2019 HALF YEAR RESULTS PRESENTATION AUGUST 2019
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Steve Lucas Chairman 2
1H 2019 FINANCIAL PERFORMANCE CHRIS MAWE, CFO 3
S T R O N G P E R F O R M A N C E W I T H P R O F I T A F T E R TA X U P 7 8 % Summary Financials Operations $M (unless otherwise stated) 1H 19 1H 18 Change 2018 – 5% increase in output, pellet line refurbishment in 2H 2019 Pellet production (kt) 5,353 5,096 5% 10,607 – 4% increase in sales, stocks higher at period end – C1 cost of $46 per tonne reflects local inflation & strong currency Pellet sales volumes (kt) 4,990 4,798 4% 10,227 Market Avg CFR 62% fines price ($/t) 91.7 69.8 31% 71.3 – Significant supply side disruptions – Strong increase in iron ore fines pricing Avg CFR 65% fines price ($/t) 105.4 88.1 20% 90.4 – Majority of seaborne pellet priced off 65% Fe index Avg C1 cost ($/t) 46.0 41.6 11% 43.3 Net operating cash flow Revenue 787 617 28% 1,274 – Working capital reflects higher trade receivables & pellet stocks EBITDA 372 234 59% 503 Capital investment – Investment doubled: modernisation & concentrator expansion EBITDA margin 47% 38% 9ppt 39% programme Profit after tax 270 152 78% 335 Dividends Diluted earnings per share (cents) 45.8 25.8 78% 56.7 – Record 2019 interim ordinary dividend declared of 6.6 US cents (1H 2018: 3.3 US cents) Interim ordinary dividend per share (cents) 6.6 3.3 100% 23.1 – Dividend payments in 1H 2019 $78M; 2H 2019 payments $78M Net cash flow from operating activities 256 156 64% 292 Balance sheet Capital investment 114 56 104% 135 – Further deleveraging – Net debt to EBTIDA 0.44x Cash 92 82 12% 63 Net debt 282 369 -24% 339 Net debt to EBITDA 1 (x) 0.44 0.74 -41% 0.67 1 Last twelve month EBITDA $641M 4
5 9 % I N C R E A S E I N 1 H 2 0 1 9 E B I T D A V S . 1 H 2 0 1 8 EBITDA 1H 2019 vs. 1H 2018 $M 9 8 9 22 5 46 109 372 234 1H 2018 EBITDA Platts 62% Fe Conversion to 65% C3 freight Sales volumes Sales mix C1 cost Other 1H 2019 EBITDA index Fe index MARKET OPERATIONS FOREX Increase in fines – Higher production volumes Avg freight price & higher – Costs impacted by local inflation & strong UAH UAH appreciated per tonne Sales volumes quality premium – Increase in pellet stocks of c.370kt from 1/1/2019 5% +4% $155M -12% – Planned refurbishment of final pellet line in 2H 2019 to 30/6/2019 Note: other realised price effect principally included lagged pricing base on previous quarter less one month 5
C 1 C O S T R E F L E C T S L O C A L I N F L AT I O N , S T R O N G E R C U R R E N C Y, S T R I P P I N G & M A I N T E N A N C E Average C1 cost 1H 2019 vs. 1H 2018 Costs reflect: $ per tonne – Local inflation of 9%: wages, electricity tariffs 0.03 0.01 – Real UAH appreciated 13% vs. $ compared to 1H 2018 0.8 1.4 2.3 – Stripping: to support product quality & for future production growth – Repairs at an ongoing level – Lower gas prices (-10% half on half) offset by higher biofuel prices 46.0 41.6 – Lower diesel prices (-2% half on half) offset by higher bentonite prices – Costs remain subject to local currency, local inflation and commodity prices 1H 2018 UA inflation Stripping Repair & Commodity Other 1H 2019 Liberalisation of Ukraine electricity market as of 1/7/2019 & UAH maintenance inputs appreciation – Follows liberalization of Ukrainian gas market in 2015 Structure of C1 cash costs – c.30% related to electricity & gas 2% Electricity Gas 6% Fuel 23% 8% Materials 9% Personnel Spare parts 8% 8% Maintenance & repairs Grinding media 10% 10% Royalities 16% Explosives 6
H I G H E R C A S H G E N E R AT I O N F U N D E D W O R K I N G C A P I TA L , I N C R E A S E D I N V E S T M E N T, D I V I D E N D PAY M E N T S & N E T D E B T R E D U C T I O N EBITDA Cash flow 1H 2019 VS. 1H 2018 – Higher iron ore fines prices slightly offset by cost inflation $M (unless otherwise stated) 1H 19 1H 18 Change 2018 Working capital reflects EBITDA 372 234 503 59% – Higher pellet stocks of c.370kt Working capital movements -67 -11 -76 – Higher trade receivables due to higher pricing Working capital – stockpile ore -3 -24 -40 – Minimal increase in iron ore stocks Interest paid -20 -26 -43 -23% – Stockpiled ore to be processed starting 2020 Tax paid -36 -26 -44 38% Other (incl. non-cash operating FX) 10 9 -8 -11% Tax Net cash flow from operating – Based on expected Group weighted tax rate of 15% for 2019 256 156 64% 292 activities Increased investment Capex -114 -56 104% -135 – Concentrate expansion programme on track for end 2020 completion ($14M) Dividend paid -78 -74 -97 5% – Construction of new press filtration plant commenced ($8M) Other 3 3 - – Continued rail car purchase programme ($6M) Net cash flow 67 29 60 131% – Increased stripping to support future production growth ($19M) Proceeds from new borrowings 185 211 214 12% – Sustaining and other capex ($67M) Repayment of borrowings -223 -254 -309 13% Record dividends Cash balance at end of period 92 82 63 12% – 1H 2019: $78M Net debt -282 -369 -339 -24% – 4Q 2018 special dividend of $39M paid January 2019 – 2018 final special dividend of $39M paid May 2019 Note: net debt as of 30 June 2019 included a $6 million effect from the – 2H 2019: $78M first time application of IFRS16 Leases. – 2018 final ordinary dividend of $39M paid July 2019 – 2019 interim ordinary dividend of $39M paid September 2019 7
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