Slide 1: 2017 Half Year Results Presentation
2017 HALF YEAR RESULTS PRESENTATION AUGUST 2017
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 FERREXPO 3
Slide 4: Chris Mawe, CFO: 1H 2017 Financial Performance
C H R I S M AW E , C F O 1H 2017 FINANCIAL PERFORMANCE 4
Slide 5: Results reflect strong business profile
R E S U LT S R E F L E C T S T R O N G B U S I N E S S P R O F I L E SUMMARY FINANCIALS REVENUES HIGHER (up 29%) – Lower production due to maintenance programme $M (unless otherwise stated) 1H 17 1H 16 Change 2016 Pellet production (kt) 5,160 5,723 -10% 11,200 – Sales volume reflects production Pell
Slide 6: Continued strong margins through the cycle – up 14 percentage points to 49%
CONTINUED STRONG MARGINS THROUGH THE CYCLE – U P 1 4 P E R C E N TA G E P O I N T S T O 4 9 % EBITDA HY 2017 VS. HY 2016 ($M) OPERATIONS FOREX / OTHER MARKET +$168M -$30M -$11M 37 EBITDA 94 26 margin 30 49% 2 9 EBITDA 137 margin 35% 287 160 1H 2016 EBITDA Platts 62% Fe fines Atlantic pellet premium
Slide 7: Low cost producer through the cycle, C1 cost varies with commodity prices
LOW COST PRODUCER THROUGH THE CYCLE, C1 COST VA R I E S W I T H C O M M O D I T Y P R I C E S , L O C A L I N F L AT I O N , U A H C1 CASH COST THROUGH THE COMMODITIES CYCLE COST PERFORMANCE $ per tonne – Ukrainian inflation reflects higher electricity tariffs & wages 166 166 – UAH relatively stable
Slide 8: 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 S T R E N G T H E N I N G BALANCE SHEET CASH FLOW 1H 2017 VS. 1H 2016 $M (unless otherwise stated) 1H 17 1H 16 Change 2016 EBITDA: HIGHER REVENUE OFFSET COST INFLATION (+$127M) EBITDA 287 160 79% 375 WORKING CAPITAL (-$79M) Operating FX ga
Slide 9: Substantial debt repaid from own cash flows
S U B S T A N T I A L D E B T R E PA I D F R O M O W N C A S H F L O W S REFINANCING STRONG CREDIT METRICS – Net debt US$481M – Reduced net debt by $387M since 1/1/2016 2015 1H 2016 2016 1H 2017 – New PXF in progress Net debt / LTM EBITDA (x) 2.78 2.54 1.57 0.96 Cash and undrawn facilities ($M) 35 4
Slide 10: Structural improvement – move to 65% Fe pellet has increased margins through cycle
STRUCTURAL IMPROVEMENT – MOVE TO 65% FE PELLET HAS INCREASED MARGINS THROUGH CYCLE IRON ORE FINES PRICE AND EBITDA MARGIN SINCE 2007 – EBITDA margin at low point in cycle significantly higher in 2015 vs. 2009 – At average fines price of $74/t in 1H 2017 margin above 2010 when fines prices was $148/t
Slide 11: Conclusion to financial review
CONCLUSION TO FINANCIAL REVIEW EXCELLENT RESULTS – Another strong set of financial results – Demand for the Group’s product remains high – Substantially strengthened the balance sheet – Achieved target of reducing net debt to EBITDA below 1x – Dividend declared EXCELLENT BUSINESS – Expect demand for
Slide 12: Kostyantin Zhevago, CEO: Operational Review & Strategy
K O S T YA N T I N Z H E VA G O , C E O O P E R AT I O N A L R E V I E W & S T R AT E G Y 12
Slide 13: Strong demand for pellets
STRONG DEMAND FOR PELLETS STEEL MILL PROFITABILITY AT A HIGH POST GFC 700 OTHER FACTORS SUPPORTING HIGH GRADE ORE Delta HRC, Germany basis Raw material basket 600 – Rationalisation of Chinese steel capacity 500 • fewer but larger blast furnaces $ per tonne 400 300 • more stringent environmental & qu
Slide 14: Market strategy delivering results
M A R K E T S T R AT E G Y D E L I V E R I N G R E S U LT S CONSOLIDATING POSITION IN PREMIUM MARKETS (geographic sales split) – Strong demand from long term target customers 52% 1H 2017 46% 1H 2016 – Increased market share in Japan & South Korea – Received pellet premium in line with international
Slide 15: Mining and processing operations
M I N I N G A N D P R O C E S S I N G O P E R AT I O N S SAFETY FIRST HIGH PROPORTION OF 65% FE PELLETS MAINTAINED – One fatality (2016: one) 100% – 1H 2017 LTIFR 0.9 (vs. 1.44 2H 2016) 90% – FPM LTI improving but work remains 80% – FYM 3.7M hours LTI free; Barging LTI free for 9 months 70% PERFORMA
Slide 16: Ferrexpo has compelling brownfield optionality
FERREXPO HAS COMPELLING BROWNFIELD OPTIONALITY ENGINEERING STUDIES UNDERWAY TO INCREASE OUTPUT FERREXPO CAN EXECUTE PROJECTS AT A LOW COST DUE TO: Increase in – Access to c. 20BT magnetite resource base (FPM, FYM, FBM) concentrate output of – Utilities infrastructure in place incl. gas & electricity
Slide 17: Ferrexpo remains a competitive producer while pellet premiums average around $30 per tonne
FERREXPO REMAINS A COMPETITIVE PRODUCER WHILE P E L L E T P R E M I U M S AV E R A G E A R O U N D $ 3 0 P E R T O N N E THROUGH THE CYCLE PELLET CONVERSION COST $/T (NOMINAL 2016) PELLET COST CURVE – Cost to convert pellet feed into pellet – Vale is the market leader & the swing producer – Cost cur
Slide 18: Ukraine
UKRAINE – After challenging macro-economic & political period economy returning to growth – Government has implemented a number of reforms to address structural imbalances – Further reforms necessary to secure higher levels of international investment UKRAINE SOVEREIGN CREDIT RATING (FITCH) WORLD BA
Slide 19: Outlook
OUTLOOK – Pellet premiums remain well supported due to strong demand & lower supply – One of the lowest cost pellet producers in the world – Part way through pellet line refurbishment programme – Well placed to generate positive operating cash flows through the cycle – Focus on debt reduction & divi
Slide 20: Thank you
THANK YOU J. ae _ FERREXPO