FER R EXPO 2 0 1 4 FU LL YEA R R ESU LTS PR ESEN TATION D I S C L - - PowerPoint PPT Presentation
FER R EXPO 2 0 1 4 FU LL YEA R R ESU LTS PR ESEN TATION D I S C L - - PowerPoint PPT Presentation
FER R EXPO 2 0 1 4 FU LL YEA R R ESU LTS PR ESEN TATION 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 or form any governmental or regulatory body without the prior written consent
D I S C L A I M E R
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This document is being supplied to you solely for your information and does not constitute or form part of any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company or any other securities, nor shall any part
- f it nor the fact of its distribution form part of or be relied on in connection with any contract or
investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. No information made available to you in connection with this document may be passed on, copied, reproduced, in whole or in part, or otherwise disseminated, directly or indirectly, to any other person. Some of the information in this document is still in draft form and is subject to verification, finalisation and change. Neither the Company nor its affiliates nor advisers are under an
- bligation to correct, update or keep current the information contained in this document or to
publicly announce the result of any revision to the statements made herein except where they would be required to do so under applicable law. No reliance may be placed for any purpose whatsoever on the information contained in this
- document. No representation or warranty, expressed or implied, is given by or on 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 in this document and no liability whatsoever is accepted by the Company or any of the Company’s members, directors,
- fficers or employees nor any other person for any loss howsoever arising, directly or indirectly,
from any use of such information or opinions otherwise arising in connection therewith. This presentation and its contents are confidential. By reviewing and / or attending this presentation you are deemed to accept that you are under a duty of confidentiality in 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 with any of the directors
- r employees of the Company or its subsidiaries nor with any of their customers or suppliers, or
any governmental or regulatory body without the prior written consent of the Company. Certain statements, beliefs and opinions in this document and any materials distributed in connection with this document are forward-looking. The statements typically contain words such as “anticipate”, “assume”, “believe”, “estimate”, “expect”, “plan”, “intend” and words of similar
- substance. By their nature, forward-looking statements involve a number of risks, uncertainties
and assumptions that could actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risk, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Statements contained in the 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 statement in this document is intended to be a profit forecast. You should not place
reliance on forward-looking statements, which speak only as of the date of this document. You should not base any behaviour in relation to financial instruments related to the Company’s securities or any other securities and investments on information until after it is made publicly available by the Company or any of their respective advisers. 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 to market abuse under the Financial Services and Markets Act 2000.
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IN TR OD U C TION MIC H AEL ABR AH AMS C BE D L, C H AIR MAN
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2014 FIN AN C IALS R ESU LTS C H R IS MAW E , C FO
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2 0 1 4 : S T R O N G P E R F O R M A N C E
US$M (unless otherwise stated) 2014 2013 % Change Total production (kt) 11,021 10,813 2% Sales volumes (kt) 11,167 10,689 5% Average CFR 62% fines price (US$/t) 97 135 (28%) Revenue 1,388 1,581 (12%) C1 cash cost (US$/t) 46 60 (23%) Operating foreign exchange gains 76 1 n/a EBITDA 496 506 (2%) Impairments (84) (1) n/a Profit for the period 184 264 (30%) Income tax % 28% 14% 100% Diluted eps 30.39 44.69 (31%) Net cash flow from operating activities 288 233 24% CAPEX 235 278 (15%) Dividend 13.2 13.2
- Closing net debt
678 639 6% Net assets 718 1,735 (59%) Benchmark iron ore price down 47% in 2014 from US$135/t to US$72/t, however Strong performance highlights strength of business model
- Higher pellet premiums
- Improved pricing terms
- Increased production volumes and quality
- Improved efficiency
- Lower costs (currency effects)
- Lower freight – from December
Dividend retained in line with 2013 Capex to complete QUP & CUP; 12 MTPA capacity reached FYM concentrator on hold Net debt increased modestly by US$39M
- US$20M increase in VAT (no repayment in Nov & Dec), normal repayments in Jan & Feb 2015
1,581 430 164 62 64 1,388 11 200 400 600 800 1000 1200 1400 1600 2013 revenue Spot 62% Fe fines Pellet premium & price realisation Volume, own
- re
Freight &
- ther
2014 revenue
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506 496 164 23 45 104 43 76 430 35 100 200 300 400 500 600 2013 EBITDA Spot 62% Fe fines Pellet premium & price realisation Volume,
- wn ore
C1 / constant currency Other costs / constant currency C1 / forex effect Other costs / forex effect Forex non- cash gain 2014 EBITDA
REVENUE 2014 VS. 2013 (US$M) EBITDA 2014 VS. 2013 (US$M)
H I G H E R V O L U M E S , I N D E X B A S E D P R I C I N G , I M P R O V E D P E L L E T P R E M I U M S A N D L O W E R C O S T S S U P P O RT E D 2 0 1 4 E B I T D A
L O W E R C O S T S
C1 CASH US$ PER TONNE
60 46 36 30 35 40 45 50 55 60 2013 2014 Jan/Feb 2015
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25% Electricity 15% Gas 13% Fuel 10% Materials 10% Personnel 7% Grinding bodies 7% Maintenance 6% Spares 4% Royalites 3% Explosives
BREAKDOWN OF C1 CASH COST
Average 2013 Average 2014 Average 2015 as of 28 Feb 2015 Current spot (approximately) UAH vs. US$ 8.0 11.9 20.3 23.0
C1 cost US$14 per tonne lower
- Largely driven by UAH devaluation
- Positive FYM contribution
- 15% decline in gas prices
- Improved consumption norms
14% increase in electricity tariffs Increased royalty payments in UAH
- 23%
45% = FPP1 52% = FPP1 81% = FPP1
1Ferrexpo Premium Pellets, 65% Fe
US$ per tonne
- 22%
US$2 BILLION CAPEX PROGRAMME SINCE IPO DELIVERING BENEFITS TO CONSUMPTION NORMS
Electricity consumption (kWh/t pellets) Gas (m3/t pellets) Grinding bodies (t/th.t pellets) 8
15.0 15.5 16.0 16.5 17.0 17.5 18.0 18.5 2007 2008 2009 2010 2011 2012 2013 2014 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 2007 2008 2009 2010 2011 2012 2013 2014
Project (US$M) 2014 2013 Status Capacity upgrade project 37 20 Complete Sustaining capex (incl. logistics) 43 67 Total sustaining capex 80 87 Quality upgrade project 44 47 Complete 1Q 2015 FYM 74 100 Complete Logistics 18 20 Complete Other projects 19 24 Complete Total development capex 155 191 Total capex 235 278
MAJOR CAPEX PROGRAMMES DELIVERED
CUP: modernisation complete QUP: final of 3 floatation units commissioned in 1Q 15 (c. US$3M) FYM: mining infrastructure complete November 2014 run rate 11.5 MTPA of pellets January 2015 1 MT pellet production, February 2015 all 65% pellet output
M A J O R C A P E X P R O G R A M M E S C O M P L E T E D – 1 2 M T PA C A PA C I T Y A C H I E V E D
140 150 160 170 180 190 200 2007 2008 2009 2010 2011 2012 2013 2014
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C A S H F L O W S 2 0 1 4 V S . 2 0 1 3
US$M (unless otherwise stated) 2014 2013 % Change EBITDA 496 506 (2%) Non cash operating forex gain (76) (1) n/a Interest, tax & working capital (132) (272) (51%) Net cash flows from operating activities 288 233 24% Sustaining capex (80) (87) (8%) Free cash flow 208 146 42% Development capex (155) (191) (21%) Dividend (77) (78)
- Acquisition
- (82)
n/a Other (15) (10) n/a Change in net debt (39) (215) (82%) Net debt at period end (678) (639) (6%) Net debt to EBITDA (x) 1.4 1.3
- Cash balance at period end
627 390 60% EBITDA flat year on year Working capital reflects VAT refunds Sustaining capex in-line with historic run rate 42% increase in free cash flow Growth projects complete Drawdown of PXF facility in 2H 2014 increased liquidity Strong credit metrics maintained, net debt to EBITDA 1.4x
1US$54M bond prepayment as announced on 23 February 2015
L I Q U I D I T Y A N D F I N A N C I N G 2 0 1 4 V S . 2 0 1 3
10 US$M (unless otherwise stated) Net debt Gross debt Opening net debt - 1 January 2014 (639) (1,029) Movement in net debt (39) Debt facilities repaid 119 New debt facilities (393) Closing net debt – 31 December 2014 (678) (1,305)
627 54 573 300 273
100 200 300 400 500 600 700 Cash 31/12/14 Paid to bondholders 24.2.15 Proforma cash 2015/1Q 2016 bank amortisation Proforma cash
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PROFORMA CASH & CORE NET DEBT – POST BOND EXCHANGE
100 200 300 400 500 600 700 2015/ 1Q 2016 Apr-16 Rest 2016 2017 2018 2019 Bank Bond
Debt maturity flat Net debt increased by US$39M – losses on VAT Main debt maturity US$286M April 2016 Eurobond Diversified sources of funding (bond, PXF, ECA/leasing)
US$286M BANK US$M US$M
PRO FORMA GROSS DEBT MATURITY PROFILE AT 31 DECEMBER 2014
C O N C L U S I O N T O F I N A N C I A L R E V I E W
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Strong financial performance
Market weakness mitigated by:
- Higher volume & quality
- Improved pellet premiums
- Index based pricing
- Improved efficiency
- Currency devaluation
Growth projects successfully completed Net debt reflects completion of projects Maintained healthy credit metrics Debt repayment profile well matched to cash flow
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BU SIN ESS U PD ATE KOSTYAN TIN ZH EVAGO, C EO
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2 0 1 4 : D E C L I N E I N I R O N O R E F I N E S P R I C E S B U T P E L L E T P R E M I U M S I N C R E A S E
INCREASE IN PRICE GAP BETWEEN FINES & PELLETS IN 2014
Exports of Iron Ore (MT) 2000 2014 Increase (MT) Proportion of increase Pellets 106 144 38 4% Lump 93 207 144 12% Sinter fines 265 1,016 751 78% Pellet feed 18 73 55 6% Total 482 1,440 958 Avg annual world GDP growth (2000 to 2014) 3.7% Pellet exports (MT) 2014 Vale 26.8 Samarco 23.2 LKAB 21.3 Metalloinvest 13.9 Ferrexpo 11.0 Rio Tinto (IOC) 8.3 Cliffs 6.0 Total 143.7 % of top 7 exporters 74%
Costs normalised to basis of 62% sinter fines CFR Qingdao1
CRU PELLET COST CURVE ANALYSIS, average 2014
50 100 150 200 250 300
50 100 150 200 250 300
Cumulative production, M tonnes, 2014 Source: CRU Iron Ore Cost Model 2014 Samarco Vale (average) Ferrexpo LKAB (average) Cliffs (average)
US$ per tonne
1These costs curves are based on CRU’s “business costs”. This includes site operating costs of the mining operation, the realisation costs associated with transporting products to market,
sales and marketing expenses, the financing of inventories, goods in transit and receivables, as well as any discount or premium associated with product quality compared with the benchmark product. The concept of business costs permits a more direct comparison among different products produced in different locations. 40 60 80 100 120 140 160 180
65% Fe fines FOB 65% Fe pellets FOB
Source: Platts, Metal Bulletin
US$ per tonne
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2007 2014
Mines FPM FPM & FYM Pellet output 9MT 11MT (31% from FYM) Logistics 110 rail cars Acquired berth at TIS Ruda port in May 2007 (5MTPA capacity) 0 capes loaded No barging operations 2,200 rail cars Shipped a record 6.3MT through port 22 capes loaded 139 strong barging fleet Customer diversification 77% to Traditional markets (of which 25% in Ukraine) 2% to Natural markets 21% to Growth markets 49% to Traditional markets (zero Ukraine) 16% to Natural markets 35% to Growth markets Pricing Negotiated 100% index based Revenue US$698M US$1,388M C1 cost US$32 per tonne US$46 per tonne EBITDA US$246M US$496M # of employees 10,112 9,658 Modernisation of facilities Average monthly pellet output c.750kt 12MTPA capacity in place, 1MT pellet output achieved in January 2015 Processing capacity 41% of production FPP One floatation unit in operation 53% of production FPP, ramping up Capacity in place to produce all FPP (65% Fe) – 100% FPP output in February 2015
S I G N I F I C A N T P R O G R E S S S I N C E I P O : R E V E N U E & E B I T D A D O U B L E D , A S S E T B A S E W E L L I N V E S T E D
US$2 BILLION RE-INVESTED INTO THE BUSINESS SINCE IPO IN 2007
F E R R E X P O W E L L P O S I T I O N E D T O C O N T I N U E T O G E N E R AT E P O S I T I V E C A S H F L O W
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1For indicative purposes only does not represent Ferrexpo’s received price
Stable pellet premiums C3 freight 2015 forward curve c. US$14 per tonne, improving net back price Higher production Improvement in pellet quality Lower costs due to higher output & devaluation Benefit from lower oil price – Brent average YTD US$53 per barrel (2014 avg US$99 per barrel Lower average iron ore benchmark prices Ukrainian inflation (railway tariffs, electricity, wages)
BEHAVIOUR OF MARGIN & COSTS THROUGH THE CYCLE:
50 100 150 200 250 2009 2010 2011 2012 2013 2014
US$ per tonne
CRU historic price curve for 65% Fe FOB Tubarao pellets1
Ferrexpo FOB costs
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UKRAINE
U KR AIN E
Uncertain operating environment but progress has been made:
- Introduction of flexible exchange rate
- VAT refunds reintroduced
But still some difficulties:
- Prepaid corporate profit tax
- Inflation
- Weak Ukrainian banking sector
International support
- IMF US$17.5 billion loan package announced in February 2015
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S T R AT E G Y I N T H E C U R R E N T E N V I R O N M E N T
Increase production & quality Improve operating costs, efficiency and competitiveness of the operations Continue to finalise new long term contracts with premium steel mills Refinance prudently Target prudent balance sheet ratios - net debt levels commensurate with forecast long term iron ore prices Invest where adequate returns can be made and financial resources are available Pay dividends commensurate with earnings and balance sheet capacity
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IN LINE WITH OUR CASH GENERATION ABILITY, OUR PRIORITIES ARE TO:
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APPENDIX
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A W O R L D C L A S S P E L L E T P R O D U C E R
LONG LIFE RESOURCE ESTABLISHED LOGISTICS CAPABILITY PREMIUM GLOBAL CUSTOMER PORTFOLIO
BROVARIKOVSKOYE 4.0BT MANUILOVSKOYE 3.4BT KHARCHENKOVSKOYE 2.8BT VASILIEVSKOYE 1.4BT ZARUDENSKOYE 1.5BT GALESCHINSKOYE 0.2BT BELANOVSKOYE 1.7BT MINE LIFE – XX YEARS YERISTOVSKOYE 1.2BT MINE LIFE – 23 YEARS
13.1 6.7
FSU SOVIET CLASSIFIED RESOURCES JORC CLASSIFIED RESOURCES
GORISHNE-PLAVNINSKOYE & LAVRIKOVSKOYE 3.5BT MINE LIFE – 25 YEARS
PRODUCTION DEVELOPMENT LICENCE MAINTENANCE
EASTERN & CENTRAL EUROPE CHINA NORTH EAST ASIA WESTERN EUROPE TURKEY, MIDDLE EAST & INDIA
25% 8% 10% 49% 8%
105 278 86 167 380 430 278 232 50 100 150 200 250 300 350 400 450 2007 2008 2009 2010 2011 2012 2013 2014
US$2BN CAPITAL INVESTMENT SINCE IPO
US$M