,994 747,860
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Income tax expense 8 (135,473) (44,086) (112,568)
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Profit for the period/year 661,426 249,908 635,292
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Profit attributable to:
Equity shareholders of Ferrexpo plc 661,417 249,904 635,292
Non-controlling interests 9 4 -
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Profit for the period/year 661,426 249,908 635,292
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Earnings per share:
Basic (US cents) 9 112.5 42.6 108.1
Diluted (US cents) 9 112.3 42.4 107.9
-------------------------------------------- ------ ------------------------ ------------------------ ------------
Interim Consolidated Statement of Comprehensive Income
6 months ended Year ended
US$000 Notes 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Profit for the period/year 661,426 249,908 635,292
Items that may subsequently be reclassified to profit
or loss:
Exchange differences on translating foreign
operations 6 95,770 (213,632) (317,674)
Income tax effect (3,688) 10,977 16,278
Net other comprehensive income/(loss) that may be
reclassified to profit or loss in subsequent
periods 92,082 (202,655) (301,396)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement gains/(losses) on defined benefit
pension liability 1,304 71 (1,057)
Net other comprehensive income/(loss) not being
reclassified to profit or loss in subsequent
periods 1,304 71 (1,057)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Other comprehensive income/(loss) for the
period/year, net of tax 93,386 (202,584) (302,453)
------------------------------------------------------ ------ --------------- ------------------------ -----------
Total comprehensive income for the period/year, net
of tax 754,812 47,324 332,839
------------------------------------------------------ ------ --------------- ------------------------ -----------
Total comprehensive income attributable to:
Equity shareholders of Ferrexpo plc 754,825 47,315 332,822
Non-controlling interests (13) 9 17
------------------------------------------------------ ------ --------------- ------------------------ -----------
754,812 47,324 332,839
------------------------------------------------------ ------ --------------- ------------------------ -----------
Interim Consolidated Statement of Financial Position
As at As at As at
US$000 Notes 30.06.21 31.12.20 30.06.20
(unaudited) (audited) (unaudited)
Assets
Property, plant and equipment 10 1,107,143 1,004,385 989,894
Right-of-use assets 11 6,319 8,313 7,893
Goodwill and other intangible assets 43,195 40,734 41,711
Investments in associates 5,712 5,873 6,462
Inventories 13 230,000 213,685 218,414
Other non-current assets 41,005 25,480 18,510
Deferred tax assets 37,830 30,574 34,268
------------------------------------------------------------ ------ ------------ ------------ ------------
Total non-current assets 1,471,204 1,329,044 1,317,152
------------------------------------------------------------ ------ ------------ ------------ ------------
Inventories 13 192,600 144,605 167,260
Trade and other receivables 209,694 152,750 108,970
Prepayments and other current assets 31,114 25,884 37,315
Income taxes recoverable and prepaid 8 1,130 1,351 174
Other taxes recoverable and prepaid 12 39,226 31,323 28,993
Cash and cash equivalents 3/14 234,669 270,006 169,226
------------
Total current assets 708,433 625,919 511,938
------------------------------------------------------------ ------ ------------ ------------ ------------
Total assets 2,179,637 1,954,963 1,829,090
------------------------------------------------------------ ------ ------------ ------------ ------------
Equity and liabilities
Issued capital 18 121,628 121,628 121,628
Share premium 185,112 185,112 185,112
Other reserves 18 (1,973,463) (2,065,896) (1,967,035)
Retained earnings 3,525,374 3,250,534 2,982,638
------------------------------------------------------------ ------ ------------ ------------ ------------
Equity attributable to equity shareholders of Ferrexpo plc 1,858,651 1,491,378 1,322,343
------------------------------------------------------------ ------ ------------ ------------ ------------
Non-controlling interest 82 95 87
------------------------------------------------------------ ------ ------------ ------------ ------------
Total equity 1,858,733 1,491,473 1,322,430
------------------------------------------------------------ ------ ------------ ------------ ------------
Interest-bearing loans and borrowings 3/15 2,686 132,129 204,950
Defined benefit pension liability 33,279 32,475 31,492
Provision for site restoration 3,137 2,846 2,840
Deferred tax liabilities 262 101 102
------------------------------------------------------------ ------ ------------ ------------ ------------
Total non-current liabilities 39,364 167,551 239,384
------------------------------------------------------------ ------ ------------ ------------ ------------
Interest-bearing loans and borrowings 3/15 19,475 134,349 138,538
Trade and other payables 117,242 43,749 54,382
Accrued and contract liabilities 30,971 45,542 28,284
Income taxes payable 8 97,002 58,483 34,768
Other taxes payable 16,850 13,816 11,304
------------------------------------------------------------ ------ ------------ ------------ ------------
Total current liabilities 281,540 295,939 267,276
------------------------------------------------------------ ------ ------------ ------------ ------------
Total liabilities 320,904 463,490 506,660
------------------------------------------------------------ ------ ------------ ------------ ------------
Total equity and liabilities 2,179,637 1,954,963 1,829,090
------------------------------------------------------------ ------ ------------ ------------ ------------
The financial statements were approved by the Board of Directors
on 3 August 2021.
Lucio Genovese Jim North
Non-executive Chair Interim Chief Executive Officer and
Executive Director
Interim Consolidated Statement of Cash Flows
6 months ended 6 months ended Year ended
US$000 Notes 30.06.21 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Profit before tax 796,899 293,994 747,860
Adjustments for:
Depreciation of property, plant and equipment, right-of-use
assets and amortisation of intangible
assets 5 55,427 51,374 102,475
Finance expense 7 5,302 6,248 9,113
Finance income 7 (254) (372) (553)
Losses on disposal and liquidation of property, plant and
equipment 5 2,975 877 1,303
Write-offs/(write-backs) 5 3,060 (71) 192
Share of profit from associates (1,368) (2,476) (5,624)
Movement in allowance for doubtful receivables 410 1,385 724
Movement in site restoration provision 172 167 18
Employee benefits 2,229 2,450 4,779
Share-based payments 329 399 291
Operating foreign exchange losses/(gains) 6 38,022 (35,773) (61,023)
Non-operating foreign exchange losses/(gains) 6 3,431 (1,635) (5,302)
Other adjustments (5,508) (1,018) (2,546)
--------------------------------------------------------------- ------ --------------- --------------- -----------
Operating cash flow before working capital changes 901,126 315,549 791,707
--------------------------------------------------------------- ------ --------------- --------------- -----------
Changes in working capital:
Increase in trade and other receivables (67,352) (8,378) (49,538)
(Increase)/decrease in inventories (44,119) 18,270 27,034
Decrease in trade and other payables (incl. accrued and
contract liabilities) (10,855) (38,947) (4,798)
(Increase)/decrease in other taxes recoverable and payable
(incl. VAT) (3,791) 4,153 3,214
--------------------------------------------------------------- ------ --------------- --------------- -----------
Cash generated from operating activities 775,009 290,647 767,619
--------------------------------------------------------------- ------ --------------- --------------- -----------
Interest paid (6,326) (12,949) (21,439)
Income tax paid (106,872) (18,758) (56,571)
Post-employment benefits paid (1,231) (968) (2,391)
--------------------------------------------------------------- ------ --------------- --------------- -----------
Net cash flows from operating activities 660,580 257,972 687,218
--------------------------------------------------------------- ------ --------------- --------------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment and intangible
assets (142,451) (95,989) (205,779)
Proceeds from disposal of property, plant and equipment and
intangible assets 328 469 836
Interest received 229 289 442
Dividends from associates 2,067 1,987 4,027
Advance payment for investment in joint venture - - (5,000)
--------------------------------------------------------------- ------ --------------- ---------------
Net cash flows used in investing activities (139,827) (93,244) (205,474)
--------------------------------------------------------------- ------ --------------- --------------- -----------
Cash flows from financing activities
Proceeds from borrowings and finance 15 15,346 - -
Repayment of borrowings and finance 15 (257,433) (67,459) (144,904)
Principal elements of lease payments 15 (2,612) (1,111) (3,082)
Dividends paid to equity shareholders of Ferrexpo plc 9 (310,476) (58,419) (195,446)
--------------------------------------------------------------- ------ --------------- --------------- -----------
Net cash flows used in financing activities (555,175) (126,989) (343,432)
--------------------------------------------------------------- ------ --------------- --------------- -----------
Net (decrease)/increase in cash and cash equivalents (34,422) 37,739 138,312
Cash and cash equivalents at the beginning of the period/year 270,006 131,020 131,020
Currency translation differences (915) 467 674
--------------------------------------------------------------- ------ --------------- --------------- -----------
Cash and cash equivalents at the end of the period/year 14 234,669 169,226 270,006
--------------------------------------------------------------- ------ --------------- --------------- -----------
Interim Consolidated Statement of Changes in Equity
For the financial year
2020 and the six months
ended Attributable to equity shareholders
30 June 2021 of Ferrexpo plc
----------------------------------------------------
Other Total
Issued Share reserves Retained capital and Non-controlling Total
US$000 capital premium (Note 18) Earnings reserves interests equity
At 31 December
2019
(audited) 121,628 185,112 (1,764,774) 2,810,588 1,352,554 78 1,352,632
Profit for the
period - - - 635,292 635,292 - 635,292
Other
comprehensive
(loss)/income - - (301,413) (1,057) (302,470) 17 (302,453)
--------------- --------- ----------- ------------ ---------- ------------- ------------------------ ----------
Total
comprehensive
(loss)/income
for the year - - (301,413) 634,235 332,822 17 332,839
Equity
dividends to
the
shareholders
of Ferrexpo
plc (Note 9) - - - (194,289) (194,289) - (194,289)
Share-based
payments - - 291 - 291 - 291
At 31 December
2020
(audited) 121,628 185,112 (2,065,896) 3,250,534 1,491,378 95 1,491,473
--------------- --------- ----------- ------------ ---------- ------------- ------------------------ ----------
Profit for the
period - - - 661,417 661,417 9 661,426
Other
comprehensive
income/(loss) - - 92,104 1,304 93,408 (22) 93,386
--------------- --------- ----------- ------------ ---------- ------------- ------------------------ ----------
Total
comprehensive
income/(loss)
for the
period - - 92,104 662,721 754,825 (13) 754,812
Equity
dividends
paid to
shareholders
of Ferrexpo
plc (Note 9) - - - (387,881) (387,881) - (387,881)
Share-based
payments - - 329 - 329 - 329
--------------- --------- ----------- ------------ ---------- ------------- ------------------------ ----------
At 30 June
2021
(unaudited) 121,628 185,112 (1,973,463) 3,525,374 1,858,651 82 1,858,733
--------------- --------- ----------- ------------ ---------- ------------- ------------------------ ----------
For the six
months ended Attributable to equity shareholders
30 June 2020 of Ferrexpo plc
------------------------------------------------------------
Issued Share Other reserves Retained Total capital Non-controlling Total
US$000 capital premium (Note 18) earnings and reserves interests equity
At 31 December
2019
(audited) 121,628 185,112 (1,764,774) 2,810,588 1,352,554 78 1,352,632
Profit for the
period - - - 249,904 249,904 4 249,908
Other
comprehensive
(loss)/income - - (202,660) 71 (202,589) 5 (202,584)
--------------- --------- --------- --------------- --------------- --------------- ---------------- ----------
Total
comprehensive
(loss)/income
for the
period - - (202,660) 249,975 47,315 9 47,324
Equity
dividends
paid to
shareholders
of Ferrexpo
plc (Note 9) - - - (77,925) (77,925) - (77,925)
Share-based
payments - - 399 - 399 - 399
--------------- --------- --------- --------------- --------------- --------------- ---------------- ----------
At 30 June
2020
(unaudited) 121,628 185,112 (1,967,035) 2,982,638 1,322,343 87 1,322,430
--------------- --------- --------- --------------- --------------- --------------- ---------------- ----------
Notes to the Interim Condensed Consolidated Financial
Statements
Note 1: Corporate information
Organisation and operation
Ferrexpo plc (the "Company") is incorporated and registered in
England, which is considered to be the country of domicile, with
its registered office at 55 St James's Street, London, SW1A 1LA,
UK. The Company is listed on the London Stock Exchange and is a
member of the FTSE 250 Index. Ferrexpo plc and its subsidiaries
(the "Group") operate two mines and a processing plant near
Kremenchug in Ukraine, have 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 operate a fleet
of vessels operating on the Rhine and Danube waterways and an ocean
going vessel which provides top off services. 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-Plavninske-Lavrykivske ("GPL") and Yerystivske
deposits.
The majority shareholder of the Group is Fevamotinico S.a.r.l.
("Fevamotinico"), a company incorporated in Luxembourg.
Fevamotinico is ultimately wholly owned by The Minco Trust, of
which Kostyantin Zhevago, the Group's previous Chief Executive
Officer, and two other members of his family are the beneficiaries.
At the time this report was published, Fevamotinico held 50.3% (31
December 2020: 50.3%; 30 June 2020: 50.3%) of Ferrexpo plc's issued
share capital.
The Group's interests in its subsidiaries are held indirectly by
the Company, with the exception of Ferrexpo AG, which is directly
held. The Group's consolidated subsidiaries are disclosed in the
Additional Disclosures of the 2020 Annual Report &
Accounts.
At 30 June 2021, the Group also holds through PJSC Ferrexpo
Poltava Mining an interest of 49.9% (31 December 2020: 49.9%; 30
June 2020: 49.9%) in TIS Ruda LLC, a Ukrainian port located on the
Black Sea. As this is an associate, it is accounted for using the
equity method of accounting.
Note 2: Summary of significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the
six months period ended 30 June 2021 have been prepared in
accordance with International Accounting Standard ('IAS') 34
Interim Financial Reporting , as adopted for use in the United
Kingdom. 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 2020 .
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 2020. A copy of the statutory accounts for that year,
which were prepared in accordance with International Financial
Reporting Standards ('IFRSs') issued by the International
Accounting Standard Board ('IASB'), as adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and with the Companies Act 2006, as applicable to companies
reporting under international accounting standards, have been
delivered to the Registrar of Companies. The auditors' report under
section 495 of the Companies Act 2006 in relation to those accounts
was unqualified and did not contain a statement under sections
498(2) or 498(3) of the Companies Act 2006.
The financial statements have been reviewed, not audited.
Going concern
The Group has assessed that, taking into account: i) its
available cash and cash equivalents available at the date of
authorisation of the interim condensed consolidated financial
statements; ii) its cash flow projections for the period of
management's going concern assessment; and iii) events and
conditions beyond the period of management's going concern
assessment, it has sufficient liquidity to meet its present
obligations and cover working capital needs for the aforementioned
period and will remain in compliance with its financial covenants
throughout this period. Therefore, the Group continues to adopt the
going concern basis of accounting for the preparation of this set
of financial statements. The update on risks, including COVID-19
related considerations
relevant to the Group, is disclosed on page 13.
Accounting policies adopted
The accounting policies and methods of computation adopted in
the preparation of the interim condensed consolidated financial
statements are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 31
December 2020 except for the adoption of the new standards,
interpretations and amendments to IFRSs that became effective as of
1 January 2021.
New standards, interpretations and amendments adopted without
impact on the Group's consolidated financial statements
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform - Phase 2 relate to the modification
of financial assets, financial liabilities and lease liabilities,
specific hedge accounting requirements, and corresponding
disclosure requirements. Modifications of financial assets and
financial liabilities required as a direct consequence of the
Interbank offered rates ("IBOR") reform and made on an economically
equivalent basis are accounted for by updating the effective
interest rate and a similar practical expedient is proposed for
lessee accounting applying IFRS 16. All other modifications are
accounted for using the current IFRS requirements. Additional
disclosure requirements are introduced in order to allow users to
understand the nature of the exposure and extent of risks arising
from the IBOR reform and how those risks are assessed as well as
the progress in transitioning from IBORs to alternative benchmark
rates, and how this transition is managed. The Group has no
floating rate finance facilities outstanding as at 30 June 2021
(see Note 15 Interest-bearing loans and borrowings for further
information) and is therefore not immediately exposed to this
reform, but will continue to monitor the developments when entering
into new finance facilities in the future.
New standards, interpretations and amendments not yet
adopted
-- Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current were issued
in January 2020 and are effective for the financial year beginning
on 1 January 2023 subject to endorsement of the UK Endorsement
Board. The amendments clarify that the classification of
liabilities as current or non-current should be based on the
rights, in existence at the end of the reporting period, to defer
settlement by at least twelve months and not on expectations about
whether these rights will be exercised. Furthermore, the amendments
clarify that settlement refers to the transfer to the counterparty
of cash, equity instruments, other assets or services. The Group
does not expect a material impact on its consolidated financial
statements from these amendments.
-- Amendments to IAS 16 Property, Plant and Equipment were
issued in May 2020 and are effective for the financial year
beginning on 1 January 2022 subject to endorsement of the UK
Endorsement Board. The amendments prohibit the deduction from the
cost of an item of property, plant and equipment of any proceeds
from selling items produced while bringing that asset into
operation and clarify that these proceeds (and the corresponding
costs of production) are recognised in profit or loss. The Group
does not expect a material impact on its consolidated financial
statements from these amendments.
-- Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets were issued in May 2020 and are effective for the
financial year beginning on 1 January 2022 subject to endorsement
of the UK Endorsement Board. The amendments clarify that the cost
of fulfilling a contract comprises the costs that relate directly
to the contract. These can either be incremental costs of
fulfilling that contract or the allocation of other costs that
relate directly to fulfilling contracts. The Group does not expect
a material impact on its consolidated financial statements from
these amendments.
-- Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies were
issued in February 2021 and are effective for the financial year
beginning on 1 January 2023 subject to endorsement of the UK
Endorsement Board. They require the disclosures of material
accounting policies rather than significant accounting policies.
The amendments to IAS 1 clarify that accounting policy information
may be material because of its nature, even if it relates to
immaterial amounts, that accounting policy information is material
when it is needed by users of financial statements to understand
other material information in the financial statements and that the
disclosure of immaterial accounting policy information shall not
obscure material accounting policy information. The amendments to
IFRS Practice Statement 2 include guidance and examples to the
amendments to IAS 1 and illustrate, in particular, the 'four-step
materiality process' to accounting policy information. The Group
does not expect a material impact on its consolidated financial
statements from these amendments.
-- Amendments to IAS 8 Accounting policies, Changes in
Accounting Estimates and Errors: Definition of Accounting Estimates
were issued in February 2021 and are effective for the financial
year beginning on 1 January 2023 subject to endorsement of the UK
Endorsement Board. The amendments replace the definition of change
in accounting estimates with the definition of accounting estimates
as monetary amounts subject to measurement uncertainty following
accounting policies requirements. A change in accounting estimate
resulting from new information or developments is not the
correction of an error and changes in an input or a measurement
technique of an accounting estimate are changes in accounting
estimates if they do not result from the correction of prior period
errors. The effect of the change relating to the current period is
recognised as income or expense in the current period while the
effect, if any, on future periods is recognised as income or
expense in those future periods. The Group does not expect a
material impact on its consolidated financial statements from these
amendments.
-- Amendments to IAS 12 Income Taxes: Deferred Tax related to
Assets and Liabilities arising from a Single Transaction were
issued in May 2021 and are effective for the financial year
beginning on 1 January 2023 subject to endorsement of the UK
Endorsement Board. The amendments clarify that the recognition
exemption in paragraphs 15 and 24 of IAS 12 does not apply to
transactions that, on initial recognition, give rise to equal
taxable and deductible temporary differences. For these
transactions, such as leases or decommissioning obligations,
deferred tax has to be recognised upon accounting of both an asset
and a liability.
The Group does not expect a material impact on its consolidated
financial statements from all other standards, interpretations and
amendments issued at the reporting date, but not yet to be adopted
for these financial statements.
Use of critical estimates and judgements
In the course of preparing financial statements, management has
to make estimates and judgements that can have a significant impact
on the Group's consolidated financial statements. The most critical
accounting estimates include the recoverability of stockpiled lean
and weathered ore (Note 13 Inventories) while significant
judgements relate to taxation in terms of the application of tax
legislation in the jurisdictions the Group operates (Note 8
Taxation) and the loan relationship between related parties of the
Group entered into in previous years (Note 17 Commitments,
contingencies and legal disputes).
The use of inaccurate assumptions in assessments made for any of
these estimates and judgements could result in a significant impact
on the Group's financial position and/or financial performance.
There are no significant changes to the afore-mentioned critical
estimates and judgements compared to 31 December 2020 and the
detailed description of the critical estimates and judgements is
disclosed in the Group's 2020 Annual Report & Accounts. The
ongoing COVID-19 pandemic did not impact the use of critical
estimates and judgements applied when preparing these interim
condensed consolidated financial statements.
Seasonality
The Group's operations are not affected by seasonality.
Note 3: Segment information
The Group is managed as a single segment, 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 consolidated income statement for the Group.
Management monitors the operating result of the Group based on a
number of measures including Underlying EBITDA, gross profit and
net debt.
Underlying EBITDA and gross profit
The Group presents the Underlying EBITDA as it is a useful
measure for evaluating its ability to generate cash and its
operating performance. The Group's full definition of Underlying
EBITDA is disclosed in the Glossary on page 44.
6 months ended Year ended
US$000 Notes 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Profit before tax and finance 806,573 299,863 754,291
Losses on disposal and liquidation of property, plant
and equipment 5 2,975 877 1,303
Share based payments 329 399 291
Write-offs/(write-backs) 5 3,060 (71) 192
Depreciation and amortisation 5 55,427 51,374 102,475
------------------------------------------------------ ------ --------------- ------------------------ -----------
Underlying EBITDA 868,364 352,442 858,552
------------------------------------------------------ ------ --------------- ------------------------ -----------
6 months ended Year ended
US$000 Notes 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Revenue 4 1,352,656 775,831 1,700,321
Cost of sales 5 (307,870) (304,974) (608,641)
--------------- ------ --------------- ------------------------ -----------
Gross profit 1,044,786 470,857 1,091,680
--------------- ------ --------------- ------------------------ -----------
Net cash/(debt)
Net cash/(debt) as defined by the Group comprises cash and cash
equivalents less interest-bearing loans and borrowings.
US$000 Notes As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Cash and cash equivalents 14 234,669 270,006 169,226
Interest-bearing loans and borrowings - current 15 (19,475) (134,349) (138,538)
Interest-bearing loans and borrowings - non-current 15 (2,686) (132,129) (204,950)
----------------------------------------------------- ------ --------------- --------------- ---------------
Net cash/(debt) 212,508 3,528 (174,262)
----------------------------------------------------- ------ --------------- --------------- ---------------
The Group's balance of cash and cash equivalents decreased by
US$35,337 thousand after debt repayments net of proceeds of
US$244,899 thousand during the period ended 30 June 2021 (31
December 2020: U S$148,328 thousand; 30 June 2020: US$68,790
thousand). Net cash/(debt) is an Alternative Performance Measure
("APM"). Further information on the APMs used by the Group,
including the definitions, is provided on pages 38 and 39 .
Note 4: Revenue
Revenue for the six months period ended 30 June 2021 consisted
of the following:
6 months ended Year ended
US$000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Revenue from sales of iron ore pellets and concentrate 1,262,494 686,415 1,523,772
Freight revenue related to sales of iron ore pellets and
concentrate 61,212 64,139 125,254
------------------------------------------------------------ --------------- ------------------------ -----------
Total revenue from sale of iron ore pellets and concentrate 1,323,706 750,554 1,649,026
------------------------------------------------------------ --------------- ------------------------ -----------
Revenue from logistics and bunker business 26,188 22,513 46,002
Revenue from other sales and services provided 2,762 2,764 5,293
Total revenue 1,352,656 775,831 1,700,321
------------------------------------------------------------ --------------- ------------------------ -----------
Information on the commodity risk related to provisionally
priced sales are provided in Note 16 Financial instruments.
Total revenue from sales of iron ore pellets and concentrate by
geographical destination were as follows:
6 months ended Year ended
US$'000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Central Europe 428,431 144,836 356,461
Western Europe 174,698 30,809 145,311
North East Asia 85,453 23,707 78,786
China and South East Asia 434,669 516,243 951,718
Turkey, Middle East and North Africa 180,093 12,482 82,514
North America 20,362 22,477 34,236
Total revenue from sale of iron ore pellets and concentrate 1,323,706 750,554 1,649,026
------------------------------------------------------------ --------------- ------------------------ -----------
The Group markets its products across various regions. The
disclosure of the segmentation reflects how the Group makes its
business decisions and monitors its sales. Information about the
composition of the regions is provided in the Glossary.
Note 5: Operating expenses
Operating expenses for the six months period ended 30 June 2021
consisted of the following:
6 months ended Year ended
US$000 Notes 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Cost of sales 307,870 304,974 608,641
Selling and distribution expenses 152,054 161,634 309,276
General and administrative expenses 32,905 30,499 61,788
Other operating expenses 21,021 19,129 38,404
Total operating expenses 513,850 516,236 1,018,109
---------------------------------------------- --------------- ------------------------ -----------
Operating expenses include:
Inventories recognised as an expense upon sale of goods 293,632 291,374 582,796
Employee costs (excl. logistics and bunker business) 49,417 53,832 106,782
Inventory movements (29,847) 29,608 41,471
Depreciation of property, plant and equipment and right-of-use assets 3 54,704 50,734 101,278
Amortisation of intangible assets 3 723 640 1,197
Royalties and levies 22,817 15,823 34,596
Costs of logistics and bunker business 23,011 19,245 39,993
Audit and non-audit services 716 919 1,719
Community support donations 2,835 2,506 5,800
Write-offs/(write-backs) 3,060 (71) 192
Losses on disposal and liquidation of property, plant and equipment 2,975 877 1,303
Write-offs of property, plant and equipment and intangible
assets for the six months period ended 30 June 2021 primarily
related to the cancellation of the licence for the Galeschynske
project, which is in the exploration phase. Whilst the Group is
focused on returning this licence to its previous state, all
capitalised costs associated to this licence have been written-off
as of 30 June 2021, as the outcome is currently uncertain. See also
the update on the Group's Principal Risks on page 15 in terms of
the Ukraine country risk.
6 months ended Year ended
US$000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
(Write-back)/write-off of inventories (210) 101 466
Write-off/(write-back) of property, plant and equipment 2,318 (176) (288)
Write-off of intangible assets 931 - -
Write-off/(write-back) of receivables and prepayments 21 4 14
Total write-offs/(write-backs) 3,060 (71) 192
---------------------------------------------------------- --------------- ------------------------ -----------
Note 6: Foreign exchange losses and gains
Foreign exchange losses and gains for the six months period
ended 30 June 2021 consisted of the following:
6 months ended Year ended
US$000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Operating foreign exchange (losses)/gains
Revaluation of trade receivables (38,009) 35,906 61,948
Revaluation of trade payables 3 (92) (538)
Others (16) (41) (387)
------------------------------------------------------ --------------- ------------------------ -----------
Total operating foreign exchange (losses)/gains (38,022) 35,773 61,023
------------------------------------------------------ --------------- ------------------------ -----------
Non-operating foreign exchange (losses)/gains
Revaluation of interest-bearing loans (1,371) (110) 3,378
Conversion of cash and cash equivalents (1,980) 675 2,506
Others (80) 1,070 (582)
------------------------------------------------------ --------------- ------------------------ -----------
Total non-operating foreign exchange (losses)/gains (3,431) 1,635 5,302
------------------------------------------------------ --------------- ------------------------ -----------
Total foreign exchange (losses)/gains (41,453) 37,408 66,325
------------------------------------------------------ --------------- ------------------------ -----------
Operating foreign exchange gains and losses are those items that
are directly related to the production and sale of pellets (e.g.
trade receivables, trade payables on operating expenditure).
Non-operating gains and losses are those associated with the
Group's financing and treasury activities and with local income tax
payables.
The translation differences and foreign exchange gains and
losses are predominantly dependent on the fluctuation of the
exchange rate of the Ukrainian Hryvnia against the US Dollar. The
table below shows the closing and average rate of the most relevant
currencies of the Group compared to the US Dollar.
Average exchange rate Closing exchange rate
Against US$ 6 months Year
6 months ended ended ended As at As at As at
30.06.21 30.06.20 31.12.20 30.06.21 31.12.20 30.06.20
UAH 27.779 25.979 26.958 27.176 26.692 28.275
EUR 0.830 0.907 0.877 0.842 0.890 0.815
------------- --------------- ---------- ---------- ---------- ---------- ----------
Exchange differences arising on translation of non-USD
functional currency operations (mainly in Ukrainian Hryvnia) are
included in the translation reserve. See Note 18 Share capital and
reserves for further details.
Note 7: Net finance expense
Net finance expense for the period ended 30 June 2021 consisted
of the following:
6 months ended Year ended
US$000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Finance expense
Interest expense on loans and borrowings (9,078) (12,879) (22,381)
Less capitalised borrowing costs 4,796 7,563 14,871
Interest on defined benefit plans (1,513) (1,628) (3,170)
Bank charges (281) (413) (829)
Interest expense on lease liabilities (271) (310) (443)
Other finance costs (150) (209) (334)
------------------------------------------- --------------- ------------------------ -----------
Total finance expense (6,497) (7,876) (12,286)
------------------------------------------- --------------- ------------------------ -----------
Finance income
I nterest income 238 335 497
Other finance income 16 37 56
------------------------------------------- --------------- ------------------------ -----------
Total finance income 254 372 553
------------------------------------------- --------------- ------------------------ -----------
Net finance expense (6,243) (7,504) (11,733)
------------------------------------------- --------------- ------------------------ -----------
Note 8: Taxation
The Group pays corporate profit tax in a number of
jurisdictions, Ukraine, Switzerland, the United Kingdom and Dubai,
and its effective tax rate is subject to various factors outside of
the Group's control. This includes the volatility in the global
iron pellet market and foreign exchange rates, primarily between
the Ukrainian Hryvnia and the US Dollar. For the period ended 30
June 2021, the income tax expense was based on an expected weighted
average tax rate of 17.0% for the financial year 2021, compared to
an effective tax rate of 15.1% for the financial year 2020. The
expected tax rate for the financial year 2021 was computed based on
the expected taxable profits in the Group's major jurisdictions
taken from the latest forecast multiplied with the enacted
statutory tax rates in these jurisdictions. The increase of the
applied tax rate as at 30 June 2021 is primarily due to the higher
taxable profits expected in Ukraine.
The income tax expense for the period ended 30 June 2021
consisted of the following:
6 months ended Year ended
US$000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Current income tax
Current income tax charge 140,057 43,509 111,160
Amounts related to previous years 27 (14) (1,203)
---------------------------------------------------- --------------- ------------------------ -----------
Total current income tax 140,084 43,495 109,957
---------------------------------------------------- --------------- ------------------------ -----------
Deferred income tax
Origination and reversal of temporary differences (4,611) 591 2,611
---------------------------------------------------- --------------- ------------------------ -----------
Total deferred income tax (4,611) 591 2,611
---------------------------------------------------- --------------- ------------------------ -----------
Total income tax expense 135,473 44,086 112,568
---------------------------------------------------- --------------- ------------------------ -----------
As disclosed in Note 17 Commitments, contingencies and legal
disputes, the Group is involved in ongoing tax audits and a court
proceeding in respect of its cross-border transactions and an
unexpected adverse outcome would have an adverse impact on the
Group's total income tax expense and its effective tax rate. In
addition to the afore-mentioned ongoing tax audits and court
proceeding, the Group's future effective tax rate could be further
impacted by legislative changes, changes in the statutory tax rates
or different interpretations of the legislation in any of its key
jurisdictions. See also the update on the Group's Principal Risks
on page 15 in terms of the Ukraine country risk.
The net income tax payable as at 30 June 2021 consisted of the
following:
Year ended
US$000 6 months ended 30.06.21 31.12.20 6 months ended 30.06.20
(unaudited) (audited) (unaudited)
Income tax receivable balance 1,130 1,351 174
Income tax payable balance (97,002) (58,483) (34,768)
-------------------------------- ------------------------ ----------- ------------------------
Net income tax payable (95,872) (57,132) (34,594)
-------------------------------- ------------------------ ----------- ------------------------
The net deferred income tax assets as at 30 June 2021 consisted
of the following:
Year ended
US$000 6 months ended 30.06.21 31.12.20 6 months ended 30.06.20
(unaudited) (audited) (unaudited)
Total deferred tax assets 37,830 30,574 34,268
Total deferred tax liabilities (262) (101) (102)
--------------------------------- ------------------------ ----------- ------------------------
Net deferred tax assets 37,568 30,473 34,166
--------------------------------- ------------------------ ----------- ------------------------
The increase of the deferred tax assets as at 30 June 2021 is
primarily related to the recognition of available tax losses for a
Ukrainian subsidiary that started to trade and generate taxable
profits in 2021. At current prices for iron ore pellets, it is
expected that the entire balance of available tax losses from
previous years will be utilised during the financial year 2022.
Other movements, which impacted the net deferred tax assets though
not necessarily the income tax expense related to foreign exchange
movements and a reclass from current to deferred taxes.
The afore-mentioned recognition of the available tax losses will
reduce the balance of US$116,076 thousand of available tax loss
carry forwards for which no deferred tax assets were recognised
that was available at the beginning of the financial year 2021. The
total available tax loss carry forwards of the Group will be
reassessed again at year-end.
Note 9: Earnings per share and dividends paid and proposed
Basic earnings per share ("EPS") are calculated by dividing the
net profit for the period attributable to ordinary equity
shareholders of Ferrexpo plc by the weighted average number of
Ordinary Shares.
Diluted earnings per share are calculated by adjusting the
weighted average number of Ordinary Shares in issue on the
assumption of conversion of all potentially dilutive Ordinary
Shares. All share awards are potentially dilutive and have been
considered in the calculation of diluted earnings per share.
Year ended 31.12.20
6 months ended 30.06.21 (unaudited) 6 months ended 30.06.20 (unaudited) (audited)
Earnings for
the
period/year
attributable
to equity
shareholders
- per share
in US cents
Basic 112.5 42.6 108.1
Diluted 112.3 42.4 107.9
Profit for
the
period/year
attributable
to equity
shareholders
- US$000
Basic and diluted
earnings 661,417 249,904 635,292
Weighted
average
number of
shares -
thousands
Basic number of
ordinary shares
outstanding 587,699 587,294 587,496
Effect of dilutive
potential ordinary
shares 1,047 1,581 1,510
-------------------- ------------------------------------ ------------------------------------ --------------------
Diluted number of
ordinary shares
outstanding 588,746 588,875 589,006
-------------------- ------------------------------------ ------------------------------------ --------------------
The basic number of ordinary shares is calculated by subtracting
the weighted average of shares held in treasury and employee
benefit trust reserves from the total number of ordinary shares in
issue.
Dividends proposed and paid
Prior to the dividend proposed below and taking into account
relevant thin capitalisation rules and dividend-related covenants
for the Group's major bank debt facility, the total available
distributable reserves of Ferrexpo plc is US$508,928 thousand for
the remainder of the financial year 2021.
6 months ended Year ended
US$000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Dividends proposed
Interim dividend for 2021: 39.6 US cents per Ordinary 232,729
Share - -
Final dividend for 2020: 13.2 US cents per Ordinary Share 77,576
(1) - -
Special interim dividend for 2020: 39.6 US cents per
Ordinary Share - - 232,729
Special interim dividend for 2020: 13.2 US cents per
Ordinary Share - - 77,576
Interim dividend for 2020: 6.6 US cents per Ordinary Share - 38,788 -
Interim dividend for 2020: 6.6 US cents per Ordinary Share - 38,788 -
Final dividend for 2019: 3.3 US cents per Ordinary Share - 19,394 -
Total dividends proposed 310,305 96,970 310,305
------------------------------------------------------------ --------------- ------------------------ -----------
1) Declared on 16 April 2021 and paid on 1 July 2021
6 months ended Year ended
US$000 30.06.21 6 months ended 30.06.20 31.12.20
(unaudited) (unaudited) (audited)
Dividends paid during the period
Special interim dividend for 2020: 39.6 US cents per
Ordinary Share 233,097
Special interim dividend for 2020: 13.2 US cents per 77,379
Ordinary Share - -
Special interim dividend for 2020: 6.6 US cents per
Ordinary Share - - 39,004
Interim dividend for 2020: 6.6 US cents per Ordinary Share - - 38,796
Interim dividend for 2020: 6.6 US cents per Ordinary Share - - 39,177
Final dividend for 2019: 3.3 US cents per Ordinary Share - - 20,050
Final special dividend for 2019: 3.3 US cents per Ordinary
Share - 19,458 19,458
Special interim dividend for 2019: 6.6 US cents per
Ordinary Share - 38,961 38,961
Total dividends paid during the period 310,476 58,419 195,446
------------------------------------------------------------ --------------- ------------------------ -----------
Although accounts are published in US Dollars and dividends are
declared in US Dollars, the shares are denominated in UK Pounds
sterling and dividends are therefore paid in UK Pounds
Sterling.
Note 10: Property, plant and equipment
During the six months period ended 30 June 2021, the additions
to property, plant and equipment totalled US$131,340 thousand (30
June 2020: US$109,766 thousand; 31 December 2020: US$230,315
thousand) and the net book value of the disposals of property,
plant and equipment totalled US$5,371 thousand (30 June 2020:
US$1,023 thousand; 31 December 2020: US$5,489 thousand). The total
depreciation charge for the period was US$58,880 thousand (30 June
2020: US$51,971 thousand; 31 December 2020: US$105,223
thousand).
The carrying value of property, plant and equipment includes
capitalised borrowing costs on qualifying assets of US$56,621
thousand (31 December 2020: US$50,474 thousand; 30 June 2020:
US$46,399 thousand) .
Note 11: Leases
During the six months period ended 30 June 2021, the additions
to the right-of-use assets totalled US$101 thousand (30 June 2020:
US$85 thousand; 31 December 2020: US$2,599 thousand). The total
depreciation charge for the period was US$2,173 thousand (30 June
2020: US$2,321 thousand; 31 December 2020: US$4,384 thousand).
As at 30 June 2021, the carrying amount of the lease liabilities
consisted of the following:
US$000 As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Non-current 2,686 3,796 4,950
Current 4,129 5,252 3,694
-------------- --------------- --------------- ---------------
The total cash outflow for leases falling under the scope of
IFRS 16 Leases during the period ended 30 June 2021 was US$2,815
thousand (31 December 2020: US$3,425 thousand; 30 June 2020:
US$1,330 thousand). During the period ended 30 June 2021 US$522
thousand was recognised as an expense in the consolidated income
statement in respect of short-term leases with a corresponding
impact on the net cash flows from operating activities (31 December
2020: US$424 thousand; 30 June 2020: US$156 thousand). Furthermore,
interest expense on lease liabilities in the amount of US$271
thousand was recognised in the consolidated income statement during
the period ended 30 June 2021 (31 December 2020: US$443 thousand;
30 June 2020: US$310 thousand).
Note 12: Other taxes recoverable and prepaid
As at 30 June 2021, taxes recoverable and prepaid comprised:
US$000 As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
VAT receivable 38,828 31,226 28,743
Other taxes prepaid 398 97 250
-------------------------------------------- --------------- --------------- ---------------
Total other taxes recoverable and prepaid 39,226 31,323 28,993
-------------------------------------------- --------------- --------------- ---------------
As at 30 June 2021, US$37,040 thousand of the VAT receivable
relates to the Group's Ukrainian business operations (31 December
2020: US$ 29,863 thousand; 30 June 2020: US$27,499 thousand). There
is no material VAT receivable balance overdue in Ukraine as at 30
June 2021 and the end of the comparative periods 31 December 2020
and 30 June 2020.
The total VAT receivable balance shown in the table above is net
of an allowance of US$1,203 thousand (31 December 2020: US$ 1,739
thousand; 30 June 2020: US$1,836 thousand) to reflect the
uncertainties in terms of the timing of the recovery of VAT
receivable balances.
Note 13: Inventories
As at 30 June 2021, inventories comprised:
US$000 As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Lean and weathered ore - - 9,867
Raw materials and consumables 56,437 38,286 43,824
Spare parts 88,331 76,565 78,815
Finished ore pellets 33,806 17,699 27,212
Work in progress 11,811 9,679 5,038
Other 2,215 2,376 2,504
---------------------------------- --------------- --------------- ---------------
Total inventories - current 192,600 144,605 167,260
---------------------------------- --------------- --------------- ---------------
Lean and weathered ore 230,000 213,685 218,414
---------------------------------- --------------- --------------- ---------------
Total inventories - non-current 230,000 213,685 218,414
---------------------------------- --------------- --------------- ---------------
Total inventories 422,600 358,290 385,674
---------------------------------- --------------- --------------- ---------------
Inventories are held at the lower of cost or net realisable
value.
Inventories classified as non-current comprise lean and
weathered ore that are, based on the Group's current processing
plans, not planned to be processed within the next twelve months.
After having processed some of these volumes in the second half of
the financial year 2020, it was planned to ramp up the processing
during the financial year 2021. As disclosed in the 2020 Annual
Report & Accounts, it was decided to postpone the processing of
the lean ore in order to realise the maximum financial benefits in
the continued high price environment for iron ore pellets. The
processing of this stockpile will take more than 12 months. The
beginning and duration of the processing depend on the Group's
future mining activities, processing capabilities and anticipated
market conditions.
The net realisable value of lean and weathered ore is most
sensitive to changes in long-term iron ore prices and delays in the
commencement of utilising the ore in the production process. The
net realisable value test has been updated as of 30 June 2021 based
on latest available price expectations for iron ore products. Two
separate sensitivities assuming a further one-year delay and a US$5
per tonne lower forecast long-term iron ore price would result in a
reduction in the net realisable value by US$45,900 thousand and
US$36,900 thousand, respectively. The lower net realisable values
under both sensitivities still exceed cost as at 30 June 2021.
Note 14: Cash and cash equivalents
As at 30 June 2021, cash and cash equivalents comprised:
US$000 Notes As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Cash at bank and on hand 234,669 270,006 169,226
--------------------------------- ------ --------------- --------------- ---------------
Total cash and cash equivalents 3 234,669 270,006 169,226
--------------------------------- ------ --------------- --------------- ---------------
The debt repayments net of proceeds during the period ended 30
June 2021 totalled US$244,899 thousand (31 December 2020:
US$148,328 thousand; 30 June 2020: US$68,790 thousand) affecting
the balance of cash and cash equivalents.
Further information on the Group's gross debt is provided in
Note 15 Interest-bearing loans and borrowings.
The balance of cash and cash equivalents held in Ukraine amounts
to US$33,731 thousand as at 30 June 2021 (31
December 2020: US$ 33,058 thousand; 30 June 2020: US$32,140 thousand).
Note 17 Commitments , contingencies and legal disputes provides
details on the Group's balance of restricted cash and deposits,
which has been fully provided for during the financial years 2015
and 2016 as not available to the Group.
Note 15: 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 Notes As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Current
Syndicated bank loans - secured - 128,333 133,333
Other bank loans - unsecured - 764 1,511
Lease liabilities 4,129 5,252 3,694
Trade finance facilities 15,346 - -
Total current interest-bearing loans and borrowings 3 19,475 134,349 138,538
--------------------------------------------------------- ------ --------------- --------------- ---------------
Non-current
Syndicated bank loans - secured - 128,333 200,000
Lease liabilities 2,686 3,796 4,950
Total non-current interest-bearing loans and borrowings 3 2,686 132,129 204,950
--------------------------------------------------------- ------ --------------- --------------- ---------------
Total interest-bearing loans and borrowings 22,161 266,478 343,488
--------------------------------------------------------- ------ --------------- --------------- ---------------
Following two further quarterly amortisations and the
cancellation of advance prepayments of US$60,000 thousand of the
Group's syndicated revolving pre-export facility (the "facility")
earlier in 2021, the remaining outstanding amount of US$140,000
thousand was fully repaid on 30 June 2021 and the facility was
subsequently cancelled. The facility agreement was signed in 2018
and repayment was scheduled to take place quarterly between 2020
and 2022.
As at the end of the comparative periods ended 31 December 2020
and 30 June 2020, the outstanding amount of the facility was
US$256,666 thousand and US$333,333 thousand, respectively.
The aforementioned bank debt facility was guaranteed and secured
as follows:
-- Ferrexpo AG and Ferrexpo Middle East FZE, which were also
joint borrowers, assigned the rights to revenue from certain sales
contracts;
-- PJSC Ferrexpo Poltava Mining assigned all of its rights of
certain export contracts for the sale of pellets to Ferrexpo AG and
Ferrexpo Middle East FZE; and
-- the Group pledged bank accounts of Ferrexpo AG and Ferrexpo
Middle East FZE into which sales proceeds from certain assigned
sales contracts are exclusively received.
Arrangement fees for the aforementioned facility were presented
in prepayments and current assets and other non-current assets
based on the maturity of the underlying facility and were amortised
on a straight-line basis over the term of the facility and fully
amortised as of 30 June 2021 following the repayment.
The table below shows the movements in the interest-bearing
loans and borrowings:
6 months ended 6 months ended
US$000 30.06.21 Year ended 31.12.20 30.06.20
(unaudited) (audited) (unaudited)
Opening balance of interest-bearing loans and borrowings 266,478 412,378 412,378
Cash movements
Repayments of syndicated bank loans - secured (256,666) (143,333) (66,667)
Repayments of other bank loans - unsecured (764) (1,570) (793)
Principal and interest elements of lease payments (2,815) (3,425) (1,330)
Change of trade finance facilities, net 15,346 - -
Total cash movements (244,899) (148,328) (68,790)
---------------------------------------------------------- --------------- -------------------- ---------------
Non-cash movements
Amortisation of prepaid arrangement fees 4 39 20
Additions to lease liabilities 101 2,589 78
Others (incl. translation differences) 477 (200) (198)
---------------------------------------------------------- --------------- -------------------- ---------------
Total non-cash movements 582 2,428 (100)
---------------------------------------------------------- --------------- -------------------- ---------------
Closing balance of interest-bearing loans and borrowings 22,161 266,478 343,488
---------------------------------------------------------- --------------- -------------------- ---------------
The interest elements of lease payments are included in the cash
flows from operating activities and not in the cash flows used in
financing activities.
Further information on the Group's exposure to interest rate,
foreign currency and liquidity risk is provided in Note 27
Financial instruments of the 2020 Annual Report & Accounts.
Note 16: Financial instruments
Fair values
Set out below are the carrying amounts of the Group's financial
instruments that are carried in the interim consolidated statement
of financial position:
US$000 As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Financial assets
Cash and cash equivalents 234,669 270,006 169,226
Trade and other receivables 209,694 152,750 108,970
Other financial assets 5,285 5,328 583
----------------------------------------- --------------- --------------- ---------------
Total financial assets 449,648 428,084 278,779
----------------------------------------- --------------- --------------- ---------------
Financial liabilities
Trade and other payables 117,250 43,749 54,382
Accrued liabilities 25,413 24,407 22,316
Interest-bearing loans and borrowings 22,161 266,478 343,488
Total financial liabilities 164,824 334,634 420,186
----------------------------------------- --------------- --------------- ---------------
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. The
fair values of interest-bearing loans and borrowings totalled
US$22,161 thousand (31
December 2020: US$257,441 thousand; 30 June 2020: US$ 340,115 thousand).
Other financial assets and liabilities
The fair values of cash and cash equivalents, trade and other
receivables and payables, other financial assets and accrued
liabilities are approximately equal to their carrying amounts due
to their short maturity.
Credit risk
Whilst the COVID-19 pandemic did not result in a significant
increase in the Group's credit risk, the risks highlighted in the
2020 Annual Report & Accounts remain relevant. See pages 166
and 167 of the 2020 Annual Report & Accounts for detailed
information.
The change of the balance of impairment losses on trade
receivables recognised in the interim consolidated income statement
as of 30 June 2021 and during the comparative periods ended 31
December 2020 and 30 June 2020 was not material and therefore not
disclosed separately in the interim consolidated income
statement.
Commodity risk
Revenues related to provisionally priced sales are initially
recognised at the estimated fair value of the consideration
receivable based on the forward price at each reporting date for
the relevant period outlined in the different contracts. As a
consequence, the receivable balance may change in a future period
when final invoices can be issued based on final iron ore prices to
be applied according to the specific underlying contract terms. The
provisionally priced iron ore exposure as at 30 June 2021 was
87,701 tonnes (31 December 2020: 622,705 tonnes; 30 June 2020:
1,215,000 tonnes) and gave rise to a fair value loss relating to
the embedded provisional pricing mechanism of US$945 thousand as at
30 June 2021 (31 December 2020: gain of US$28,921 thousand; 30 June
2020: gain of US$909 thousand). Final iron ore prices based on the
relevant index are normally known within 60 days after the
reporting period. The difference between the provisionally priced
receivable balance recognised as at 30 June 2021 and the receivable
balance taking into account known final and latest forward prices
is US$578 thousand and would have decreased the consolidated result
and the shareholders' equity by this amount (31 December 2020:
increased by US$3,968 thousand; 30 June 2020: increased
by US$12,391 thousand).
Where pricing terms deviate from the index-based pricing model,
derivative commodity contracts may be used to swap the pricing
terms to the iron ore index price.
Finished goods are held at cost without revaluation to a spot
price for iron ore pellets at the end of the reporting period, as
long as the recoverable amount exceeds the cost basis.
Note 17: Commitments, contingencies and legal disputes
Commitments
Commitments as at 30 June 2021 consisted of the following:
US$000 As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Total commitments for the lease of mining land (out of the scope
of IFRS 16) 42,531 30,874 26,120
Total future contingent rental payments (IFRS 16) 22,019 16,217 16,479
Total capital commitments on purchase of property, plant and
equipment 151,446 57,526 52,913
----------------------------------------------------------------- --------------- --------------- ---------------
Commitments for the lease of mining land
These commitments relate to the agreements for the use of mining
land, which fall out of the scope of IFRS 16 Leases.
Future minimum rental payments
These commitments relate to leases under the scope of IFRS 16 to
which the lessee is committed, but the leases did not commence.
Future commitments for contingent rental payments
These commitments include future cash flows dependent on
non-fixed rates related to the long-term portion of leases of land
not used for the direct extraction of ore and accounted for under
IFRS 16 whereas the short-term portion is recognised as lease
liability in the statement of financial position. See Note 11
Leases for further details.
Contingencies
As disclosed in the 2020 Annual Report & Accounts, the
Board, acting through the Committee of Independent Directors (the
"CID"), has been conducting during the financial year 2020 a review
in connection with the Group's sponsorship arrangements with FC
Vorskla following the identification of a loan made by FC Vorskla
to Collaton Limited, another related party of the Group. The CID
has concluded its enquiry in March 2021. In the event that any of
the payments made by the Group to FC Vorskla or the loan provided
by FC Vorskla to Collaton Limited were not fully used for the
benefit of the football club, or there was any non-compliance with
legal, regulatory or other requirements, liabilities (including
fines and penalties) may accrue to the Group. At the current time,
the existence, timing or quantum of potential future liabilities,
if any, cannot be determined and measured reliably and, as a
consequence, no associated liabilities have been recognised in
relation to these matters in the consolidated statement of
financial position as of 30 June 2021. See Note 30 Commitments,
contingencies and legal disputes in the 2020 Annual Report &
Accounts for detailed information.
Further to the disclosure made in Note 30 Commitments,
contingencies and legal disputes in the 2020 Annual Report &
Accounts in respect of the Group's former relationship with
Blooming Land, a Charity, there have been no further developments
during the period ended 30 June 2021 and the likelihood of any
claims is considered to be more remote due to the passing of
time.
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.
Deposit Guarantee Fund and liquidator of Bank F&C
The Group's former transactional bank in Ukraine, Bank F&C
("BFC"), is still going through the liquidation process after
having been declared insolvent by the National Bank of Ukraine and
put under temporary administration on 18 September 2015. The Group,
through its major subsidiaries in Ukraine, is engaged in various
court proceedings with the aim to maximise its recovery in the
liquidation process of BFC as disclosed below.
Following the commencement of the liquidation process of BFC and
in accordance with the applicable local legislation, PJSC Ferrexpo
Poltava Mining ("FPM"), LLC Ferrexpo Yeristovo Mining ("FYM") and
LLC Ferrexpo Belanovo Mining ("FBM"), collectively referred to as
"Ukrainian subsidiaries", submitted on 21 January 2016 their claims
for cash and deposit balances held with BFC on the date of
introduction of temporary administration totalling UAH4,262 million
(US$156,628 thousand as of 30 June 2021).
On 22 April 2016, the liquidator of BFC issued certificates
recognising UAH540 million (US$19,870 thousand as of 30 June 2021)
of these claims and recognised these claims in the ninth rank. The
afore-mentioned Ukrainian subsidiaries are still involved in legal
proceedings in respect of the under-recognition of the claims
amounting to UAH3,722 million (US$136,958 thousand as of 30 June
2021) and the ranking of the claims in the liquidation process.
The court proceedings commenced in October 2016 and, following
various hearings during the financial year 2017, the relevant court
instance dismissed in October 2017 FPM's claim in full. FPM filed
an appeal in November 2017. In July 2018, the court ruled in favour
of FPM and the counterparty subsequently filed its cassation appeal
against this decision. On 11 December 2018, the Supreme Court of
Ukraine upheld the cassation appeal and the case was directed for
new consideration to the Northern Commercial Court of Appeal. On 19
June 2019, the Northern Commercial Court of Appeal satisfied the
claim of FPM and the opposing party filed a cassation appeal. On 31
October 2019, the Supreme Court cancelled the decision of the
Northern Commercial Court of Appeal and directed the case to this
court instance for new consideration. The date of the hearing by
the Northern Commercial Court of Appeal is scheduled for 30
September 2021.
In terms of FYM's claim on the same matter, the Northern
Commercial Court of Appeal dismissed on 16 February 2021 the claim
of the opposing party and satisfied FYM's claim in full. Following
a cassation claim lodged by the opposing party, the Supreme Court
of Ukraine commenced the cassation proceedings in June 2021 and the
next court hearing is scheduled for 17 August 2021.
The outcomes of the aforementioned legal proceedings will not
have an adverse impact on the Group's financial result in future
periods as a full allowance was recorded for the claimed amounts
during the financial year 2015.
Share dispute
On 23 November 2020, the Kyiv Commercial Court opened court
proceedings in relation to an old shareholder litigation. In 2005,
a former shareholder in FPM brought proceedings in the Ukrainian
courts seeking to invalidate the share sale and purchase agreement
pursuant to which a 40.19% stake in FPM was sold to nominee
companies that were previously ultimately controlled by Kostyantin
Zhevago, amongst other parties. After a long period of litigations,
all old claims were fully dismissed in 2015. In January 2021,
Ferrexpo AG (FAG) received a claim from a former shareholder in FPM
to invalidate part of the share sale and purchase agreement
concluded in 2002 related to the sale of 9.32% shareholding in FPM.
Following the receipt of the claim FAG, as the parent company of
FPM, filed on 27 January 2021 its statement of defence to the court
in response to this claim. In February 2021 after the first hearing
of the Kyiv Commercial Court on this case, FAG became aware that
three new claims have been filed by other three former shareholders
in FPM. Taken together four claimants seek to invalidate the share
sale and purchase agreement concluded in 2002 pursuant to which a
40.19% stake in FPM was sold similarly to the previous claims made
back in 2005. FAG filed on 5 March 2021 its statements of defense
to the court in response to these new claims. The Kyiv Commercial
Court ruled on 27 May 2021 in favour of FAG. The opposing parties
filed in June 2021 their appeals. The Northern Commercial Court of
Appeal has opened the appeal proceedings and the next hearing is
scheduled for 9 September 2021.
Based on legal advice obtained and considering the dismissal of
the claims made by a former shareholder in FPM back in 2015, it is
management's view that FAG has compelling arguments to defend its
position in the court.
Taxation
Tax legislation
The Group operates across a number of jurisdictions through its
value chain and prices its sales between its subsidiaries using
international benchmark prices for comparable products covering
product quality and applicable freight costs. The Group judges
these to be on terms, which comply with applicable legislation in
the jurisdictions the Group operates.
In August 2017, the State Fiscal Service of Ukraine ("SFS")
commenced a tax audit for the period from 1 September 2013 to 31
December 2015 at the Group's major subsidiary in Ukraine with a
focus on cross-border transactions in terms of its pellet sales to
another subsidiary of the Group. Following the completion of this
audit, the SFS issued its official tax audit report on 27 December
2018, claiming a tax adjustment totalling UAH448 million (US$16,485
thousand as of 30 June 2021) and issued the formal claim on 12
March 2019. The Group's subsidiary initiated legal proceedings and
filed a claim to the first court instance in Poltava on 22 March
2019. The Poltava court of first court instance confirmed on 4
September 2019 the position of the Group's major subsidiary. The
SFS filed its appeal in November 2019 and the Second Administrative
Court of Appeal confirmed on 21 December 2019 the decision of the
first court instance and supported the position of the Group's
subsidiary in full. The SFS subsequently filed an application of
cassation to the Supreme Court of Ukraine and, as of the date of
approval of these interim condensed consolidated financial
statements, the date of the hearing is unknown.
On 18 February 2020, the State Tax Service of Ukraine ("STS"),
formerly known as SFS, commenced two new tax audits for
cross-border transactions between the Group's major subsidiary in
Ukraine and two subsidiaries of the Group outside of Ukraine in
relation to the sale of iron ore products during the financial
years 2015 to 2017. The audits have been halted in March 2020 due
to a COVID-19 related quarantine imposed in Ukraine and resumed on
10 February 2021 following a decision of the Cabinet of Ministers
that tax audits in the country will resume again. On 14 June 2021,
the STS commenced another tax audit for cross-border transactions
of another Ukrainian subsidiary with the same two subsidiaries of
the Group outside of Ukraine and for the same period as for the
aforementioned audit at the Group's major subsidiary. Based on
legislation in Ukraine, the results of these audits are to be
provided by STS within 18 months after commencement.
The Group considers that it has complied with applicable
legislation for all cross-border transactions undertaken and
continues to expect that it can successfully defend its methodology
applied to determine the prices between its subsidiaries.
Consequently, no provision has been recorded as at 30 June 2021,
neither for the years subject to the aforementioned court
proceedings nor for transactions and years subject to the newly
commenced audits by the SFS in Ukraine. As of the approval of these
interim condensed consolidated financial statements, no claim has
been made by the SFS in respect of the newly commenced audits.
As required by IFRIC 23 Uncertainty over income tax treatments,
the Group reviewed and reassessed its exposure in respect of all
uncertain tax positions, including the ongoing court proceedings
and the newly commenced audits of cross-border transactions in
Ukraine under the provisions of this interpretation. Considering
the two favourable court decisions and third party advice obtained
for the year ended 31 December 2020 and 2019, the management of the
Group concluded that it is probable that the Supreme Court of
Ukraine will confirm the decisions from the two lower court
instances. In case of any new claims made by the STS, the Group
will continue to successfully defend its pricing methodology
applied during these years. An unexpected outcome of the ongoing
court proceeding would have an adverse impact on the Group's total
income tax expense and effective tax rate in a future period.
Detached from the cases mentioned above, FPM received on 23 June
2020 a court ruling, which grants access to information and
documents to the State Bureau of Investigators in Ukraine ("SBI")
in relation to the sale of iron ore products to two subsidiaries of
the Group outside of Ukraine during the years 2013 to 2019. The
court ruling relates to pre-trial investigations carried out by SBI
in relation to potential tax evasion by the Group in Ukraine. At
the time of the approval of these interim condensed consolidated
financial statements, there is very little information provided in
the court ruling in respect to the alleged offences. There is no
quantified claim made by the SBI and the ruling is primarily
seeking for disclosure of information in order to allow SBI to
determine whether there have potentially been any offences. The
Ukrainian subsidiaries cooperated with the SBI and provided the
requested information as per the court ruling in order to support
these pre-trial investigations. As of the date of approval of these
interim condensed consolidated financial statements, there were
neither any actions nor any new requests received from SBI.
The Ukrainian legislation and regulations on taxation continued
to evolve over the last couple of years, which are however not
always clearly written and are therefore subject to varying
interpretations and inconsistent enforcement by local, regional and
national tax authorities. As a result, instances of inconsistent
interpretations and enforcements to resolve the same or similar
cases are not unusual. See also the update on the Group's Principal
Risks on page 15 in terms of the Ukraine country risk.
Except for the matters in Ukraine mentioned above, the Group is
not aware of any significant challenges by local tax authorities in
any jurisdictions the Group operates. However, the application of
international and local tax legislation and regulations can be
complex and requires judgement to assess possible associated risks,
particularly in relation to the Group's cross-border operations and
transactions.
Note 18: Share capital and reserves
The share capital of Ferrexpo plc at 30 June 2021 was
613,967,956 (31 December 2020: 613,967,956; 30 June 2020:
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 (31 December 2020:
25,343,814 shares; 30 June 2020: 25,343,814 shares), which are held
in treasury, resulting from a share buyback that was undertaken in
September 2008, and 924,899 shares held in the employee benefit
trust reserve (31 December 2020: 924,899 shares; 30 June 2020:
924,899 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). The exchange
differences arising on translation of the Group's foreign
operations are initially recognised in the other comprehensive
income. See also the Interim Consolidated Statement of
Comprehensive Income on page 20 of these financial statements for
further details.
As at 30 June 2021 other reserves attributable to equity
shareholders of Ferrexpo plc comprised:
For the financial
year 2020 and the
6 months ended
30.06.21
Uniting of Treasury share Employee benefit Translation Total other
US$000 interest reserve reserve trust reserve reserve reserves
At 1 January 2020 31,780 (77,260) (2,826) (1,716,468) (1,764,774)
------------------ ----------------- ------------------ ----------------- ------------------ --------------
Foreign currency
translation
differences - - - (317,691) (317,691)
Tax effect - - - 16,278 16,278
------------------ ----------------- ------------------ ----------------- ------------------ --------------
Total
comprehensive
loss for the
year - - - (301,413) (301,413)
Share based
payments - - 291 - 291
------------------ ----------------- ------------------ ----------------- ------------------ --------------
At 31 December
2020 (audited) 31,780 (77,260) (2,535) (2,017,881) (2,065,896)
------------------ ----------------- ------------------ ----------------- ------------------ --------------
Foreign currency
translation
differences - - - 95,792 95,792
Tax effect - - - (3,688) (3,688)
------------------ ----------------- ------------------ ----------------- ------------------ --------------
Total
comprehensive
income for the
period - - - 92,104 92,104
Share based
payments - - 329 - 329
------------------ ----------------- ------------------ ----------------- ------------------ --------------
At 30 June 2021
(unaudited) 31,780 (77,260) (2,206) (1,925,777) (1,973,463)
------------------ ----------------- ------------------ ----------------- ------------------ --------------
For the 6 months
ended 30.06.20
Uniting of Treasury share Employee benefit Translation Total other
US$000 interest reserve reserve trust reserve reserve reserves
At 1 January 2020 31,780 (77,260) (2,826) (1,716,468) (1,764,774)
------------------ ----------------- ------------------ ----------------- ------------------ --------------
Foreign currency
translation
differences - - - (213,637) (213,637)
Tax effect - - - 10,977 10,977
------------------ ----------------- ------------------ ----------------- ------------------ --------------
Total
comprehensive
income for the
period - - - (202,660) (202,660)
Share based
payments - - 399 - 399
------------------ ----------------- ------------------ ----------------- ------------------ --------------
At 30 June 2020
(unaudited) 31,780 (77,260) (2,427) (1,919,128) (1,967,035)
------------------ ----------------- ------------------ ----------------- ------------------ --------------
Note 19: Related party disclosures
During the periods presented, the Group entered into arm's
length transactions with entities under the common control of
Kostyantin Zhevago, a controlling shareholder of Ferrexpo plc, with
associated companies and with other related parties. Management
considers that the Group has appropriate procedures in place to
identify, control, properly disclose and obtain independent
confirmation, when relevant, for 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 49.9% (31 December 2020:
49.9%; 30 June 2020; 49.9%). This is the only associated company of
the Group.
All related party transactions entered into by the Group during
the periods presented are summarised in the tables on the following
pages, except for those made to the Non-executive Directors and
Executive Directors of Ferrexpo plc.
The payments made to the Non-executive Directors and Executive
Directors in the comparative period ended 31 December 2020 are
disclosed in detail in the Remuneration Report included in the
Group's 2020 Annual Report & Accounts.
Revenue, expenses, finance income and finance expenses
6 months ended 30.06.21 (unaudited) 6 months ended 30.06.20 Year ended 31.12.20
(unaudited) (audited)
------------------------------------------ ------------------------------------------ ----------------------------------------
US$000 Entities Asso- Other related parties Entities Asso- Other related parties Entities Asso- Other related
under ciated under ciated under ciated parties
common compa- common compa- common compa-
control nies control nies control nies
Other sales (a) 278 - 5 151 - 3 323 - 7
---------------- --------- ------- ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Total related
party
transactions
within revenue 278 - 5 151 - 3 323 - 7
---------------- --------- ------- ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Materials (b) 3,604 - - 3,216 - - 6,299 - -
Spare parts and
consumables
(c) 3,007 - - 1,236 - - 3,063 - -
Other expenses
(d) 627 - - 232 - - 524 - -
Total related
party
transactions
within cost of
sales 7,238 - - 4,684 - - 9,886 - -
---------------- --------- ------- ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Selling and
distribution
expenses (e) 2,354 8,860 - 2,151 9,435 - 4,552 19,073 -
General and
administration
expenses (f) 1,561 - 236 909 - 195 1,747 - 482
Finance
expenses 11 - - 12 - - 25 - -
---------------- --------- ------- ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Total related
party
transactions
within
expenses 11,164 8,860 236 7,756 9,435 195 16,210 19,073 482
---------------- --------- ------- ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Other income
(g) 1 - - 6 - - 21 - -
---------------- --------- ------- ---------------------- --------- ------- ---------------------- --------- ------- --------------------
Total related
party
transactions 11,443 8,860 241 7,913 9,435 198 16,554 19,073 489
---------------- --------- ------- ---------------------- --------- ------- ---------------------- --------- ------- --------------------
The Group entered into various related party transactions. 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.
Entities under common control
a Sales of scrap metal to OJSC Uzhgorodsky Turbogas totalling
US$174 thousand (30 June 2020: US$72 thousand; 31 December 2020:
US$157 thousand).
b Purchases of compressed air, oxygen and metal scrap from
Kislorod PCC for US$993 thousand (30 June 2020: US$1,098 thousand;
31 December 2020: US$2,060 thousand);
b Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas
for US$2,285 thousand (30 June 2020: US$2,118 thousand; 31 December
2020: US$4,191 thousand); and
b Purchase of services from OJSC Berdichev Machine-Building
Plant Progress for US$304 thousand (30 June 2020: nil; 31 December
2020: nil).
c Purchases of spare parts from Holding company AvtoKraz, OJSC
in the amount of US$766 thousand (30 June 2020: nil; 31 December
2020: US$446 thousand);
c Purchases of spare parts from CJSC Kyiv Shipbuilding and Ship
Repair Plant ("KSRSSZ") in the amount of US$233 thousand (30 June
2020: US$347 thousand; 31 December 2020: US$656 thousand);
c Purchases of spare parts from OJSC Berdichev Machine-Building
Plant Progress in the amount of US$701 thousand (30 June 2020:
US$146 thousand; 31 December 2020: US$353 thousand);
c Purchases of spare parts from OJSC Uzhgorodsky Turbogas in the
amount of US$494 thousand (30 June 2020: US$280 thousand; 31
December 2020: US$675 thousand); and
c Purchases of spare parts from Valsa GTV of US$785 thousand (30
June 2020: US$437 thousand; 31 December 2020: US$878 thousand).
d Insurance premiums of US$627 thousand (30 June 2020: US$232
thousand; 31 December 2020: US$524 thousand) paid to ASK Omega for
insurance cover in respect of mining equipment and machinery.
e Purchases of advertisement, marketing and general public
relations services from FC Vorskla of US$2,354 thousand (30 June
2020: US$2,152 thousand; 31 December 2020: US$4,552 thousand). See
page 33 in respect of a loan relationship between FC Vorskla and
another related party.
f Insurance premiums of US$1,368 thousand (30 June 2020: US$716
thousand; 31 December 2020: US$1,365 thousand) paid to ASK Omega
for workmen's insurance and other insurances ; and
f Purchase of marketing services from TV & Radio Company of
US$114 thousand (30 June 2020: US$115 thousand; 31 December 2020:
US$237 thousand).
Associated companies
e Purchases of logistics services in the amount of US$8,860
thousand (30 June 2020: US$9,435 thousand; 31 December 2020:
US$19,073 thousand) relating to port operations, including port
charges, handling costs, agent commissions and storage costs.
Other related parties
f Legal and administrative services in the amount of US$218
thousand (30 June 2020: US$187 thousand; 31 December 2020: US$471
thousand) provided by Kuoni Attorneys at law Ltd., which is
controlled by a former member of the Board of Directors of Ferrexpo
plc who resigned in November 2016, but still acts as member of the
Board of Directors of one of the subsidiaries of the Group and
received Directors' fee of US$50 thousand (30 June 2020: US$50
thousand; 31 December 2020: US$100 thousand).
Purchases of property, plant, equipment and investments
The table below details the transactions of a capital nature,
which were undertaken between Group companies and entities under
common control, associated companies and other related parties
during the periods presented.
6 months ended 30.06.21 (unaudited) 6 months ended 30.06.20 Year ended 31.12.20 (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
in the
ordinary
course of
business 135 - - 270 - - 2,247 - -
----------- --------- ------------ ------------ --------- -------- ------------ --------- -------- ----------
Total
purchases
of
property,
plant and
equipment 135 - - 270 - - 2,247 - -
----------- --------- ------------ ------------ --------- -------- ------------ --------- -------- ----------
During the period ended 30 June 2021, the Group purchased major
spare parts and equipment from OJSC Berdichev Machine-Building
Plant Progress totalling US$86 thousand (30 June 2020: US$195
thousand; 31 December 2020: US$1,719 thousand) in respect of its
regular sustaining capital expenditure programme and construction
supervision services in respect of the construction of the
concentrate stockyard. The Group also procured equipment from CJSC
Kyiv Shipbuilding and Ship Repair Plant ("KSRSSZ") totalling US$32
thousand (31 December 2020: US$510 thousand; 30 June 2020: US$62
thousand) for several ongoing major projects, including the
construction of the concentrate stockyard, the upgrade of
beneficiation sections and the refurbishment of the pellet loading
area.
The FPM Charity Fund owns 75% of the Sport & Recreation
Centre ("SRC") in Horishni Plavni and made contributions totalling
US$65 thousand during the period ended 30 June 2021 (30 June 2020:
US$56 thousand; 31 December 2020: US$115 thousand) for the
construction and maintenance of the building, including costs
related to electricity, gas and water consumption. The remaining
stake of 25% is owned by JSC F&C Realty, which is under the
control of Kostyantin Zhevago.
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 30.06.21 (unaudited) Year ended 31.12.20 (audited) 6 months ended 30.06.20
(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
Prepayments
for
property,
plant and
equipment
(f) 358 - - 133 - - 1,187 - -
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
Total
non-current
assets 358 - - 133 - - 1,187 - -
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
Trade and
other
receivables
(g) 106 4,335 1 96 4,473 1 70 3,322 1
Prepayments
and other
current
assets (h) 787 - - 1,390 - - 1,104 - -
Total
current
assets 893 4,335 1 1,486 2,472 1 1,174 3,322 1
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
Trade and
other
payables
(i) 766 294 - 462 2 86 594 662 -
Accrued and
contract
liabilities 66 - - 71 - - 83 - -
Total
current
liabilities 832 294 - 533 2 86 677 662 -
------------- --------- ------------ ------------ --------- ------- ---------- --------- ------- ------------
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
f Prepayments for property, plant and equipment totalling US$345
thousand (31 December 2020: nil; 30 June 2020: US$1,187 thousand)
were made to OJSC Berdichev Machine-Building Plant Progress.
h Prepayments and other current assets totaling US$264 thousand
to ASK Omega for insurance premiums (31 December 2020: US$1,053
thousand; 30 June 2020: US$451 thousand);
h Prepayments and other current assets totaling US$281 thousand
to KSRSSZ for purchase of materials and spare parts (31 December
2020: US$162 thousand; 30 June 2020: US$44 thousand).
h No prepayments and other current assets made to FC Vorskla for
advertisement, marketing and general public relations services (31
December 2020: nil; 30 June 2020: US$213 thousand); and
i Trade and other payables of US$158 thousand (31 December 2020:
US$195 thousand; 30 June 2020: US$200 thousand) related to the
purchase of compressed air, oxygen and metal scrap from Kislorod
PCC; and
i Trade and other payables of US$351 thousand (31 December 2020:
US$191 thousand; 30 June 2020: US$282 thousand) related to the
purchase of spare parts from OJSC Berdichev Machine-Building Plant
Progress.
Associated companies
g Trade and other receivables of US$4,335 thousand (31 December
2020: US$4,473 thousand; 30 June 2020: US$3,322 thousand) related
to dividend receivables from TIS Ruda LLC.
i Trade and other payables included US$294 thousand (31 December
2020: US$2 thousand; 30 June 2020: US$662 thousand) related to
purchases of logistics services from TIS Ruda LLC.
Note 20: Events after the reporting period
No material adjusting or non-adjusting items have occurred
subsequent to the period-end other than the proposed dividend
disclosed in Note 9 Earnings per share and dividends paid and
proposed.
Alternative Performance Measures ("APM")
When assessing and discussing the Group's reported financial
performance, financial position and cash flows, management may make
reference to Alternative Performance Measures ("APMs") that are not
defined or specified under International Financial Reporting
Standards ("IFRSs").
APMs are not uniformly defined by all companies, including those
in the Group's industry. Accordingly, the APMs used by the Group
may not be comparable with similarly titled measures and
disclosures made by other companies. APMs should be considered in
addition to, and not as a substitute for or as superior to,
measures of financial performance, financial position or cash flows
reported in accordance with IFRSs.
Ferrexpo makes reference to the following APMs in the 2021 Half
Year Results.
C1 cash cost of production
Definition : Non-financial measure, which represents the cash
costs of production of iron pellets from own ore divided by
production volume of own production ore. Non-C1 cost components
include non-cash costs such as depreciation, inventory movements
and costs of purchased ore and concentrate. The Group presents the
C1 cash cost of production because it believes it is a useful
operational measure of its cost competitiveness compared to its
peer group.
US$000 As at 30.06.21 As at 30.06.20 As at 31.12.20
(unaudited) (unaudited) (audited)
C1 cash costs 259,121 228,755 466,013
Non-C1 cost components 34,511 62,619 116,783
---------------------------------------------------------- --------------- --------------- ---------------
Inventories recognised as an expense upon sale of goods 293,632 291,374 582,796
---------------------------------------------------------- --------------- --------------- ---------------
Own ore produced (tonnes) 5,562,870 5,598,000 11,217,926
C1 cash cost per tonne (US$) 46.6 40.9 41.5
---------------------------------------------------------- --------------- --------------- ---------------
Underlying EBITDA
Definition : The Group calculates the underlying EBITDA as
profit before tax and finance plus depreciation and amortisation,
net gains and losses from disposal of investments and property,
plant and equipment, share-based payments and write-offs and
impairment losses. The underlying EBITDA is presented because it is
a useful measure for evaluating the Group's ability to generate
cash and its operating performance. See Note 3 Segment information
for further details.
Closest equivalent IFRSs measure : Profit before tax and
finance.
Rationale for adjustment : The Group presents the underlying
EBITDA as it is a useful measure for evaluating its ability to
generate cash and its operating performance. Also it aids
comparability across peer groups as it is a measurement that is
often used.
Reconciliation to closest IFRSs equivalent :
US$000 Notes As at 30.06.21 As at 30.06.20 As at 31.12.20
(unaudited) (unaudited) (audited)
Underlying EBITDA 868,364 352,442 858,552
Losses on disposal and liquidation of property, plant and
equipment 5 (2,975) (877) (1,303)
Share-based payments (329) (399) (291)
Write-backs/(write-offs) 5 (3,060) 71 (192)
Depreciation and amortisation 5 (55,427) (51,374) (102,475)
----------------------------------------------------------- ------ --------------- --------------- ---------------
Profit before tax and finance 806,573 299,863 754,291
----------------------------------------------------------- ------ --------------- --------------- ---------------
Diluted earnings per share
Definition : Earnings per share calculated using the diluted
number of Ordinary Shares outstanding.
Closest equivalent IFRSs measure: Diluted earnings per
share.
Rationale for adjustment : Excludes the impact of special items
that can mask underlying changes in performance.
Reconciliation to closest IFRSs equivalent :
US$000 Year ended 31.12.20
6 months ended 30.06.2021 (unaudited) 6 months ended 30.06.2020 (unaudited) (audited)
Earnings for
the
period/year
attributable
to equity
shareholders
- per share
in US cents
Basic 112.5 42.6 108.1
Diluted 112.3 42.4 107.9
-------------------- -------------------------------------- -------------------------------------- --------------------
Net cash/(debt) to underlying EBITDA
Definition : Net cash/(debt) divided by the underlying EBITDA
(for the last 12 months):
As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Net cash/(debt) (US$000) 212,508 3,528 (174,262)
Underlying EBITDA (US$000) for the last 12 months 1,374,474 858,552 566,212
---------------------------------------------------- --------------- --------------- ---------------
Net cash/(debt) to underlying EBITDA N/A N/A 0.31x
---------------------------------------------------- --------------- --------------- ---------------
Rationale for adjustment : The ratio is a measurement of the
underlying EBITDA Group's leverage, calculated as a company's
interest-bearing liabilities minus cash or cash equivalents,
divided by its underlying EBITDA.
Reconciliation to net cash/(debt) :
US$000 Notes As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Cash and cash equivalents 14 234,669 270,006 169,226
Interest-bearing loans and borrowings - current 15 (19,475) (134,349) (138,538)
Interest-bearing loans and borrowings - non-current 15 (2,686) (132,129) (204,950)
----------------------------------------------------- ------ --------------- --------------- ---------------
Net cash/(debt) 212,508 3,528 (174,262)
----------------------------------------------------- ------ --------------- --------------- ---------------
For a reconciliation of underlying EBITDA to profit before tax
and finance see the previous page.
Capital investment
Definition: Capital expenditure for the purchase of property,
plant and equipment and intangible assets.
Closest equivalent IFRSs measure: Purchase of property, plant
and equipment and intangible assets (net cash flows used in
investing activities).
Rationale for adjustment : The Group presents the capital
investment as it is a useful measure for evaluating the degree of
capital invested in its business operations.
Reconciliation to closest IFRSs equivalent :
US$000 Notes As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Purchase of property, plant and equipment and intangible
assets
(net cash flows used in investing activities) 10 142,451 205,779 95,989
----------------------------------------------------------- ------ --------------- --------------- ---------------
Total liquidity
Definition : Sum of cash and cash equivalents and available
committed facilities and uncommitted facilities. Committed
facilities include the Group's syndicated revolving pre-export
finance facility while uncommitted facilities include trade finance
facilities secured against receivable balances related to these
specific trades. See Note 15 Interest-bearing loans and borrowings
for further information.
Closest equivalent IFRSs measure: Cash and cash equivalents.
Rationale for adjustment: The Group presents total liquidity as
it is a useful measure for evaluating its ability to meet
short-term business requirements.
Reconciliation to closest IFRSs equivalent:
US$000 Notes As at 30.06.21 As at 31.12.20 As at 30.06.20
(unaudited) (audited) (unaudited)
Cash and cash equivalents 14 234,669 270,006 169,226
Available committed facilities - 10,000 -
Uncommitted facilities 140,000 80,000 40,000
-------------------------------- ------ --------------- --------------- ---------------
Total liquidity 374,669 360,006 209,226
-------------------------------- ------ --------------- --------------- ---------------
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
Bank F&C Bank Finance & Credit
Belanovo or Bilanivske An iron ore deposit located immediately to the north
of Yeristovo
Benchmark Price International seaborne traded iron ore pricing mechanism
understood to be offered to the market by major iron
ore producers under long-term contracts
Beneficiation Process A number of processes whereby the mineral is extracted
from the crude ore
BIP Business Improvement Programme, a programme of projects
to increase production output and efficiency at FPM
Blast furnace pellets Used in Basic Oxygen Furnace "BOF" steelmaking and
constitute about 70% of the traded pellet market
Board The Board of Directors of the Company
Bt Billion tonnes
C1 costs Represents 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
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
Capex Capital expenditure for the purchase of property,
plant and equipment and intangible assets
Central Europe This segmentation for the Group's sales includes
Austria, Czech Republic, Hungary, Romania, Serbia
and Slovakia
CFR Delivery including cost and freight
Charity Donations made to a charity called Blooming Land
which operates through three sub-funds
CHF Swiss Franc, the currency of Switzerland
China and South East This segmentation for the Group's sales includes
Asia China and Vietnam
CID Committee of Independent Directors
CIF Delivery including cost, insurance and freight
CIS The Commonwealth of Independent States
Code The UK Corporate Governance Code
CODM The Executive Committee is considered to be the Group's
Chief Operating Decision-Maker
Company Ferrexpo plc, a public company incorporated in England
and Wales with limited liability
Controlling Shareholder 50.3% of Ferrexpo plc shares are held by Fevamotinico
S.a.r.l., Fevamotinico is wholly owned by The Minco
Trust. The Minco Trust is a discretionary trust that
has three beneficiaries, consisting of Mr Zhevago
and two
other members of his family. Mr Zhevago is considered
a controlling shareholder of Ferrexpo plc
CPI Consumer Price Index
CRU The CRU Group provides market analysis and consulting
advice in the global mining industry
(see www.crugroup.com)
CSR Corporate Social Responsibility
DAP Delivery at place
DFS Detailed feasibility study
Directors The Directors of the Company
Direct reduction Used in Direct Reduction Iron ("DRI") production.
"DR" pellets In regions where natural gas is cheap and plentiful,
such as the Middle East, DR pellets are mixed with
natural gas to produce DRI, an alternative source
of metallic to scrap in
Electric Arc Furnace ("EAF") steelmaking. DR pellets
are a niche, higher quality product with Fe content
greater than 67% and a combined level of silica and
alumina of <2%
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 LLC Ferrexpo Belanovo Mining, 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 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 PJSC Ferrexpo
Poltava Mining, a company incorporated under the
laws of Ukraine
FRMCC Finance, Risk Management and Compliance Committee,
a sub-committee of the Executive Committee
FTSE 250 Financial Times Stock Exchange top 250 companies
FYM LLC Ferrexpo Yeristovo Mining, a company incorporated
under the laws of Ukraine
GPL Gorishne-Plavninske-Lavrykivske, the iron ore deposit
being mined by FPM
Group The Company and its subsidiaries
HSE Health, safety and environment
HSEC Committee The Health, Safety, Environment and Community Relations
Committee
IAS International Accounting Standards, as adopted for
use in the United Kingdom
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards, as adopted
for use in the United Kingdom
IFRIC interpretations IFRS interpretations, as issued by the IFRS Interpretations
Committee
IPO Initial public offering
Iron ore concentrate Product of the beneficiation process with enriched
iron content
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
Iron ore sinter fines Fine iron ore screened to -6.3mm
IRR Internal Rate of Return
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 (in Ukraine)
LSE London Stock Exchange
LTI Lost time injury
LTIFR Lost-Time Injury Frequency Rate
LTIP Long-Term Incentive Plan
m3 Cubic metre
Mm Millimetre
Mt Million tonnes
Mtpa Million tonnes per annum
NBU National Bank of Ukraine
Nominations Committee The Nominations Committee of the Company's Board
Non-executive Directors Non-executive Directors of the Company
NOPAT Net operating profit after tax
North America This segmentation for the Group's sales includes
the United States
North East Asia This segmentation for the Group's sales includes
Japan and Korea
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
PPE Personal protective equipment
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
PXF Pre-export finance
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
Resources Concentration or occurrence of material of intrinsic
economic interest in or on the earth's crust in such
form,
quality and quantity that there are reasonable prospects
for eventual economic extraction
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
Sub-funds Three funds that operate under the Blooming Land
charity
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
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
Turkey, Middle East This segmentation for the Group's sales includes
a. North Africa Algeria, the United Arab Emirates and Turkey
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
Underlying EBITDA The Group calculates the Underlying EBITDA as profit
before tax and finance plus depreciation and amortisation,
net gains and losses from disposal of investments
and property, plant and equipment, share based payments
and write-offs and impairment losses
US$/t US Dollars per tonne
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
VAT Value Added Tax
WAFV Weighted average fair value
Western Europe This segmentation for the Group's sales includes
Germany and Italy
WMS Wet magnetic separation
Yeristovo or Yerystivske The deposit being developed by FYM
[1] Five-year trailing full-year average LTIFR for 2016-2020 is 0.98.
[2] Source: Government of Western Australia, http://www.dmp.wa.gov.au/ , accessed July 2021.
[3] Source: Baltic Exchange.
[4] Relates to Scope 1 and Scope 2 emissions only. 6% reduction
against FY2020 level of 113kg CO(2) e per tonne production.
[5] CRU Iron Ore Market Outlook, July 2021
[6] CRU Iron Ore Market Outlook, July 2021.
[7] Source: Baltic Exchange.
[8] Management estimate.
[9] Management estimates.
[10] CRU Iron Ore Market Outlook, July 2021.
[11] By comparison, the global pe llet export trade amounted to
129 million tonnes in 2020 (management estimate).
[12] Source: World Steel Association, release: June 2021 crude steel production
[13] World Steel Association, Short Range Outlook (April 2021)
[14] Source : Baltic Exchange.
[15] Please note that the LTIFR of 0.77 as reported in the 2020
Interim Results reflected the 12 month trailing average rate,
whereas the report should have reported a rate of 0.87, reflecting
the safety rate for the 6-month period to June 2020.
[16] Please note figure corrected from 67% as shown in 1H 2020 Interim Results release.
[17] www.CMEGroup.com , accessed 28 July 2021.
[18] Source: Platts.
[19] Seaborne freight rates, such as C3, are published by the
Baltic Exchange and represent the cost for ocean transportation of
iron ore from the Brazilian port of Tubarão (where the largest
seaborne suppliers of pellets are based) to Qingdao, China (the
largest steel producing country in the world). As Ferrexpo sells to
international customers, the price it receives includes reference
to C3 or other global benchmarks.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR USSVRARUWRRR
(END) Dow Jones Newswires
August 04, 2021 02:00 ET (06:00 GMT)
Ferrexpo (LSE:FXPO)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Ferrexpo (LSE:FXPO)
Historical Stock Chart
Von Jul 2023 bis Jul 2024