1H 2016 INTERIM RESULTS PRESENTATION Supplying the world with iron ore pellets for over 35 YEARS
D ISC LAIMER 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 consent of the Company. part of any offer or invitation or inducement to sell or issue, or any solicitation of any offer to Certain statements, beliefs and opinions in this document and any materials distributed in purchase or subscribe for, any shares in the Company or any other securities, nor shall any part connection with this document are forward-looking. The statements typically contain words such of it nor the fact of its distribution form part of or be relied on in connection with any contract or as “anticipate”, “assume”, “believe”, “estimate”, “expect”, “plan”, “intend” and words of similar investment decision relating thereto, nor does it constitute a recommendation regarding the substance. By their nature, forward-looking statements involve a number of risks, uncertainties securities of the Company. No information made available to you in connection with this and assumptions that could mean actual results or events differ materially from those expressed document may be passed on, copied, reproduced, in whole or in part, or otherwise disseminated, or implied by the forward-looking statements. These risk, uncertainties and assumptions could directly or indirectly, to any other person. adversely affect the outcome and financial effects of the plans and events described herein. Statements contained in the document regarding past trends or activities should not be taken as a Some of the information in this document is still in draft form and is subject to verification, representation or warranty (express or implied) that such trends or activities will continue in the finalisation and change. Neither the Company nor its affiliates nor advisers are under an future. No statement in this document is intended to be a profit forecast. You should not place obligation to correct, update or keep current the information contained in this document or to reliance on forward-looking statements, which speak only as of the date of this document. publicly announce the result of any revision to the statements made herein except where they would be required to do so under applicable law. The information in this document may constitute non-public price sensitive information ('inside information'). You should not base any behaviour in relation to the Company's securities, No reliance may be placed for any purpose whatsoever on the information contained in this financial instruments related to the Company’s securities or any other securities and investments document. No representation or warranty, expressed or implied, is given by or on behalf of the on information until after it is made publicly available by the Company. Any dealing or Company or any of the Company’s directors, officers or employees or any other person as to the encouraging others to deal on the basis of such information may amount to insider dealing under accuracy or completeness of the information or opinions contained in this document and no the Criminal Justice Act 1993 and/or to market abuse under the Financial Services and Markets liability whatsoever is accepted by the Company or any of the Company’s members, directors, Act 2000. officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions otherwise arising in connection therewith. This presentation should be read in conjunction with the 2015 interim results announcement. This presentation and its contents are confidential. By reviewing and / or attending this presentation you are deemed to accept that you are under a duty of confidentiality in relation to the contents of this presentation. You agree that you will not at any time have any discussion, correspondence or contact concerning the information in this document with any of the directors or employees of the Company or its subsidiaries nor with any of their customers or suppliers, or 2
MICHAEL ABRAHAMS CBE DL, CHAIRMAN 3
CHRIS MAWE, CFO 4
1 H 2 0 1 6 R E S U LT S D E M O N S T R AT E R E S I L I E N C E & Q U A L I T Y O F B U S I N E S S SUMMARY FINANCIALS – Excellent operational performance 1H 16 1H 15 Change 2015 $M (unless otherwise stated) • Record production from own ore in 1H period Production from own ore (kt) 5,700 5,503 4% 11,258 Sales volumes (kt) 6,017 5,680 6% 11,330 • Record output of 65% Fe pellets (94% in 1H 2016) Avg CFR 62% fines price (US$/t) 52 61 -15% 56 • Record sales volumes Avg C1 cost (US/t) 25.7 33.4 -23% 31.9 • Significantly lower costs Revenue 458 512 -11% 961 – Increase in operating profit excl foreign exchange gains Cost of sales -192 -236 -19% -447 – EBITDA margin 35% Gross profit 266 276 -4% 514 Selling & distribution -101 -113 -11% -226 – Diluted EPS before special items up 3% vs. 1H 2015 General & admin -18 -21 -14% -37 – $54M increase in net cash flows from operating activities Other income 2 3 -33% 7 • Lower working capital Other expense -17 -18 -6% -33 – $120M of debt repaid - cash balance increased $9M to $44M Operating FX gains (non-cash) 2 15 -87% 26 – Net debt to EBITDA improved to 2.5x at 30 June 2016 1 Operating profit excl operating forex gains 131 128 2% 225 – Improving credit metrics EBITDA 160 176 -9% 313 Diluted EPS before special items (cents) 13.14 12.80 3% 23.86 Net CF from operating activities 142 88 61% 128 Net debt to EBITDA 1 2.5 1.9 32% 2.8 1 Last twelve months 5
S T R O N G P E R F O R M A N C E D U E T O H I G H E R S A L E S O F P R E M I U M P R O D U C T, L O W E R F R E I G H T & C O S T R E D U C T I O N S EBITDA COMPARISON EXCLUDING NON-CASH OPERATING FOREX GAIN 1H 2015 VS. 1H 2016 ($M) 200 180 6 13 160 44 140 49 8 23 23 120 100 176 163 80 160 60 40 20 0 1H 2015 Oper forex 1H 15 EBITDA Platts 62% Fe Lower C3 Platts Atlantic Sales volume C1 cost Other 1H 2016 EBITDA gain excl. oper fx fines index PP EBITDA C1 COST PER TONNE 1H 2015 VS. 1H 2016 ($) 35 2.8 2.6 30 2.3 25 33.4 25.7 20 15 10 5 0 C1 cost 1H 2015 Mining efficiency Lower oil & gas Currency C1 cost 1H 2016 gains price devaluation 6
S T R O N G C A S H G E N E R AT I O N CASH FLOW 1H 2016 VS. 1H 2015 – Notable working capital improvement in 1H 2016 $M (unless otherwise stated) 1H 16 1H 15 Change 2015 EBITDA 160 176 313 • Lower net trade receivables/account payables -9% Operating FX gains (non-cash) -2 -15 -26 • Lower pellet stocks -87% Working capital movements 16 -28 -77 -157% • VAT recovery Interest paid -29 -34 -64 -15% – Lower interest & tax Tax paid -2 -8 -11 -75% – Net cash flow from operations $54M higher than 1H 15 & $14M higher Other -1 -3 -7 -67% than FY 15 Net cash flow from operating 142 88 61% 128 activities – New borrowings (trade finance) Capex -24 -25 -4% -65 – Repaid $120M of debt in line with amortisation schedule Proceeds from sale of investment - 42 42 - Reclassification of restricted cash - - -185 - – Net debt reduced by $115M Dividend paid - -58 -78 - – Cash balance increased by $9M to $44M Other (including FX on cash) 2 -23 -40 n/a Net cash flow 120 24 -198 n/a Proceeds from new borrowings 9 - - - Repayment of borrowings -120 -180 -394 -33% Cash balance at start of period 35 627 627 -94% Cash balance at end of period 44 471 35 -91% Net debt -753 -653 -868 15% 7
D E B T M AT U R I T Y P R O F I L E E A S I N G I N 2 H 2 0 1 6 A N D 2 0 1 7 DEBT MATURITY PROFILE AS OF 30 JUNE 2016 – Repaid $420M PXF facility in full - final payment July 2016 ECA, Leasing PXF-1 PXF-2 Bond – Secured new trade finance lines in 1H 2016 300 Repaid 273 – 2H 2016 debt amortisation $76M (1H 2016: $120M) from cash 250 generated – 2017 debt amortisation approximately $50M per quarter 200 173 $ million – Continue to asses new financing options 150 120 102 100 100 – Refinancing risk diminishing 76 55 – Net debt reduction 50 – Improving credit metrics (net debt to EBTIDA towards 2x) 0 1H 2016 2H 2016 1H 2017 2H 2017 1H 2018 2H 2018 1H 2019 8
C O N C L U S I O N T O F I N A N C I A L R E V I E W - Excellent results - EBITDA in line with prior year - Net cash flow from operating activities $142M - Net debt reduced by $115M - Cash increased by $9M - Well placed to continue deleveraging in 2H 2016 9
KOSTYANTIN ZHEVAGO, CEO
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