Supplying the world with QUALITY iron ore pellets for over 35 YEARS
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Introduction Michael Abrahams
Chris Mawe, Chief Financial Officer 4
2015: strong performance & continues into January & February 2016 – Record operational performance • Record production volumes US$M (unless otherwise stated) 2015 2014 % Change • Record output of 65% Fe pellets, c. 80% of output Total production (kt) 11,662 11,021 5.8% • Significantly lower C1 costs Sales volumes (kt) 11,330 11,167 1.5% – EBITDA margin 33% - Premium product Average CFR 62% fines price (US$/t) 56 97 (42%) – Special items reflect: Revenue 961 1,388 (31%) • Bank F&C restricted cash US$146M after expected tax credit • Disposal of Ferrous resources US$42M C1 cash cost (US$/t) 32 46 (30%) – Net cash flows from operating activities US$128M : Operating foreign exchange gains 26 76 (66%) - VAT stable EBITDA 313 496 (37%) - Higher pellet and ore stocks – future marketing and operational benefits Profit for the period before special items 142 267 (47%) Balance sheet and debt: Income tax before special items 14% 21% (7%) – Major Investment programs completed Special items after tax (110) (84) 24% – In compliance with all provisions in financing agreements Diluted eps before special items 23.86 44.63 (47%) – No final dividend – initial priority to reduce gearing levels CAPEX (65) (235) (72%) – Currently trading above expectations • Lower C1 Closing net debt (868) (678) 28% • Better pricing Cash 35 627 (94%) • Better W/C management: all overdue VAT refunded in January Net debt to EBITDA 2.78 1.37 103% • US$39M debt repaid whilst liquidity held stable (as of end February 2016) 5
Stable pellet premiums, higher quality & strong cost reduction partially offset lower prices EBITDA waterfall 2014 vs. 2015 US$M – Platts 62% Fe price declined 42% reducing turnover by 496 467 US$467M – Compensated by US$336M of savings • Reduced seaborne freight costs 17 48 61 • Increased volume and quality 313 • Weaker currency reducing costs 125 • Lower operational costs (constant currency) 7 – Stable pellet premiums 19 • Atlantic and spot pellet premiums now starting to 107 increase following Samarco production outage 2014 Platts 62% Seaborne Quality Sales UAH cost C1 cost Other Operating 2015 EBITDA Fe fines freight costs volume reduction reduction: forex gains EBITDA index (net of lower oil & & losses inflation) efficiencies 6
Continued strong cost management 30% reduction in 2015 C1 cash cost US$ per tonne Steadily improved competitiveness 8.0 45.9 US$2BN investment, rigorous & continual cost management since IPO have steadily increased 2.7 37.9 competitiveness 4.1 0.8 0.8 31.9 Cost ranking (from lowest to highest) of seaborne pellet producers 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f C1 2014 UAH Restated Oil price Cost Quality C1 2015 devaluation 2014 effect reduction Ferrexpo 6 7 4 4 3 3 2 3 1 1 (net of initiatives Samarco 2 2 1 3 4 4 4 1 2 n/a inflation) Vale 1 1 3 2 2 1 1 2 3 2 – Controllable costs significantly lower GIIC 11 11 8 11 10 10 10 10 7 3 • pit optimisation Metalloinvest 5 9 5 8 8 8 9 7 5 4 • Improvements in dig & haul rates ArcelorMittal 7 5 6 6 7 7 6 5 6 5 • Increased utilisation of mining equipment &lower maintenance costs MetInvest 3 3 2 1 1 2 3 4 4 6 • Lower waste movements (mine optimisation) IOC 9 8 7 9 9 9 8 8 8 7 – Weakening local currency LKAB 4 6 10 5 5 5 5 6 9 8 – Lower oil & gas Cliffs Natural 8 4 9 7 6 6 7 9 11 9 – Continued reduction in 2016 Grange 10 10 11 10 11 11 11 11 10 10 • February C1 cost US$24.3 per tonne, 23% lower than full year 2015 Source: CRU, February 2016 7
Good cashflow generation in low iron ore price environment Movement in net debt US$M 47 45 693 78 678 206 33 11 32 65 Net debt 1 Opening net debt (1 Net CF before Interest Tax Sustaining capex Project capex Dividends paid Translation & other Ferrous disposal Jan 2015) interest & tax proceeds – US$206M generated from operations – Avg cost of debt was 5.97% (2014 avg: 4.85%), avg gross debt in 2015 US$1BN – Capex reduced to US$65M (2014: US$235M) due to completion of investment programme – returning to sustaining levels – Dividend paid in year line with 2014, no final dividend 2015 – commitment to reduce gearing – US$42M proceeds from Ferrous disposal – Net debt flat year on year before reclassification of restricted cash at Bank F&C actual net debt US$868M – Net debt reduced by US$39M in first two months of year – cash generation & working capital management 1 this excludes the US$175 million reclassification of funds held at Bank F&C as restricted. If this is taken into account Net debt as of 31 December 2015 was US$868M 8
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