2019 HALF YEAR RESULTS PRESENTATION AUGUST 2019 D I S C L A I M E - PowerPoint PPT Presentation

2019 HALF YEAR RESULTS PRESENTATION AUGUST 2019

D I S C L A I M E R This document is being supplied to you solely for your information and does not constitute relation to the contents of this presentation. You agree that you will not at any time have any discussion, correspondence or contact concerning the information in this document or form part of any offer or invitation or inducement to sell or issue, or any solicitation of with any of the directors or employees of the Company or its subsidiaries nor with any of any offer to purchase or subscribe for, any shares in the Company or any other securities, their customers or suppliers, or any governmental or regulatory body without the prior nor shall any part of it nor the fact of its distribution form part of or be relied on in written consent of the Company. connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. No information made Certain statements, beliefs and opinions in this document and any materials distributed available to you in connection with this document may be passed on, copied, reproduced, in connection with this document are forward-looking. The statements typically contain in whole or in part, or otherwise disseminated, directly or indirectly, to any other person. words such as “anticipate”, “assume”, “believe”, “estimate”, “expect”, “plan”, “intend” and words of similar substance. By their nature, forward-looking statements involve a Some of the information in this document is still in draft form and is subject to number of risks, uncertainties and assumptions that could mean actual results or events verification, finalisation and change. Neither the Company nor its affiliates nor advisers differ materially from those expressed or implied by the forward-looking statements. are under an obligation to correct, update or keep current the information contained in These risk, uncertainties and assumptions could adversely affect the outcome and this document or to publicly announce the result of any revision to the statements made financial effects of the plans and events described herein. Statements contained in the herein except where they would be required to do so under applicable law. document regarding past trends or activities should not be taken as a representation or warranty (express or implied) that such trends or activities will continue in the future. No No reliance may be placed for any purpose whatsoever on the information contained in statement in this document is intended to be a profit forecast. You should not place reliance this document. No representation or warranty, expressed or implied, is given by or on on forward-looking statements, which speak only as of the date of this document. behalf of the Company or any of the Company’s directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained The information in this document may constitute non-public price sensitive information in this document and no liability whatsoever is accepted by the Company or any of the ('inside information'). You should not base any behaviour in relation to the Company's Company’s members, directors, officers or employees nor any other person for any loss securities, financial instruments related to the Company’s securities or any other howsoever arising, directly or indirectly, from any use of such information or opinions securities and investments on information until after it is made publicly available by the otherwise arising in connection therewith. Company. Any dealing or encouraging others to deal on the basis of such information may amount to insider dealing under the Criminal Justice Act 1993 and/or to market This presentation and its contents are confidential. By reviewing and / or attending this abuse under the Financial Services and Markets Act 2000. presentation you are deemed to accept that you are under a duty of confidentiality in 1

Steve Lucas Chairman 2

1H 2019 FINANCIAL PERFORMANCE CHRIS MAWE, CFO 3

S T R O N G P E R F O R M A N C E W I T H P R O F I T A F T E R TA X U P 7 8 % Summary Financials Operations $M (unless otherwise stated) 1H 19 1H 18 Change 2018 – 5% increase in output, pellet line refurbishment in 2H 2019 Pellet production (kt) 5,353 5,096 5% 10,607 – 4% increase in sales, stocks higher at period end – C1 cost of $46 per tonne reflects local inflation & strong currency Pellet sales volumes (kt) 4,990 4,798 4% 10,227 Market Avg CFR 62% fines price ($/t) 91.7 69.8 31% 71.3 – Significant supply side disruptions – Strong increase in iron ore fines pricing Avg CFR 65% fines price ($/t) 105.4 88.1 20% 90.4 – Majority of seaborne pellet priced off 65% Fe index Avg C1 cost ($/t) 46.0 41.6 11% 43.3 Net operating cash flow Revenue 787 617 28% 1,274 – Working capital reflects higher trade receivables & pellet stocks EBITDA 372 234 59% 503 Capital investment – Investment doubled: modernisation & concentrator expansion EBITDA margin 47% 38% 9ppt 39% programme Profit after tax 270 152 78% 335 Dividends Diluted earnings per share (cents) 45.8 25.8 78% 56.7 – Record 2019 interim ordinary dividend declared of 6.6 US cents (1H 2018: 3.3 US cents) Interim ordinary dividend per share (cents) 6.6 3.3 100% 23.1 – Dividend payments in 1H 2019 $78M; 2H 2019 payments $78M Net cash flow from operating activities 256 156 64% 292 Balance sheet Capital investment 114 56 104% 135 – Further deleveraging – Net debt to EBTIDA 0.44x Cash 92 82 12% 63 Net debt 282 369 -24% 339 Net debt to EBITDA 1 (x) 0.44 0.74 -41% 0.67 1 Last twelve month EBITDA $641M 4

5 9 % I N C R E A S E I N 1 H 2 0 1 9 E B I T D A V S . 1 H 2 0 1 8 EBITDA 1H 2019 vs. 1H 2018 $M 9 8 9 22 5 46 109 372 234 1H 2018 EBITDA Platts 62% Fe Conversion to 65% C3 freight Sales volumes Sales mix C1 cost Other 1H 2019 EBITDA index Fe index MARKET OPERATIONS FOREX Increase in fines – Higher production volumes Avg freight price & higher – Costs impacted by local inflation & strong UAH UAH appreciated per tonne Sales volumes quality premium – Increase in pellet stocks of c.370kt from 1/1/2019 5% +4% $155M -12% – Planned refurbishment of final pellet line in 2H 2019 to 30/6/2019 Note: other realised price effect principally included lagged pricing base on previous quarter less one month 5

C 1 C O S T R E F L E C T S L O C A L I N F L AT I O N , S T R O N G E R C U R R E N C Y, S T R I P P I N G & M A I N T E N A N C E Average C1 cost 1H 2019 vs. 1H 2018 Costs reflect: $ per tonne – Local inflation of 9%: wages, electricity tariffs 0.03 0.01 – Real UAH appreciated 13% vs. $ compared to 1H 2018 0.8 1.4 2.3 – Stripping: to support product quality & for future production growth – Repairs at an ongoing level – Lower gas prices (-10% half on half) offset by higher biofuel prices 46.0 41.6 – Lower diesel prices (-2% half on half) offset by higher bentonite prices – Costs remain subject to local currency, local inflation and commodity prices 1H 2018 UA inflation Stripping Repair & Commodity Other 1H 2019 Liberalisation of Ukraine electricity market as of 1/7/2019 & UAH maintenance inputs appreciation – Follows liberalization of Ukrainian gas market in 2015 Structure of C1 cash costs – c.30% related to electricity & gas 2% Electricity Gas 6% Fuel 23% 8% Materials 9% Personnel Spare parts 8% 8% Maintenance & repairs Grinding media 10% 10% Royalities 16% Explosives 6

H I G H E R C A S H G E N E R AT I O N F U N D E D W O R K I N G C A P I TA L , I N C R E A S E D I N V E S T M E N T, D I V I D E N D PAY M E N T S & N E T D E B T R E D U C T I O N EBITDA Cash flow 1H 2019 VS. 1H 2018 – Higher iron ore fines prices slightly offset by cost inflation $M (unless otherwise stated) 1H 19 1H 18 Change 2018 Working capital reflects EBITDA 372 234 503 59% – Higher pellet stocks of c.370kt Working capital movements -67 -11 -76 – Higher trade receivables due to higher pricing Working capital – stockpile ore -3 -24 -40 – Minimal increase in iron ore stocks Interest paid -20 -26 -43 -23% – Stockpiled ore to be processed starting 2020 Tax paid -36 -26 -44 38% Other (incl. non-cash operating FX) 10 9 -8 -11% Tax Net cash flow from operating – Based on expected Group weighted tax rate of 15% for 2019 256 156 64% 292 activities Increased investment Capex -114 -56 104% -135 – Concentrate expansion programme on track for end 2020 completion ($14M) Dividend paid -78 -74 -97 5% – Construction of new press filtration plant commenced ($8M) Other 3 3 - – Continued rail car purchase programme ($6M) Net cash flow 67 29 60 131% – Increased stripping to support future production growth ($19M) Proceeds from new borrowings 185 211 214 12% – Sustaining and other capex ($67M) Repayment of borrowings -223 -254 -309 13% Record dividends Cash balance at end of period 92 82 63 12% – 1H 2019: $78M Net debt -282 -369 -339 -24% – 4Q 2018 special dividend of $39M paid January 2019 – 2018 final special dividend of $39M paid May 2019 Note: net debt as of 30 June 2019 included a $6 million effect from the – 2H 2019: $78M first time application of IFRS16 Leases. – 2018 final ordinary dividend of $39M paid July 2019 – 2019 interim ordinary dividend of $39M paid September 2019 7