2019 Full Year Results Presentation March 2020
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 Corporate Governance 2
F O C U S O N C O R P O R AT E G O V E R N A N C E Corporate Governance Independent Board Executive Director – Comply with UK Corporate governance code – Related party transactions – strict procedures, systems & controls in place – Board composed of a majority of Independent Christopher Mawe Non-Executive Directors Acting Chief Executive Officer Non-Executive Directors Steve Lucas Vitalii Lisovenko Fiona MacAulay Independent Senior Independent I ndependent Non-executive Chairman Non-Executive Director Non-Executive Director Graeme Dacomb Lucio Genovese Kostyantin Zhevago Independent Non-Executive Director Non-Executive Director Non-Executive Director 10+ years listed on the Non-Independent LSE (since 2007) 3
Roman Palyvoda, Acting CFO 2019 Financial Performance 4
S T R O N G P E R F O R M A N C E W I T H N E T C A S H F L O W F R O M O P E R AT I N G A C T I V I T I E S U P 6 0 % Summary Financials Operations – Production of 65% Fe pellets from own ore up 3% $M (unless otherwise stated) 2019 2018 Change – 65% Fe pellets 96% of total production (2018: 94%) Pellet production from own ore (kt) 10,519 10,506 +0.1% – Sales volumes up 1% Pellet sales volumes (kt) 10,312 10,227 +0.8% Market Avg CFR 62% fines price ($/t) 93 69 +35% – All high grade pellets priced off 65% Fe index (or equivalent) Avg CFR 65% fines price ($/t) – Pellet premiums lower in 4Q 2020 104 90 +16% Avg C1 cost ($/t) EBITDA +17% 47.8 43.3 +10% – 17% increase in average received price Revenue 1,507 1,274 +18% – Partially offset by higher C1 & G&A costs EBITDA 586 503 +17% – Non-cash operating forex loss of $47M (2018: $5M 2018) EBITDA margin 39% 39% - Net operating cash flow +62% Profit after tax 403 335 +20% – Higher working capital – pellet stocks 1MT Diluted earnings per share (cents) 68.4 56.7 +21% Capital investment +83% Net cash flow from operating activities 473 292 +62% – Reflects modernisation, concentrator expansion programme to 12MTPA, Capital investment rail car purchases 247 135 +83% Cash Balance sheet 131 63 +108% Net debt – Net debt to EBTIDA 0.48x 281 339 -17% Net debt to EBITDA (x) 0.48 0.67 -28% 5
1 7 % I N C R E A S E I N 2 0 1 9 E B I T D A V S . 2 0 1 8 EBITDA 2019 vs. 2018 $ million 19 73 10 47 1 12 11 246 47 503 633 586 FY 2018 Platts 62% Fe Average pellet C3 freight Sales volumes Other realised C1 cost S&D Other EBITDA Non cash FY 2019 EBITDA index premium price effect operating forex EBITDA MARKET FOREX OPERATIONS – Production volumes from own ore in line with 2018 Increase in – 3% increase in production volumes of 65% Fe pellets Increase in fines price received price Sales volumes UAH appreciation vs. $ – Final pellet line refurbishment in 2019 $246M 17% +1% 14% from 1/1/2019 – Costs impacted by local inflation (4%) & strong UAH to 31/12/2019 – Increase in pellet stocks of c.218kt Note: other realised price effect is a result of a variety of reference periods used in sales price calculations. This had a positive effect in 2019. 6
C 1 C O S T I N C R E A S E D D U E T O 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 & H I G H E R M A I N T E N A N C E C O S T S Average C1 cost 2019 vs. 2018 $ per tonne 2.0 2.5 47.81 43.27 FY 2018 UA inflation & UAH Repair & maintenance Commodity inputs Consumption norms FY 2019 appreciation Costs reflect: – Local inflation of 4% – UAH appreciated 14% vs. $ from 1.1.2019 to 31.12.2019 – Higher fleet repairs – Costs subject to local currency, local inflation and commodity prices – From 2Q 2020, royalties due to increase by c. $1 per tonne CAT 6060 hydraulic mining shovel 7
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 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 Cash flow 2019 vs. 2018 EBITDA – Higher iron ore fines prices partially offset by lower pellet premiums $M (unless otherwise stated) 2019 2018 Change & cost inflation EBITDA +17% 586 503 Working capital reflects Working capital movements -28 -76 -63% – Higher pellet closing stocks of c.218kt Working capital – stockpile ore -2 -40 -95% – Higher trade receivables due to higher pricing & strong sales in Dec 2019 Interest paid -34 -43 -21% – Minimal increase in ore stocks Tax paid -84 -44 +91% Tax Other (incl. non-cash operating FX) 35 -8 n/a – Higher profits drove 91% increase in taxes paid in 2019 to $84M Net cash flow from operating activities +62% 473 292 Increased investment Capex -247 -135 +83% – Concentrate expansion programme (2019: $34M) Dividend paid -155 -97 +60% – Construction of new press filtration plant commenced (2019: $22M) Other -1 - - – Pelletizer drying upgrade (2019: $3M) Net cash flow before change in borrowings – Continued rail car purchase programme (2019: $26M) 70 60 +17% – FYM investment (2019: $46M) Proceeds from new borrowings 225 214 +5% – Belanovo & other (2019: $14M) Repayment of borrowings -224 -309 -28% – Sustaining and other capex ($102M) Higher dividends Cash balance at end of period 131 63 +108% – Record dividends paid in 2019 of $155M, +60% vs. 2018 Net debt -281 -339 -17% – Board committed to dividends, will make further declarations once there is better market visibility 8
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