Slide 1: Full Year Results Presentation
FULL YEAR RESULTS PRESENTATION APRIL 2019
Slide 2: Disclaimer
DISCLAIMER This document is being supplied to you solely for your information and does not any discussion, correspondence or contact concerning the information in this document constitute or form part of any offer or invitation or inducement to sell or issue, or any with any of the directors or empl
Slide 3: Steve Lucas, Chairman
Steve Lucas Chairman 3
Slide 4: Successful 2018, well positioned for the future
SUCCESSFUL 2018, WELL POSITIONED FOR THE FUTURE Ferrexpo is well placed to benefit from demand for pellet – Large resource and well invested assets – Competitive cost position – High value product 65% Fe pellets – High quality well-diversified customers Continued strong financial performance – Recor
Slide 5: 2018 Financial Performance
2018 FINANCIAL PERFORMANCE Chris Mawe, CFO 5
Slide 6: Strong business profile
STRONG BUSINESS PROFILE Summary Financials Revenue up 6% $M (unless otherwise stated) 2018 2017 Change – Average selling price increased by $9 per tonne Pellet production (kt) 10,607 10,444 2% – Strong market environment for pellets continued (significant increase in premiums) – Lower sales volumes
Slide 7: Higher pellet premiums, higher commodity cost inputs & local inflation
HIGHER PELLET PREMIUMS, HIGHER COMMODITY COST I N P U T S & L O C A L I N F L AT I O N EBITDA 2018 VS. 2017 (US$M) 17 19 32 141 111 5 15 551 503 2017 EBITDA Production Pellet premium Inventories Fines price C3 freight C1 cost Operating forex & 2018 EBITDA volumes other 7
Slide 8: Costs up reflecting higher commodity prices & stable currency
COSTS UP REFLECTING HIGHER COMMODITY PRICES & S TA B L E C U R R E N C Y I N S T R O N G S T E E L M A R K E T 2018 costs reflect: C1 cash costs breakdown 2018 vs. 2017 – Commodity price inflation: higher diesel, gas, steel prices, coal $ per tonne • Avg brent in 2018 up 31% at $71/t vs. $54/t in 20
Slide 9: Strong cash flow generation further strengthening balance sheet
S T R O N G C A S H F L O W G E N E R AT I O N F U R T H E R STRENGTHENING BALANCE SHEET Cash flow 2018 vs. 2017 Working capital reflects $M (unless otherwise stated) 2018 2017 Change – Low grade ore $40M or $3.7 per tonne (2017: $5.0 per tonne) EBITDA 503 551 (9)% – Higher trade receivables due to
Slide 10: Excellent credit metrics
EXCELLENT CREDIT METRICS Strong reduction in net debt ($M) Amortisation profile as of 31 December 2018 ($M) $M Net debt to EBITDA (x) Cash Undrawn PXF-18 PXF-18 ECA Bond 1000 2.8 3 900 Net Debt Net debt to EBITDA 2.5 800 700 205 2 600 1.6 500 1.5 400 868 Assumes full draw of remaining $205M of PXF 1
Slide 11: Conclusion to financial review
CONCLUSION TO FINANCIAL REVIEW Strong results – Good set of financial results – Demand for the Group’s product remains high – Record dividends (+40%); 31% increase in capex & strong balance sheet maintained Excellent Industry Dynamics – Pellet supply expected to remain tight in the short to medium t
Slide 12: Market & Operations Review
Yeristovo mine The town of Horishni Plavni Poltava mine Tailings Dam Concentrator Pelletizer facilities facilities MARKET & OPERATIONS REVIEW KOSTYANTIN ZHEVAGO, CEO 12
Slide 13: Strong demand environment for pellet
STRONG DEMAND ENVIRONMENT FOR PELLET Crude steel capacity utilisation (%) Average Ore Burden Mix to Produce Hot Metal (%) 95% 2% 91% China 6% 14% 90% 23% 10% 85% 36% 83% Ex-China 12% 80% Lump 89% 75% Pellet 76% 70% 58% 65% Sinter 65% 60% 9% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 14: Incumbent pellet producers enjoy high barriers to entry
INCUMBENT PELLET PRODUCERS ENJOY HIGH BARRIERS TO ENTRY Exports of pellets peaked in 2010 at c. 150MT – Pellet exports peaked in 2010 & since declined 14% 2010 2018 % change 2019 – In 2019, CRU expect pellet exports to fall approximately 10MT: MT exports exports vs. 2010 forecast – Incumbents in Swe
Slide 15: Capital investment – continue to increase quality & pellet output
C A P I TA L I N V E S T M E N T – C O N T I N U E T O I N C R E A S E Q U A L I T Y & P E L L E T O U T P U T W H I L E M A I N TA I N I N G A S T R O N G B A L A N C E S H E E T Commissing of MFC1, increased Completion of CEP1- Commenced Increased ownership maintenance vs. increase in pellet Start
Slide 16: Capital allocation becoming more balanced
C A P I T A L A L L O C AT I O N B E C O M I N G M O R E B A L A N C E D Split of cash flows between debt repayment, dividends, capex 20161 2017 2018 Capex Capex Capex Debt repayment Debt repayment Debt repayment Dividends Dividends Dividends Gross Debt ($M) Dividend pay out1 (%) Capital Investment
Slide 17: Outlook
OUTLOOK • Steel margins to recover from lows seen in 4Q 2018 but not to 2018 highs • Pellet premiums strongly correlated to steel margins • Seaborne supply of pellets to remain tight following major supply disruptions in Brazil • Expect higher received prices in 2019 • Continue repairs & maintenance
Slide 18: Thank you
Thank you 18
Slide 19: Appendix
Appendix 19
Slide 20: Ferrexpo is a high quality iron ore producer
FERREXPO IS A HIGH QUALITY IRON ORE PRODUCER WITH C. 8% MARKET SHARE OF GLOBAL PELLET EXPORTS Premium 65% Fe iron ore pellets Significant resource base – +40 years of World class asset – 62% Fe pellets 65% Fe pellets 2P reserves at FPM & FYM over $2.2bn invested since IPO 12 PRODUCTION Logistics: ba
Slide 21: Tailings dam
TA I L I N G S D A M FPM’s tailings storage facility – Ferrexpo has 1 tailings dam split into 4 sections – Centre line construction methodology – Covers 1500 hectares – Operating since 1974 • Most recent section commenced in 2012 – Safety audits twice a year by independent 3rd parties – In line with