2018 HALF YEAR RESULTS PRESENTATION AUGUST 2018
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Steve Lucas Chairman 2
1H 2018 FINANCIAL PERFORMANCE Chris Mawe, CFO 3
S T R O N G M A R K E T E N V I R O N M E N T F O R P E L L E T S H I G H E R C O S T S D R I V E N B Y C O M M O D I T Y C O S T I N F L AT I O N Summary Financials Market – Strong market environment for high grade product $M (unless otherwise stated) 1H 18 1H 17 Change 2017 – Record pellet premium – 5% increase in realised price despite lower fines price & higher freight Pellet production (kt) 5,096 5,160 -1.2 10,444 Operations Pellet sales volumes (kt) 4,798 5,065 -5.3 10,467 – Slightly lower pellet production due to planned line refurbishment Avg CFR 62% fines price (US$/t) 69.7 74.4 -6.2 71.3 – Increase in stocks due to delayed railings Avg C1 cost (US/t) 41.6 31.7 31.2 32.3 – C1 cost of $41.6 per tonne reflects • Cost inflation – oil, local inflation, strong local currency Revenue 617 591 4.4 1,197 Net operating cash flow EBITDA 234 287 -18.5 551 – Working capital reflects lower grade ore and pellet stock increase EBITDA margin 38.1% 48.5% -10.4ppt 46.0% Capital investment Profit after tax 152 216 -29.6 394 – Increase spend on modernisation & concentrator expansion programme Diluted earnings per share (cents) 25.79 36.60 -29.5 66.85 Dividends Interim dividend per share (cents) 3.3 3.3 - 16.5 – Paid out $74M of dividends in 1H 2018 vs. $39M in 1H 2017 – Declared interim dividend per share of 3.3 US cents (1H 2017: 3.3 US Net cash flow from operating activities 156 194 -19.6 353 cents) to be paid in September 2018 Capital investment 56 45 24.4 103 Balance sheet Cash 82 93 -11.8 98 – Continued deleveraging Net debt 369 472 -21.8 394 – Net debt to EBTIDA comfortably below 1x Net debt to EBITDA 1 (x) – 2H 2018 debt repayments remaining $11M 0.74 0.96 -22.9 0.73 1 Last twelve month EBITDA $514M 4
E B I T D A 1 H 2 0 1 8 V S . 1 H 2 0 1 7 MARKET $26M OPERATIONS -$68M FOREX -$10M 22 15 63 49 1 14 3 10 287 reverse in 2H non-cash 234 1H 2017 Atlantic pellet Platts 62% C3 freight C1 cost of Logistic Pellet Production Operating 1H 2018 EBITDA premium Fe fines index production costs inventory volumes forex loss EBITDA OPERATIONS MARKET FOREX – Higher commodity costs & local inflation 62% Fe fines price Pellet premiums Freight UAH appreciated – Increase in pellet stocks of 300kt (rail shipments) -6% +32% +37% 7% from 1/1/18 – Planned refurbishment of pellet line #1 to 30/6/18 5
C O M P E T I T I V E C O S T B A S E T H R O U G H T H E C Y C L E , C 1 C O S T 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 Costs reflect: C1 cost 1H 2018 vs. 1H 2017 $ per tonne – Commodity price inflation: higher diesel, gas, steel prices, coal – Local inflation 2.6 0.2 – UAH appreciated 7% against $ from 1.1.18 to 30.6.18 2.6 41.6 1.6 • Half of operating costs in UAH 3.3 – Higher level of repair & maintenance costs ` 31.7 – FPM mine plan reflects increased stripping levels – Planned pelletiser maintenance marginally reduced production volumes C1 cost 1H Commodity Local inflation Repair & Stripping Improved C1 cost 1H 2017 price & UAH maintenance consumption 2018 increases norms Structure of C1 cash costs – over 60% commodity related Increase in prices 1H 2018 vs 1H 2017 Avg increase Oil 37% 2% Electricity Grinding media 23% Gas 6% Fuel Diesel 21% 8% 24% Materials Salaries 20% 8% Personnel ` Spare parts Gas 17% 9% 10% Maintenance & repairs Electricity 15% Grinding media 9% Rail tariffs 15% 10% Royalities 14% Explosives Real UAH appreciation vs. Dollar (adj for local inflation) 10% 6
C A S H G E N E R AT I O N S U P P O RT I N G B A L A N C E S H E E T Cash flow 1H 2018 VS. 1H 2017 EBITDA – Higher pellet premiums offset by cost inflation $M (unless otherwise stated) 1H 18 1H 17 Change % 2017 EBITDA 234 287 551 -18.5 Working capital reflects Working capital movements -11 -37 -57 -70.2 – Higher pellet stocks of 300kt Working capital – stockpile ore -24 -26 -53 -7.7 – Lower grade ore build up: $4.8 per tonne Interest paid -26 -26 -49 - – Higher spare parts for maintenance programme for fleet refurbishment Tax paid -26 -6 -14 n/a Other (incl. non-cash operating FX) 10 2 -25 n/a Tax Net cash flow from operating 156 194 -19.6 353 – Normalised level as previous tax assets consumed activities Capex -56 -45 24.4 -103 Higher capex Dividend paid -74 -39 -58 89.7 – Largely reflects sustaining capital & construction of MFC1 Other - 4 - n/a Net cash flow 27 114 192 -76.3 $74M of dividends paid to shareholders in 1H 2018 Proceeds from new borrowings 211 - - n/a Repayment of borrowings -254 -163 -239 Reduced debt and maintained liquidity 55.8 – Drew down new $195M PXF facility + $16M of trade finance Cash balance at end of period 82 93 98 -11.8 – $254M of debt repaid -472 1 -394 1 Net debt -369 -21.8 – Cash balance of $82M – Strong credit metrics 1 Note: accrued interest has been re-classified from borrowings to accrued liabilities and re- presented for comparative periods. This has reduced net debt from $403M as of 31 December 2017 to $394M and from $481M as of 30 June 2017 to $472M. 7
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