Supplying the world with QUALITY iron ore pellets for over 35 - - PowerPoint PPT Presentation
Supplying the world with QUALITY iron ore pellets for over 35 - - PowerPoint PPT Presentation
Supplying the world with QUALITY iron ore pellets for over 35 YEARS Disclaimer 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
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Introduction Michael Abrahams
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Chris Mawe, Chief Financial Officer
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2015: strong performance & continues into January & February 2016
US$M (unless otherwise stated) 2015 2014 % Change Total production (kt) 11,662 11,021 5.8% Sales volumes (kt) 11,330 11,167 1.5% Average CFR 62% fines price (US$/t) 56 97 (42%) Revenue 961 1,388 (31%) C1 cash cost (US$/t) 32 46 (30%) Operating foreign exchange gains 26 76 (66%) EBITDA 313 496 (37%) Profit for the period before special items 142 267 (47%) Income tax before special items 14% 21% (7%) Special items after tax (110) (84) 24% Diluted eps before special items 23.86 44.63 (47%) CAPEX (65) (235) (72%) Closing net debt (868) (678) 28% Cash 35 627 (94%) Net debt to EBITDA 2.78 1.37 103%
– Record operational performance
- Record production volumes
- Record output of 65% Fe pellets, c. 80% of output
- Significantly lower C1 costs
– EBITDA margin 33% - Premium product – Special items reflect:
- Bank F&C restricted cash US$146M after expected tax credit
- Disposal of Ferrous resources US$42M
– Net cash flows from operating activities US$128M:
- VAT stable
- Higher pellet and ore stocks – future marketing and operational benefits
Balance sheet and debt: – Major Investment programs completed – In compliance with all provisions in financing agreements – No final dividend – initial priority to reduce gearing levels – Currently trading above expectations
- Lower C1
- Better pricing
- Better W/C management: all overdue VAT refunded in January
- US$39M debt repaid whilst liquidity held stable (as of end February 2016)
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Stable pellet premiums, higher quality & strong cost reduction partially offset lower prices
496 313 107 19 7 125 61 17 467 48
2014 EBITDA Platts 62% Fe fines index Seaborne freight costs Quality Sales volume UAH cost reduction (net of inflation) C1 cost reduction: lower oil & efficiencies Other Operating forex gains & losses 2015 EBITDA
US$M
– Platts 62% Fe price declined 42% reducing turnover by US$467M – Compensated by US$336M of savings
- Reduced seaborne freight costs
- Increased volume and quality
- Weaker currency reducing costs
- Lower operational costs (constant currency)
– Stable pellet premiums
- Atlantic and spot pellet premiums now starting to
increase following Samarco production outage
EBITDA waterfall 2014 vs. 2015
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– Controllable costs significantly lower
- pit optimisation
- Improvements in dig & haul rates
- Increased utilisation of mining equipment &lower maintenance costs
- Lower waste movements (mine optimisation)
– Weakening local currency – Lower oil & gas – Continued reduction in 2016
- February C1 cost US$24.3 per tonne, 23% lower than full year 2015
Steadily improved competitiveness
US$2BN investment, rigorous & continual cost management since IPO have steadily increased competitiveness
Continued strong cost management
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f Ferrexpo 6 7 4 4 3 3 2 3 1 1 Samarco 2 2 1 3 4 4 4 1 2 n/a Vale 1 1 3 2 2 1 1 2 3 2 GIIC 11 11 8 11 10 10 10 10 7 3 Metalloinvest 5 9 5 8 8 8 9 7 5 4 ArcelorMittal 7 5 6 6 7 7 6 5 6 5 MetInvest 3 3 2 1 1 2 3 4 4 6 IOC 9 8 7 9 9 9 8 8 8 7 LKAB 4 6 10 5 5 5 5 6 9 8 Cliffs Natural 8 4 9 7 6 6 7 9 11 9 Grange 10 10 11 10 11 11 11 11 10 10
Cost ranking (from lowest to highest) of seaborne pellet producers
Source: CRU, February 2016 45.9
37.9 31.9 0.8 8.0 2.7 4.1
0.8
C1 2014 UAH devaluation (net of inflation) Restated 2014 Oil price effect Cost reduction initiatives Quality C1 2015
30% reduction in 2015 C1 cash cost
US$ per tonne
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Good cashflow generation in low iron
- re price environment
Movement in net debt
US$M
– US$206M generated from operations – Avg cost of debt was 5.97% (2014 avg: 4.85%), avg gross debt in 2015 US$1BN – Capex reduced to US$65M (2014: US$235M) due to completion of investment programme – returning to sustaining levels – Dividend paid in year line with 2014, no final dividend 2015 – commitment to reduce gearing – US$42M proceeds from Ferrous disposal – Net debt flat year on year before reclassification of restricted cash at Bank F&C actual net debt US$868M – Net debt reduced by US$39M in first two months of year – cash generation & working capital management
1 this excludes the US$175 million reclassification of funds held at Bank F&C as restricted. If this is taken into account Net debt as of 31 December 2015 was US$868M
678 693
206 45 65 11 32 33 78 47
Opening net debt (1 Jan 2015) Net CF before interest & tax Interest Tax Sustaining capex Project capex Dividends paid Translation & other Ferrous disposal proceeds Net debt 1
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Active management of debt maturity profile & gearing level
13 240 201 155 696 2015 2016 2017 2018 2019 Leasing ECA PXF Bond
Debt maturity profile as of 31 December 2015 Debt maturity profile as of 31 December 2014
– Successfully moved bond maturity from 2016 to 2018 & 2019 – Repaid US$240M of debt – Repaid US$154M of April 2016 bonds – Sold stake in Ferrous Resources for US$42M – Significantly reduced capital expenditure, lowered costs & managed VAT – Prudent approach to dividends – no 2015 final – Reduced 2016 & 2017 debt repayment profile to manageable levels – Ongoing process to further refinance both shorter & longer dated debt – Cash balance at year end US$35M – repaid US$39M of debt YTD whilst liquidity stable
196 201 328 186 2015 2016 2017 2018 2019 Leasing ECA PXF Bond 627 35 206 42 76 65 78 394 175 52
1.1.2015 Net CF before interest & tax Interest & tax paid Capex Ferrous proceeds Dividends paid Debt repaid Restricted cash at Bank F&C Other (incl forex effect) 31.12.2015
US$M US$M
US$M
Cash movement as of 31 December 2015
Ferrexpo is a strong business which is capable of remaining profitable & cash generative through the business cycle. We continue to develop the asset over the long term.
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Strong financial performance underpinned by: – Production
- Increased volumes
- Higher quality
- Lower costs
– Marketing
- High quality customer base brings benefits
- Outperformance of Platts index
– Finance
- Debt maturities extended in difficult period
Financial priorities in current environment remain to: – Maintain operating margins: costs; volume; quality; marketing – Reduce gearing – Continue to refinance debt as appropriate Currently trading above expectations
300 600 900 2007 2008 2009 2010 2011 2012 2013 2014 2015
EBITDA
US$M
C O N C L U S I O N F I N A N C I A L R E V I E W
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Kostyantin Zhevago, Chief Executive Officer
Reduced consumables per tonne
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Capital investment reflects strategy to increase quality & reduce costs
20 40 60 80 100 120 140 160 180 200 2007 2008 2009 2010 2011 2012 2013 2014 2015 FPM FYM Logistics & other
FPM capex, incl modernisation & quality upgrade programme total US$1.1bn
FYM capex, development of new mine & facilities, total US$595M
Logistics capex, railcars, transhipment vessel, barging, total US$312M
MINING
Diesel fuel (t/th.t pellets) 3.6 2.3
1 2 3 4 2007 2015
PROCESSING
Electricity (kWH/t pellets) 191 161
150 170 190 2007 2015
PELLETISING
Gas (m3/t pellets) 18.4 15.8
15 16 17 18 2007 2015
5.8 5.0
4.5 4.8 5.1 5.4 5.7 6.0
2007 2015
9,072 11,662 +31% 95 100 105 110 115 120 125 130 135 2,000 4,000 6,000 8,000 10,000 12,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 62% Fe 65% Fe Total Fe output normalised as of 2007
31% increase in Fe output & 29% increase in volumes Over US$2BN invested since IPO
US$M
Grinding media Kg/t pellets
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2015 shipments by product Ferrexpo’s proportion of delivered costs now in line with Brazil Sales volume by region
– Strong performance in premium markets: Western Europe +42%, North East Asia +26% (incl’s first shipment to South Korea) – Sales to China lower due to focus on premium markets – Consistent performance in Central & Eastern Europe – Ferrexpo’s freight cost as a % of total costs inline with peer group
- Ukraine’s proximity advantage compared to Brazil will be more
significant as oil prices recover
Supplier to world’s top steel mills
84% 82% 16% 18% 0% 20% 40% 60% 80% 100% Brazil Ukraine FOB Freight 49% 22% 12% 11% 6% 49% 25% 10% 8% 8%
0% 10% 20% 30% 40% 50%
Central & Eastern Europe China North East Asia Western Europe Turkey, Middle East, India
2015 2014
0% 20% 40% 60% 80% 100% Central & Eastern Europe China North East Asia Western Europe Turkey, Middle East & India % of volume Ferrexpo Basic Pellets Ferrexpo Premium Pellets
3 0.3 2.2 11.4 6.0 1 1.7 1.7 3.7 11.6 5.7 10.3
2 4 6 8 10 12 14 DR14 DR15
n/c (+5%) (-2%) (+29%) (+200%) (-82%)
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Estimated breakdown between blast furnace & DR pellets
0.5 2.1 2.3 5.5 5.8 6.7 6.8 7.1 7.4 11.7 12.1 13.7 23.9 0.2 1.4 1.1 2.4 3.6 2.8 5.5 6.6 7.6 4.7 11.0 11.6 11.3 16.5
5 10 15 20 25 30 BF14 BF15
(+45%) (+21%) (+4%) (+6%) (+57%) (-7%) (+3%) (+22%) (+107%) (+53%) (-4%) (+91%) n/c n/c n/c
Direct Reduction Blast Furnace
GIIC CVG Ferrominera Evraz ERG Metalloinvest CAP Grange Severstal ArcelorMittal Cliffs Metinvest IOC Ferrexpo Samarco LKAB Vale
Source: CRU Pellet analysis, March 2016
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Ferrexpo has a long-life asset, well invested production facilities, a competitive cost base, integrated logistics and a diversified high quality customer portfolio Lowest cost pellet producer The pellet market has high barriers to entry Long-term fundamentals support pellet demand
– Steel mills require high quality material to maintain quality of final product – Significantly lower emissions at the steel mill compared to sinter fines – Chinese steel mills to progressively strive for higher value-added steel products
Ferrexpo is the lowest cost pellet producer in the world & 3rd largest pellet exporter
Forecast total pellet exports Mt 2016 Vale (Brazil + Oman) 32.0 LKAB (Sweden) 22.0
Ferrexpo (Ukraine) 12.0
Rio Tinto (IOC, Canada) 9.8 Metalloinvest (Russia) 9.6 GIIC (Bahrain) 9.0 Cliffs (USA) 6.8 ArcelorMittal (Canada) 6.3 Metinvest (Ukraine) 5.2 Savage River (Australia) 2.4 Total pellet export market 135.8 Ferrexpo’s market share 9%
Exports of iron ore MT 2000 2015 increase Proportion of increase Pellets 106 121 151 4% Lump 93 228 136 15% Sinter Fines 265 1,012 747 81% Total 464 1,381 918
1 excludes 30MT of Samarco production that is currently idled due to tailings dam flooding in 2015
FOB cost curve, pellets, 2016 Y-axis: Cost ($/t) X-axis: Cumulative production (Mt) Ferrexpo Vale MetInvest Samarco Metalloinvest IOC Cliffs LKAB GIIC
– 2015 GDP declined for second year in a row, economy starting to show signs of stabilisation – IMF rescue package contingent on reforms being passed in parliament – Situation remains fragile in east of country, Russia filed lawsuit against Ukraine over US$3BN bond – BUT: – Exporters benefitting from UAH decline – As of 31 January 2016 Ferrexpo had received all outstanding VAT repayments for 2015 – As of December 2015 Group no longer required to prepay corporate profit tax (‘CPT’) in return for VAT refunds – Prepaid CPT balance for all corporates estimated to be at least UAH15 billion (or approximately US$600 million) – Government looking to resolve prepaid CPT, potentially through the issue of local currency bonds
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Ukraine
Summary – Ferrexpo is a world class operator with a well invested asset base – It has c. 10% market share of the world pellet market – It’s product is in demand from premium steel mills around the world – Prudent investment of past delivering benefits – The Group has solid track record of quietly delivering despite market conditions and Ukrainian politics – Ferrexpo makes a significant economic contribution to Ukraine
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Ferrexpo a world class iron ore pellet producer
Questions
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Appendix
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2015 income statement
US$M Before special items Special items Year-ended 31.12.15 Before special items Special items Year-ended 31.12.14
Revenue 961
- 961
1,388
- 1,388
Cost of sales (447)
- (447)
(648)
- (648)
Gross profit 514
- 514
740
- 740
Selling and distribution expenses (226)
- (226)
(311)
- (311)
General and administrative expenses (37)
- (37)
(49)
- (49)
Other income 7
- 7
9
- 9
Other expenses (33)
- (33)
(57)
- (57)
Operating foreign exchange gains 26
- 26
77
- 77
Operating profit from continuing operations before adjusted items 251
- 251
409
- 409
Allowance on restricted cash and deposits
- (175)
(175)
- Under recovery and write-down of VAT receivables
- (7)
- (7)
Write-offs and impairment losses
- (6)
(6)
- (83)
(83) Gain on disposal of available-for-sale investment
- 41
41
- Share of profit from associates
5
- 5
5
- 5
Losses on disposal of property, plant and equipment (5) (5) (5) (5) Profit/(loss) before tax and finance from continuing operations 251 (139) 112 402
- 319
Finance income 2
- 2
19
- 19
Finance expenses (72)
- (72)
(68)
- (68)
Non-operating foreign exchange losses (17)
- (18)
(15)
- (15)
Profit/(loss) before tax 164 (139) 25 338 (83) 255 Income tax (expenses)/credit (22) 29 7 (71) (71) Profit/(loss) for the year from continuing operations 142 (110) 32 267 (83) 184
Largest resource base in Europe Consistent performer & increasing quality
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A well invested established asset with a high quality customer portfolio
World class asset –
- ver us$2bn invested since IPO
With established logistics capabilities A diversified high quality customer portfolio
BROVARIKOVSKO YE 4.0BT MANUILOVSKOYE 3.4BT KHARCHENKOVSKO YE 2.8BT VASILIEVSKOYE 1.4BT ZARUDENSKOYE 1.5BT GALESCHINSKOYE 0.2BT BELANOVSKOYE 1.7BT YERISTOVSKOYE 1.2BT GPL 3.5BT
PRODUCTION
DEVELOPMENT LICENCE MAINTENANCE
105 278 86 167 380 430 278 235 65
07 08 09 10 11 12 13 14 15
0% 20% 40% 60% 80% 100% 2,000 4,000 6,000 8,000 10,000 12,000
07 08 09 10 11 12 13 14 15
% of 65% Fe output Kt pellets
Total pellet production % of 65% Fe pellet production
CENTRAL & EASTERN EUROPE CHINA NORTH EAST ASIA WESTERN EUROPE TURKEY, MIDDLE EAST & INDIA
13.1
FSU SOVIET CLASSIFIED RESOURCES
13.1 6.7
JORC CLASSIFIED RESOURCES
22% 6% 12% 11% 49%