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Ferrexpo plc

Ferrexpo PLC Profit after tax up 78% compared to H1 2018

Ferrexpo PLC (LON:FXPO) today announced its unaudited financial results for the six months ended 30 June 20191.

Financial Highlights

·    Revenue up 28% to US$787 million due to higher iron ore fines prices and an increase in sales volumes

·    Underlying EBITDA A up 59% to US$372 million (1H 2018: US$234 million)

·    Profit after tax up 78% to US$270 million

·    Declared interim ordinary dividend up 100% to 6.6 US cents (1H 2018: 3.3 US cents)

·    Net debt A reduced to US$282 million (31 December 2018: US$339 million)

·    Capital investment doubled to US$114 million

Steve Lucas, Non-Executive Chairman, said:

“I am pleased to report half-year EBITDA of US$372 million, up almost 60% compared to 1H 2018, and a profit after tax of US$270 million, up 78% compared to 1H 2018. During the period we continued to benefit from strong pricing for our high-grade iron ore pellets, which helped deliver healthy cash flows. This enabled us to allocate capital to further reduce debt, increase organic investment in our assets to drive medium term growth and declare a record interim dividend to shareholders.”

Ferrexpo has a diversified sales portfolio selling to world class steel mills under long term contracts using international benchmark pricing. Currently steel demand is muted in some regions reflecting increased raw material costs and weaker end-user demand. The Group, however, has the ability to deploy tonnage to other markets to offset any regional weakness. Overall pricing remains attractive compared to historic levels.”

1H 2019 Financial Summary:

US$ million (unless otherwise stated)6 months ended 30.06.196 months ended 30.06.18Change%Year ended 31.12.18
Total pellet production (kt)5,3535,0965%10,607
Sales volumes (kt)4,9904,7984%10,227
Avg PLATTS CFR 62% Fe iron ore fines price (US$/t)91.769.831%71.3
Avg PLATTS CFR 65% Fe iron ore fines price (US$/t)105.488.120%90.4
Revenue78761728%1,274
Average C1 cash costA (per tonne)46.041.611%43.3
Underlying EBITDAA37223459%503
Underlying EBITDA marginA47%38%9ppt39%
Profit after tax for the period27015278%335
Diluted EPS (US cents)45.825.878%56.7
Ordinary interim dividend per share declared (US cents)6.63.3100%23.1
Net cash flow from operating activities25615664%292
Capital investmentA11456104%135
Net debt2282369-24%339
Cash928212%63
Net debt to last twelve months’ EBITDAA0.44x0.74x-41%0.67x

1 These results have not been subject to a review as per the announcement of 3 July 2019

2 Note: net debt as of 30 June 2019 included a US$6 million effect from the first time application of IFRS16 Leases.

Market Environment

·    Significant increase in the iron ore fines price

·    Supply of pellets remained tight in 1H 2019

·    Average realised FOB price increased 28% compared to 1H 2018

Operational Highlights

·    5% increase in pellet production compared to 1H 2018

·    Proportion of high quality 65% Fe pellet to 96% of total output (1H 2018: 94%)

·    4% increase in sales volumes compared to 1H 2018

·    C1 cash cost US$46 per tonne up US$4.4 per tonne reflecting domestic inflation of 9% and a 5% appreciation of the local currency

·    Capital investmentA increased by US$58 million to US$114 million reflecting modernisation of processing facilities and near term organic growth opportunities to increase production by 1.5MT to 12MTPA

Corporate Governance

·    The Independent Review into the use of funds donated by Ferrexpo to the Blooming Land Charity remains ongoing, the Independent Review Committee is seeking to conclude its review as soon as possible

·    Appointment of Graeme Dacomb, a retired partner from Ernst & Young, as an independent non-executive director and as Chair of the Audit Committee

·    In July 2019, appointment of MHA MacIntyre Hudson, the UK member of Baker Tilly International, as the Company’s new auditor. Baker Tilly International has significant audit capability in Ukraine having operated there since 1999

·    Further appointments to the Board of directors to be announced in due course

Health and Safety

·    No work related fatalities (FY 2018: one)

·    Group Lost Time Injury Frequency Rate 0.45 per million man hours (FY 2018:1.18, 1H 2018: 0.97)

ALTERNATIVE PERFORMANCE MEASURES

Words with the symbolA are defined in the Alternative Performance Measures section on pages 34 and 35.

There is an analyst and investor meeting at 09.00 BST today at the offices of JPMorgan at 60 Victoria Embankment, London EC4Y 0JP. A live video webcast and slide presentation of this event will be available on www.ferrexpo.com.  It is recommended that participants register before 08.45 BST. The presentation will be hosted by Steve Lucas (Chairman), Kostyantin Zhevago (CEO) and Chris Mawe (CFO).

Webcast link:  https://edge.media-server.com/mmc/p/srmiia5u