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Ferrexpo plc

Ferrexpo plc 40% increase in dividends to a record 23.1 US cents

Ferrexpo plc (LON:FXPO) today announced its financial results for the year ended 31 December 2018.

Steve Lucas, Non-executive Chairman, said:

“I am pleased to report a successful year for Ferrexpo. We continued to benefit from the strong global demand for our high-grade iron ore pellets, which helped deliver strong cash flow despite a rise in costs. This enabled us to increase investment, reduce debt further and pay a record dividend.”

“Our balance sheet is now strong and this gives us a platform to deliver the next stage in our planned expansion. This year we plan to increase investment once more to be able to hit our medium-term production target of 12 million tonnes per annum by 2021 and lay the foundations for our longer-term intention to move to annual output of 20 million tonnes per annum.”

Extract of 2018 Financial Performance:

US$ million (unless otherwise stated)

Year ended 31.12.18

Year ended 31.12.17

Change

Total pellet production (kt)

10,607

10,444

1.6%

Sales volumes (kt)

10,227

10,467

-2.3%

Average CFR 62% iron ore fines price (US$/t)

69.5

71.3

-2.5%

Revenue

1,274

1,197

6.4%

C1 cash cost of productionA (US$/t)

43.3

32.3

34.1%

Underlying EBITDAA

503

551

-8.7%

Underlying EBITDA marginA

39%

46%

-7ppt

Profit for the year

335

394

-15.0%

Diluted EPS

56.7

66.9

-15.2%

Dividend per share (US cents)

23.1

16.5

40.0%

Net cash flow from operating activities

292

353

-17.3%

Capital investmentA

135

103

31.1%

Net debt

339

394

-14.0%

Total liquidityA

268

312

-14.1%

Net debt to Underlying EBITDA A

0.67x

0.72x

-8.2%

 

Health and Safety

· We deeply regret to report one work related fatality in 2018 (2017: one)

· Group Lost Time Injury Frequency Rate 1.18x (2017:1.17x)

Market Environment

· Strong market environment for high grade pellets

· Group achieved new record pellet premium

· Average realised FOB price increased 9% compared to 2017

Operational

· Production of pellets increased 2% to 10.6MT (2017: 10.4MT)

· Production reflected planned pellet line refurbishment in 2Q 2018 and a general increase in maintenance levels

· Production of premium 65% Fe pellets in line with 2017 at 9.9MT

· Sales volumes of 10.2MT (2017: 10.5MT) reflected 400kt increase in stocks due to temporary logistics constraints

· C1 cash cost of productionA of US$43.3 per tonne (2017: US$32.3 per tonne) reflected higher commodity input prices, local inflation and increased mining and maintenance activity

Financial

· Revenue up 6% to US$1.3BN (2017: US$1.2BN) principally reflecting higher pellet premiums and freight rates and lower sales volumes

· Underlying EBITDA A US$503M (2017: US$551M) reflected higher average prices of US$9 per tonne offset by higher costs and lower sales volumes

· Profit before tax of US$392M (2017: US$450M)

· Net cash flows from operating activities US$292M (2017: US$353M) reflected lower underlying EBITDA and working capital build mainly due to increased year end stocks

· Net debt reduced 14% to US$339M as of 31 December 2018 (31 December 2017: US$394M)

· Net debt to underlying EBITDAA lower for third consecutive year at 0.67 times as of 31 December 2018 (as of 31 December 2017: 0.72 times)

· Total liquidity A US$268M as of 31 December 2017 (31 December 2017: US$312M)

· Final special dividend of 6.6 US cents per share (2017: 6.6 US cents) payable on 14 May 2019 and final ordinary dividend of 6.6 US cents per share proposed (2017: 3.3 US cents)

· 40% increase in total dividend declared for 2018 to a 23.1 US cents per share (total 2017 dividend per share: 16.5 US cents)

Outlook

To date in 2019, realised prices for Ferrexpo’s pellets have continued at high levels.

In 2019, the Group will continue its repairs and maintenance programme which will include a 75 day pellet line shutdown in 2H 2019. Overall, 2019 production volumes are expected to be in line with 2018 at approximately 10.6 million tonnes.

The cost of production in 2019 is expected to increase as a result of higher commodity input prices and local inflation in Ukraine. Year to date the Hryvnia has been broadly stable against the US dollar, appreciating by approximately 2%.

Capital expenditure in 2019 will be focused towards growth projects and is expected to be in the range of US$220 million to US$300 million, subject to realised pricing and market conditions. Of this, sustaining capital expenditure is expected to be in line with 2018. Investment of approximately US$35 million is planned for the Concentrator Expansion Programme 1 (“CEP1”), which is anticipated to increase pellet production to approximately 12 million tonnes per annum by 2021. In addition, subject to market conditions and available cash flows, Ferrexpo will commence construction on a new press filtration plant and other pellet capacity upgrade projects as well as purchase of additional rail cars.