3 August 2022

Ferrexpo plc

("Ferrexpo", the "Group" or the "Company")

 

Interim Results for the six months ended 30 June 2022

Supporting the people and communities of Ukraine

 

Lucio Genovese, Non-executive Chair, said:

"Twelve months ago, we spoke in our Interim Results announcement of an exciting future ahead for the Ferrexpo business, and whilst this positive growth story remains in the Group's plans, today we are focused on supporting the people and communities of Ukraine following more than 150 days of Russia's continued invasion. The results announced today reflect an unprecedented period in the history of Ukraine, and Ferrexpo, and should be viewed as a result derived through the strength and determination of Ferrexpo's workforce in Ukraine and those involved in facilitating the export of the Group's products.

"Having previously shown resilience during the global Covid-19 pandemic in 2020 and 2021, the Group's operational teams managed to produce 4.8 million tonnes of iron ore pellets in 1H 2022, and a financial result that is in many ways comparable to historic periods, despite a deterioration in global iron ore markets. Through fifteen years of continual investment to strengthen the Ferrexpo business, we find ourselves in a position to deploy humanitarian support to the people of Ukraine through the Ferrexpo Humanitarian Fund, established in early 2022 and with total approved funding of US$15 million directed towards relevant humanitarian projects across Ukraine. This aid is provided alongside the direct community support provided through the Group's Charity Fund, which has a long-established presence developing and supporting local communities.

"Despite the ongoing conflict in Ukraine, the Group continues to invest in the future - advancing both near-term projects to completion such as the Group's newly completed Medium and Fine Crushing Plant, to the development of longer term projects such as development stripping activities at the Group's third mine - Belanovo, which have continued despite the current environment. The Group's major capital investment programme, the Wave 1 Expansion Project, which will add a further three million tonnes of annual pellet production, remains paused, but will recommence once the conflict risk facing the Group subsides.

"I would like to thank our workforce, suppliers, communities and customers for their continued efforts and support at the present time; it is only through the collective effort of all various stakeholders that we are able to present the results presented here today."

 

Financial Highlights

·   Revenues declined by 31% to US$936 million as a result of lower production and tighter market conditions.

·   Profit after tax in the first half of 2022 ("1H 2022") declined by 88% to US$82 million, reflecting the realisation of an impairment of US$254 million during the period.

·   Underlying EBITDA^A decreased by 44% to US$486 million, reflecting higher costs, principally driven by lower production volumes, rising global inflation and energy prices.

·   The Group remains in a Net Cash^A position (US$172 million), comprising US$177 million of cash and cash equivalents, and minimal debt as of 30 June 2022 (Net Cash^A position as at 31 December 2021: US$117 million).

·   Capital investment of US$102 million during the period, with the Group continuing to invest in projects delivering near term value.

 

US$ million (unless otherwise stated)	6 months ended 30.06.22	6 months ended 30.06.21	Change	Year ended 31.12.21
Total pellet production (kt)	4,797	5,563	(14%)	11,220
Sales volumes (kt)	4,374	5,567	(21%)	11,350
Average Platts 62% Fe iron ore fines price (US$/t)	140	184	(24%)	160
Average Platts 65% Fe iron ore fines price (US$/t)	165	212	(22%)	186
Average Platts Atlantic Pellet Premium (US$/t)	74	54	+36%	56
Revenue	936	1,353	(31%)	2,518
Average C1 cash cost of productionA (US$/t)	85.3	46.6	+83%	55.8
Underlying EBITDAA	486	868	(44%)	1,439
Underlying EBITDAA margin	52%	64%	(12pp)	57%
Profit after tax for the period	82	661	(88%)	871
Diluted EPS (US cents)	13.9	112.3	(88%)	147.9
Dividends per share declared (US cents)	19.8	52.8	(63%)	52.8
Net cash flow from operating activities	233	661	(65%)	1,094
Capital investmentA	102	142	(28%)	361
Closing Net CashA / (net debt)	172	213	(19%)	117
Closing cash and cash equivalents	177	235	(25%)	167

Table 1: Summary of financial performance

Humanitarian Fund

·   Further increase in the approved funding for the Ferrexpo Humanitarian Fund to US$15 million in June, to continue the Group's ability to respond effectively to those in need.

·   Individual projects approved on a daily basis, ranging in scale and complexity, and assessed for their ability to serve the immediate need of communities within Ukraine.

·   Support being offered to both the population located close to the Group's operations in central Ukraine, as well as locations more significantly affected.

·   Each individual project is reviewed and approved by the Group's Health, Safety, Environment and Community ("HSEC") Committee, which is a subcommittee of the Board of Directors ("Board"), and is the committee responsible for the Group's community support activities and sustainability programme.

·   To date, the Group has helped to provide accommodation and assistance to over 2,000 displaced people as a result of Russia's invasion of Ukraine, including the provision of training to allow for new opportunities for employment.

 

Health and Safety

·   The Group's operations continue to prioritise the health and safety of our workforce, despite the ongoing conflict in Ukraine, with no fatalities at Ferrexpo's operations in 1H 2022 and the Group's key safety indicator - the lost time injury frequency rate - remaining at a low level (0.67) relative to the Group's historic average[1] (2017-2021: 0.83) and peers in Western Australia[2].

·   The safety and wellbeing of the Group's workforce, their families and local communities remains the Group's key focus during this challenging period.

·   The Group's facilities continue to operate with minimal impact on operations as a result of to Covid-19.

 

Operational Highlights

·   Pellet production of 4.8 million tonnes in 1H 2022, representing a level 14% below the same period in 2021 due to the conflict in Ukraine and associated logistics constraints, with the Group matching production volumes with accessible pellet demand.

·   Limited production of direct reduction pellets and commercial concentrate during the period due to logistics constraints following Russia's blockade of Ukraine's Black Sea ports in 2022. As a result, the Group has maximised production of premium products for sale into European markets.

·   Sales volumes decreased by 21% to 4.4 million tonnes, due to the logistics constraints referenced above.

·   Sales mix for the Group's products has been largely limited to European customers since the outbreak of Russia's invasion of Ukraine in February 2022, principally linked to Russia's ongoing blockade of Ukraine's Black Sea ports.

·   C1 cash cost of production^A of US$85 per tonne, with this 83% increase reflecting higher energy prices and lower production volumes, with the former being a key driver for both the Group's C1 cash cost of production^A and logistics costs.

·   Capital investment^A of US$102 million in 1H 2022 (1H 2021: US$142 million), with the Group continuing to invest in the future and projects delivering near term value, despite the ongoing war in Ukraine.

·   The Group continues to receive adequate supplies of key consumables, with Ukraine's reduced industrial output resulting in lower overall demand for inputs such as electricity, diesel and natural gas.

 

Market Environment

·   High grade (65% Fe) iron ore prices as assessed by S&P Global Platts ("Platts") decreased by 22% in 1H 2022, reflecting tightening global markets, inflationary pressures lowering global economic output and Covid-19 restrictions in China.

·   Fundamentals for iron ore pellets remain strong, particularly in European markets, with the Platts Atlantic Pellet Premium rising by 36% in 1H 2022, reflecting reduced supply of Russian iron ore pellets into the global market, steelmakers' continued efforts to reduce emissions and limited additional new pellet supply entering the market.

·   C3 freight rates[3] rose by 20% to an average of US$26 per tonne in 1H 2022 as a result of higher global energy prices following Russia's invasion of Ukraine and restrictions in global oil supply.

 

Board of Directors and Corporate Governance

·   Appointment of Jim North as permanent Group Chief Executive Officer.

·   In February 2022, the position of Senior Independent Director was transitioned to Fiona MacAulay.

·   Ann-Christin Andersen appointed to the role of Chair of the Health, Safety, Environment and Community ("HSEC") Committee.

·   Natalie Polischuk appointed to the HSEC Committee

 

Environment, Social and Governance ("ESG")

·   Release of annual Responsible Business Report on the Group's website today, covering ESG activities in 2021.

·   Carbon emissions footprint decreased by a further 10% in 1H 2022 on a year on year basis.[4]

 

Alternative performance measures

Words with the symbol A are defined in the Alternative Performance Measures section on pages 41 and 42.

 

Ferrexpo:
Rob Simmons	r.simmons@ferrexpo.ch	+44 207 389 8305
Tavistock:
Jos Simson Emily Moss Gareth Tredway	ferrexpo@tavistock.co.uk	+44 207 920 3150 +44 7785 974 264

 

 

Notes to Editors:

Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine and a premium listing on the London Stock Exchange in the FTSE 250 index (ticker FXPO). The Group produces high grade iron ore pellets, which are a premium product for the global steel industry and enable reduced carbon emissions and increased productivity for steelmakers when the Group's iron ore pellets are converted into steel, compared to more commonly traded forms of iron ore. Ferrexpo's operations have been supplying the global steel industry for over 50 years, and in 2021 the Group produced 11.2 million tonnes of iron ore pellets, placing Ferrexpo as the world's third largest exporter of pellets to the global steel industry with a market share of approximately 9%. The Group has a global customer base comprising of premium steel mills around the world, which includes steel mills in Austria, Germany, Japan, South Korea, Taiwan, China, Slovakia, the Czech Republic, Turkey, Vietnam and America. For further information, please visit www.ferrexpo.com.

 

 

Introduction

The Group continues to operate in Ukraine, despite the ongoing invasion by Russia. Whilst the business continues to remain under significant pressure due to logistics constraints in Ukraine, the Group's operational and management teams have consistently sought to resolve issues as they emerge, minimising their impact on production and sales. Through this resilience and flexibility, the Group has been able to continue to operate and support its workforce, their families, local communities and other stakeholders throughout the conflict in Ukraine. The Group understands its role in supporting the people of Ukraine at this time and will continue to fulfil this role going forward.

Through the Ferrexpo Humanitarian Fund, the Group has sought to support those in need of humanitarian support, with this fund having US$15 million of approved funding to date.

Safety remains a core focus of the Group and its operations. Safety performance in 1H 2022 has not declined as a result of the conflict in Ukraine, with operations continuing to remain fatality free in 2022 (2021: none), and the Group-wide lost time injury rate remaining materially below both Ferrexpo's historical five-year average and iron ore producing peers in Western Australia[5]. For more information on the Group's safety performance in 1H 2022, please see section titled 'Health and Safety'.

Following 15 years of consistent investment in the Group's operations, to develop the Ferrexpo business into the world's third largest exporter of iron ore pellets, the Ferrexpo business has delivered consistent financial performance. The results presented in this release are no exception, and whilst the Group's focus remains on generating stakeholder value, the Group understands that financial metrics are currently not the primary concern of Ferrexpo's stakeholders in Ukraine.

The Group produced 4.8 million tonnes of iron ore pellets in 1H 2022 and achieved a sales figure of 4.4 million tonnes during the same period. Through this result, which was delivered through the resilience and commitment of Ferrexpo's workforce in Ukraine, sales and marketing teams and global management team, the Group has been able to register an Underlying EBITDA^A result of US$486 million (1H 2021: US$868 million). This financial performance has been made possible through the Group's continued focus on high grade, high quality forms of iron ore, with 100% of production grading more than 65% Fe in 1H 2022 (1H 2021: 100%). For further details of the Group's financial performance, please see the section titled 'Financial Review'.

Shareholder returns

The Group has long maintained a policy of investing for the future growth of its business alongside shareholder returns. In light of the ongoing conflict in Ukraine, and the associated reduction in logistics capacity for the Group to export its products, the Directors have elected not to announce an interim dividend associated with today's announcement.

In May 2022, the Board announced an interim dividend in respect of 2022 of 13.2 US cents per Ordinary Share, which reflected market conditions in 1H 2022 and continued availability of export logistics within Ukraine. In June 2022, the Group's shareholders approved a final dividend in respect of 2021 of 6.6 US cents per Ordinary Share (2020 final dividend: 13.2 US cents per Ordinary Share), which was paid in July 2022, after the close of the period.

Board membership and executive management

Ferrexpo continues to evolve its leadership team and Board to align itself towards the next phase of the Group's strategy and a low-carbon future. During the period, the Board confirmed Jim North as permanent Chief Executive Officer of the Group, having successfully led the Group on an acting basis for a period of time.

In early February 2022, the Group also announced that a number of roles at the Board level would be changed - including the appointment of Independent Non-executive Director Fiona MacAulay as Senior Independent Director ("SID"). This followed a successful period of workforce engagement by Independent Non-executive Director Vitalii Lisovenko during the global Covid-19 pandemic, and Mr Lisovenko will continue in the role of the Board's representative for workforce engagement. Following the appointment of Ms MacAulay as SID, Ann-Christin Andersen was appointed to the role of Chair of the Health, Safety, Environment and Community ("HSEC") Committee, who has been an Independent Non-executive Director of Ferrexpo since March 2021. Ms Andersen is joined on the HSEC Committee by another Independent Non-executive Director - Natalie Polischuk, who joined the Board in December 2021.

The above appointments have been made following processes that involved internal and external stakeholder consultation, including shareholder feedback received as part of the Group's regular engagement around financial results, corporate governance roadshow and Annual General Meeting. The Board will continue to engage with the Group's stakeholders to ensure the continued alignment of the Group's activities with its strategy and stakeholders.

 

 

Iron ore market review

Iron ore pricing

The following market review focuses on the high grade fines index (65% Fe), as published by Platts, since this is the basis for the pricing of Ferrexpo's iron ore products, 100% of which were graded 65% Fe or higher in 1H 2022 (1H 2021: 100%).

High grade iron ore prices began the reporting period at US$140 per tonne and ended the period at US$135 per tonne[6], representing a closing price 46% below the same point in 2021, with 24% higher volatility during the reporting period[7]. Iron ore fines (65% Fe Index) prices averaged US$165 per tonne during 1H 2022, representing a level 22% below the average for 1H 2021. The key drivers for this increased volatility and lower average prices can be attributed to two key factors: (1) the conflict in Ukraine, driving short term instability in commodity pricing and the global economic outlook, and (2) declining stimulus by central banks and government policies in response to Covid-19 in 2022, despite continuing infections affecting productivity, with a particular focus on China for this second factor. In the comparable period in 2021, the global response to the Covid-19 pandemic resulted in significant financial assistance for economies worldwide, which drove up end-user demand and therefore lead to higher commodity pricing as a result. In 2022, this factor relating to Covid-19 has lessened, and is joined by global concerns relating to rising inflation and energy costs, both of which are linked in part to Russia's invasion of Ukraine. In addition, iron ore fines exports from Australia and Brazil, which collectively represented 83% of iron ore fines exports in 2021, are expected to increase by 11% in 2H 2022 due to seasonal supply patterns and major producers continuing to increase production through operational improvements[8] - see section titled 'Iron Ore Fines Supply' below for more information.

High grade premiums, which represent the amount paid for the additional iron in material grading 65% iron ("Fe"), or above, versus the benchmark medium grade (62% Fe) index rose to 18% in 1H 2022, up from 15% in the prior period. This represents a continuation of the trend seen throughout 2021, as steelmakers seek to utilise higher grade ores to reduce their emissions.

The pellet premium represents the additional price paid by steelmakers over the iron ore fines index, and this premium typically reflects the higher quality, high grade nature of iron ore pellets, which are a product that offers steelmakers the opportunity to reduce greenhouse gas emissions. The Atlantic Pellet Premium increased by 36% in 1H 2022, reflecting reduced iron ore pellet supply from Russia into the majority of export markets, following Russia's invasion of Ukraine, as well as steelmakers' increasing desire to lower emissions. As noted on page 12 of the Market Review of the Group's Annual Report and Accounts for 2021, the Group prices its pellets using a pellet premium based on the high grade index, whereas the Atlantic Pellet Premium is priced off the medium grade index. The Atlantic Pellet Premium is therefore not directly transferrable to the pricing of Ferrexpo's products and should be viewed as an indicator for Ferrexpo's pellet premiums, which are agreed individually with customers.

The near-term outlook for the supply of medium grade iron ore fines appears to be balanced, with minimal growth in the market for production of high grade forms of iron ore in particular. However, the market outlook for iron ore pricing appears to be primarily governed by expected fluctuations in the demand from China, which accounted for 71% of global iron ore imports in 2021[9], where end user demand is expected to moderate as high levels of inflation continue to affect the global economy. Recent movements in iron ore inventories in China saw a peak in early 1H 2022, and stockpile levels are now returning to levels that were previously seen in 1H 2021. Steel margins, often an indicator of the outlook for iron ore fines pricing in the medium-term, have recently turned negative for hot rolled coil and rebar in China[10] due to end-user demand remaining weak. This will eventually lead to more steelmakers curbing production, thus reducing demand for iron ore. It is management's expectation that this will apply downward pressure on iron ore pricing in 2H 2022. Iron ore futures contracts, however, indicate pricing of US$113 per tonne for delivery of medium grade material in December 2022, indicating an expected degree of market balance for the coming period[11].

The outlook of pellet premiums, which are primarily governed by profitability of the European and Asian (excluding China) steel sectors, is expected to remain flat in the coming period, with limited additional supply into an end-user market that is looking to reduce emissions and therefore source greater quantities of iron ore pellets.

Freight

The C3 freight rate, which is principally used as a freight reference in the pricing of the Group's sales contracts, averaged US$26 per tonne in 1H 2022 (1H 2021: US$22 per tonne), representing a 20% increase[12]. The same freight rate ended the half year period on US$31 per tonne (as at 30 June 2022), and this continued escalation reflects a global trend of rising energy prices, with the Brent crude oil price rising by 48% in 1H 2022 alone[13].

An expected decrease in iron ore exports from Brazil in the third quarter of 2022, due to lower production rates in response to steel margins in China and resulting demand for iron ore, is expected to result in lower availability of Capesize vessels in the Atlantic Basin during this period, which will likely elevate C3 freight rates in the short term. Reduced steel margins in China, and an associated downward movement in demand for iron ore, has subsequently lowered iron ore production rates in Brazil, weakening the C3 freight rate seen in 3Q 2022. The current forward curve for the C3 freight rate in 3Q 2022 is marginally higher than the spot price, whereas historically this would have seen a 30% mark up against the spot C3 freight rate.

Iron ore fines supply

Published sales data for the major iron ore producers in 1H 2022 indicates that overall iron ore shipments from the Pilbara Region of Western Australia and Brazil remained in line in 1H 2022 relative to 1H 2021, implying a balanced level of iron ore supply into the global export market, and therefore indicating that the current global iron ore market is predominantly being influenced by fluctuations in demand for iron ore.

Iron ore fines consumption is expected to remain balanced in the second half of 2022 before contracting by 2% in 2023 and 3% in 2024, with a reduction in demand by Chinese steelmakers partially counterbalanced by growth in demand in ex-China regions[14]. Scrap supply in China is expected to improve in 2H 2022 with pandemic-related lockdowns being eased, thus re-opening up the domestic scrap supply chains. An expected 45% increase (versus 1H 2022) in scrap input into Chinese hot metal production has been estimated for 2H 2022[15]. However, this expected increase may be subdued due to the low, or negative, steel margins in China, which could shift mill preferences toward the lower-grade ore segment.

Iron ore pellet supply

Available data for global iron ore pellet export volumes indicate that the total export volume in the first five months of 2022 ("5M 2022") was approximately 53 million tonnes, representing a result broadly in line with the same period in 2021[16]. Major movements within the global pellet supply market include a decrease of between 3.0 and 3.5 million tonnes of Russian iron ore pellet exports due to the conflict in Ukraine and associated trade restrictions. This has been counter-balanced by an overall increase in exports of Ukrainian pellets during the period, reflecting the partial closure of the domestic steel sector in Ukraine following Russia's invasion, and a resulting increase in exports. The overall supply from other major centres of pellet production - such as Brazil, Canada and Sweden, have contributed a combined volume of material in line with the prior period.

The outlook for iron ore pellet supply remains balanced, with the ongoing conflict in Ukraine a key factor, alongside high energy costs, which may incentivise individual producers to produce iron ore concentrate over pellets. In addition, in May 2022, the Indian government introduced a 45% export duty on iron ore pellets, which has restricted the ability of local pellet producers to supply international markets[17], and there are reports of at least one export-oriented pellet plant in India suspending operations due to the unfavourable export economics.

Iron ore pellet demand

The key markets for global exports of blast furnace iron ore pellets are Europe, and markets in North East Asia such as Japan and Korea, with buying activity by steelmakers in these locations reflecting approximately 40% of total exports to locations typically associated with blast furnace pellets[18]. By contrast, in the same period, steelmakers located in China represented just 14% of total pellet exports to locations traditionally associated with blast furnace pellets, reflecting a year on year decline of approximately 3.0 million tonnes, or the equivalent of a 40% reduction. This decrease relates to the typical sourcing of pellets imported into China, which predominantly originate from locations that have all decreased export activity in 2022, as well as elevated exports to China in 1H 2021 (relating to China's economic stimulus package in response to Covid-19). In addition, with steel margins remaining weak in China in the later part of 1H 2022, steelmakers have reduced their consumption of pellets, turning toward an increased proportion of low-grade iron ore in their feedstock instead to control costs.

The Middle East and North Africa (collectively "MENA") region and North America are the main regions that have historically bought the majority of direct reduction pellets, with demand in these markets remaining balanced in 5M 2022. This balance in 2022 reflects the relative stability of the economies in these particular regions, a lower level of Covid-19 restrictions (relative to China) and a reduced reliance on Russia for energy imports.

Global steel production

According to the World Steel Association, global steel production fell by 5.5% to 949 million tonnes in 1H 2022[19], reflecting exceptionally high rates of steel production in 1H 2021 when governments around the world were providing financial stimulus packages in an effort to mitigate the impact of Covid-19 on the global economy. Global steel output has therefore declined in 2022 following governments' tapering of this financial support in late 2021, in addition to inflationary pressures and the global uncertainty brought about by Russia's invasion of Ukraine in February 2022, which have contributed to falling steel margins in 2022. This decline in steel output is most pronounced in China, where production volumes decreased by 6.5% in 1H 2022, whereas the key centres of pellet consumption - Europe (EU-27), Japan and South Korea, have seen smaller declines in output than China (being 6.2%, 4.3% and 3.9% respectively).

Looking ahead, the World Steel Association forecasts that global steel demand will grow by 0.4% in 2022[20], following an increase of 2.7% in 2021, noting the World Steel Association's caveat for producing a forecast issued "against the backdrop of the war in Ukraine and is subject to high uncertainty". Furthermore, citing unknowns relating to the war in Ukraine and global inflation, the World Steel Association also notes the significant uncertainties with any forecast of steel production for 2023.

In the longer term, the Group expects that tighter emissions controls and government regulation, particularly in the EU, will result in additional demand for high grade, low impurity pellets in the future. Independent research by CRU has demonstrated the advantage of lower CO₂ emissions from using additional pellets in the blast furnace burden instead of sinter fines, primarily as a result of higher pellet rates having a lower requirement for coke (a product derived from coal), and also as a consequence of steel producers not needing to sinter material before it enters the blast furnace (which is a process that typically requires coal). This research estimates that steel mills produce approximately 40% less CO₂ for each tonne of Ferrexpo's high grade iron ore pellets used in place of sinter fines.

Financial review

Despite unprecedented operational and logistical pressures, the Group has registered a result in 1H 2022 that reflects the resilience of the Group's workforce in Ukraine, marketing teams, suppliers and customers, to maintain production and shipments at this difficult time. In summary of financial performance during the period, revenues fell by 31% in 1H 2022 due to 21% lower sales volumes and tightening market conditions resulting in lower realised pellet prices, with iron ore markets entering into a different phase of the commodities cycle when compared to 2021, which saw governments worldwide providing economic stimulus packages in response to the Covid-19 pandemic. The Group's Underlying EBITDA^A decreased by 44% as a result of the factors described above and C1 cash cost of production^A ("C1 costs^A") rising by 83%, which were primarily impacted by rising global energy costs and associated cost inflation, in addition to the Group's lower production volumes resulting in reduced economies of scale. The Group continues to invest in the future, despite the conflict in Ukraine, with US$102 million of capital investment^A, reflecting work completed on sustaining capital investment and smaller growth projects expected to deliver near-term value.

Revenue

The Group recorded a 31% decline in revenues in 1H 2022 to US$936 million in 1H 2022, with this year on year movement coming as the result of a combination of the following key drivers: 21% lower sales volumes, 22% lower benchmark iron ore prices (65% Index), and higher freight rates as the Group has adapted its business following Russia's invasion of Ukraine in 2022.

US$ per tonne	1H 2022	1H 2021	Change
Average Platts 62% Fe iron ore fines price	140	184	(24%)
Average Platts 65% Fe iron ore fines price	165	212	(22%)
Average high grade premium (Platts)	25	28	(11%)
Average Platts Atlantic blast furnace pellet premium	74	54	+36%
Average Platts direct reduction pellet premium	81	70	+16%

Table 2: Headline pricing 1H 2022 vs. 1H 2021

 

Russia's invasion of Ukraine in 2022 has had a significant influence on the Group's operations and logistics network, with operating teams pivoting sales according to accessible markets following the closure of Ukraine's Black Sea ports in February 2022 and reacting to subsequent periodic downtime on the Ukrainian railway network as a result of Russia's aggression against the people of Ukraine.

The Group's sales mix for 1H 2022 is described in detail in the section titled 'Operational Review (Marketing)', with sales predominantly to European customers from late February 2022. This shift in sales reflects the Group's logistics flexibility, which has in the past enabled the Group to pivot to the iron ore market in China during the global Covid-19 pandemic in 2020 and then quickly return to traditional market mix of European and Asian customers as the effects of the pandemic lessened in 2021. The Group is in advanced discussions to recommence material sales volumes to customers historically accessed via oceangoing freight, with small shipments made in June 2022 to such customers from Black Sea and Baltic Sea ports.

Freight rates rose in 1H 2022 as the conflict in Ukraine has pushed the Group to utilise new logistics corridors and establish new relationships with logistics providers and port operators. Since the Group's previous logistics configuration represented the lowest cost, most efficient pathway for delivering products to Ferrexpo's customers, any deviation from this setup is likely to result in additional costs to the Group. The Group's current logistics solutions predominantly involve either the railing of products direct to European customers, or the railing of material to the Group's barging subsidiary on the River Danube for delivery to specific customers in Europe. The Group expects to resume its previous logistics operations as soon as it is practical and safe to do so.

Costs

C1 cash cost of production^A

The Group's average C1 cash cost of production^A ("C1 cost") reflects the Group's operating costs in the production of iron ore pellets, with a breakdown of this shown in Table 3. The Group's C1 Cost^A increased by 83% in 1H 2022 to US$85 per tonne, reflecting increased global energy costs and related inflationary pressures, in addition to the Group operating its assets below nameplate capacity due to the conflict in Ukraine and related logistics constraints. Key drivers in the Group's C1 Cost^A are the cost of natural gas, diesel and electricity in Ukraine, which collectively represent 46% of the cost base as presented in Table 3. Global energy prices have risen significantly since the fourth quarter of 2021 and further increased following the outbreak of Russia's invasion of Ukraine in February 2022, resulting in the Brent price for oil increasing by 48% over the course of 1H 2022. Natural gas prices have also risen in 2022, with the price for this commodity rising by more than 50% between 2021 (average) and June 2022. Electricity prices in Ukraine rose in 1H 2022, but to a lesser extent than diesel and natural gas, peaking at US$103 per megawatt-hour ("MWh") in January 2022, before declining to US$83 per MWh in June 2022, against an average for 2021 of US$72 per MWh.

As referenced in the Financial Review of the Group's Annual Report and Accounts for 2021, Ukraine has introduced a new royalty regime for iron ore producers, which came into force in January 2022, whereby royalty payments are calculated based on the benchmark medium grade (62% Fe) iron ore fines price. This new system is structured as follows: (1) at monthly iron ore prices (62% Fe) less than or equal to US$100 per tonne, a royalty rate of 3.5% will apply to iron ore product sales, (2) at prices less than or equal to US$200 per tonne a royalty rate of 5% will apply and (3) at prices above US$200 per tonne a 10% royalty rate will apply. Royalties are not tiered and therefore the rate applied will apply to the full price of the iron ore product being sold. This compares to the previous iron ore royalty calculation whereby the Group paid a flat royalty rate of approximately US$3.5 per tonne of all tonnes sold. Since the monthly iron ore price remained between US$100 and US$200 a tonne during 1H 2022, the Group has applied a royalty rate of 5% for sales during the period.

The local currency in Ukraine, the Ukrainian hryvnia ("UAH"), was directly linked to approximately 67% of the Group's C1 Costs^A in 1H 2022. In the first six months of 2022, the Ukrainian hryvnia depreciated by 7% to a rate of UAH 29.26 to the US dollar. For more information on the Ukrainian hryvnia, please see the section titled 'Currency'.

The Group expects that pricing for key commodities will remain largely in line in the near term, with potential upward pressure on natural gas prices in 2H 2022 if global supply continues to be restricted. In addition, the war in Ukraine continues to have a significant impact on the Group's C1 Costs and it is difficult to forecast any movements in the near term whilst this remains a major factor.

	% of C1 cost 1H 2022	% of C1 cost 1H 2021	Change (percentage points)
Electricity	20%	23%	(3pp)
Natural gas and sunflower husks	19%	10%	+9pp
Fuel (including diesel)	7%	7%	n/c
Materials	6%	10%	(4pp)
Personnel	7%	9%	(2pp)
Maintenance and repairs	18%	23%	(5pp)
Grinding media	6%	9%	(3pp)
Royalties	16%	7%	+9pp
Explosives	2%	2%	n/c

Table 3: Breakdown of C1 cash cost of production^A

Please note: figures in table above may not add up to 100% due to rounding. The Group's C1 cash cost of production^A represents the cash costs of production of iron pellets from own ore (to the mine gate), divided by production volume from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, also the costs of purchased ore, concentrate and gravel.

Selling and distribution costs

Total selling and distribution costs in 1H 2022 were US$147 million (1H 2021: US$152 million), with this 3% decrease reflecting the Group's lower sales volumes and reduced exposure to seaborne freight rates. These lower costs are partially counterbalanced by higher unit costs for alternative logistics access to European markets as a result of network congestion and disruption, which are the result of the conflict in Ukraine.

Following Russia's invasion of Ukraine, the railway infrastructure of Ukraine is under significant pressure to handle large volumes of goods that would otherwise have been exported through Ukraine's Black Sea ports, which remain closed due to the ongoing blockade by Russia. In addition, the national rail operator (Ukrzaliznytsia) is facing regular attacks on its network and is conducting regular repair work to maintain rail access for Ukraine's people and businesses. As a result, in June 2022, the Ministry of Infrastructure in Ukraine has signed an order permitting the rail operator to increase rail tariffs from July 2022 by 70% for all 20 types of cargo[21], which will result in an additional US$7-9 per tonne being applied to the Group's distribution costs.

General and administrative expenses

General and administrative expenses increased by US$2 million to US$35 million primarily due to local inflation related higher personnel costs in Ukraine.

Other operating expenses

Other operating expenses increased from US$21 million to US$283 million, predominantly due to a recorded impairment loss of US$254 million on the Group's non-current operating assets, including property, plant and equipment, goodwill and intangible assets, and other non-current assets. The recorded impairment loss as of 30 June 2022 results from the Group's lower cash flow generation and higher discount rate to be applied, both caused by the ongoing war in Ukraine. The impairment will be re-assessed at the end of future reporting periods and might reverse, in case of an improvement of the situation in Ukraine.

For further details, please see Note 10 Property, plant and equipment of the accounts.

Currency

Ferrexpo prepares its consolidated accounts in US dollars. The functional currency of the Group's Ukrainian operations is the hryvnia ("UAH") and, as noted in the previous section, over half of the Group's operating costs are in local currency. In 1H 2022, the Ukrainian hryvnia depreciated from UAH27.278 per US dollar on 1 January 2022 to UAH29.255 per US dollar as of 30 June 2022, whereas the local currency appreciated during the comparative period ended 30 June 2021. As a result of the Russian invasion into Ukraine, the Ukrainian government pegged the local currency to the US dollar in February 2022 in order to avoid a more severe devaluation. For further information, see section titled Costs (C1 cash cost of production^A). The Group's total operating forex gain of US$85 million in 1H 2022 predominantly resulted from the conversion of US dollar denominated assets in Ukraine, compared to a loss of US$38 million in 1H 2021.

Source: National Bank of Ukraine	Spot 30.07.22	Opening rate 01.01.2022	Closing rate 30.06.2022	Average 1H 2022	Average 1H 2021
UAH per US$	36.569	27.278	29.255	28.902	27.779

Table 4: Ukrainian hryvnia vs. US dollar

Underlying EBITDA^A

Underlying EBITDA^A in 1H 2022 decreased by 44% to US$486 million compared to US$868 million in 1H 2021, with this decrease driven by lower iron ore prices, a reduction in sales volumes and higher C1 costs^A.

Interest

The Group's interest expense declined by 65% to US$2 million, compared to US$6 million in 1H 2021 due to a lower outstanding debt balance. Further details on finance expense are disclosed in Note 7 Net finance expense of the accounts.

Tax

The income tax expense for 1H 2022 of US$74 million represents a decrease of 46% driven by a lower realised profit during the period ended 30 June 2022. Whilst an expected weighted average tax rate for the full year 2022 of 16.0% is expected, the effective tax rate of 47.3% is due to the fact that the recorded impairment loss of US$254 million on the Group's non-current operating assets is not tax deductible in Ukraine. For reference, the effective tax rate of the financial year 2021 was 18.7%.

The Group operates across a number of jurisdictions and its effective tax rate is subject to various factors outside of the Group's control. This includes the volatility in the global iron ore pellet market and foreign exchange rate movements, primarily between the Ukrainian hryvnia and the US dollar.

Further details on taxation are disclosed in Note 8 Taxation of the accounts in respect of ongoing tax-related court proceedings.

Items excluded from underlying earnings

As referenced in Note 35 of the 2021 Annual Report and Accounts, the Russian invasion of Ukraine was considered as a non-adjusting post balance sheet event as at 31 December 2021 and is to be considered as an adjusting event as at 30 June 2022.

As a result of the ongoing war in Ukraine, certain logistics networks are not available and the Group had to adjust its long-term model to be used for the impairment test. Due to the currently lower expected cash flow generation, the carrying value of the Group's non-current operating assets exceeded its computed value in use by US$254 million and the Group has recognised an impairment loss corresponding to this amount.

For more information, please see Note 10 Property, plant and equipment and Note 11 Goodwill and intangible assets of the accounts.

Profit for the period

Profit for the period was US$82 million, compared with US$661 million in 1H 2021, reflecting the net effect of the lower Underlying EBITDA^A and recognition of an impairment loss.

Cash flows

The net cash flow from operating activities was US$233 million (1H 2021: US$661 million), with this decrease driven by reduced sales, lower prices for iron ore products and higher costs in the first half of 2022.

Movements in working capital in 1H 2022 reflect a net outflow of US$112 million (1H 2021: net outflow of US$126 million), which is primarily as a result of an increase in inventories and a decrease in trade receivables.

During 1H 2022, dividend payments totalled 19.8 US cents per Ordinary Share, compared to 52.8 US cents per Ordinary Share paid in 1H 2021, with payments in 1H 2022 comprising of: (1) the interim dividend of 6.6 US cents per share in respect of 2021 that was paid in January 2022, and (2) an interim dividend in respect of the 2022 financial year (13.2 US cents per Ordinary Share) that was paid in June 2022. The Group's shareholders also approved a final dividend at the Group's Annual General Meeting of 6.6 US cents per share in June 2022, which was paid in July 2022, after the close of the period.

The Group's Board has not proposed an interim dividend as part of today's announcement.

Capital investment^A

Capital investment^A in 1H 2022 was US$102 million, compared to US$142 million in 1H 2021, which includes US$35 million of sustaining and modernisation capital investment^A across the Group. Given the operational and logistics constraints relating to Russia's invasion of Ukraine in 2022, the Group has maintained its levels of investment relating to sustaining capital investment^A and has sought to reduce activities relating to expansion capital investment^A, particularly with projects that are expected to deliver returns in the medium to long term. As such, major projects advanced in 1H 2022 include US$17 million spent on stripping activities for future production growth, US$10 million spent on the completion of the Group's press filtration complex and US$2 million for completion of the medium and fine crushing ("MFC-2") project, which will help raise concentrator capacity in the near term once operations return to full capacity, and US$22 million spent on the Wave 1 Expansion, primarily relating to expenditures in 1Q 2022 and fulfilling prior commitments. The Group also spent US$7 million in the development and exploration of the Bilanivske (Belanovo mine) and Galeschynske and Northern Deposits, alongside a US$2 million investment in the planned hydrolysis plant and US$1 million on the procurement of new railcars.

Net Cash / Debt

Throughout the first half of 2022, and particularly from the start of the conflict in Ukraine, the primary focus of the Group has been the safety and wellbeing of its workforce, alongside the protection of the Group's Net Cash^A position, balancing operational and financial targets. This prudent approach resulted in the Group's Net Cash^A position improving from US$117 million as of 31 December 2021 to US$159 million as of 31 March 2022. Throughout the conflict in Ukraine, Ferrexpo has faced various challenges relating to logistics, which it has been able to manage thanks to the Group's constructive, long-term relationships with its customers. During the second quarter of 2022, as the war has progressed in Ukraine, the Group has witnessed increasing logistical constraints and management teams have continually sought to develop alternative plans to secure sales and ensure adequate liquidity. The Group's Net Cash^A position as of 30 June 2022 was US$172 million, which was the result of the Group's commitment to maintain safe operations, whilst also maintaining adequate liquidity buffers and a balanced approach to shareholder returns.

The Group's uncommitted trade finance facilities totalling US$140 million have been maintained without disruption, despite the volatility seen in 2022. No line was in use as of 30 June 2022, while the Group's minor debt positions relate to finance lease arrangements. The Group's gross debt balance as of 30 June 2022 was US$5 million (31 December 2021: US$50 million).

It is the Group's intention to maintain strong balance sheet metrics whilst continuing to invest in the next phase of the Group's organic growth programme, in addition to maintaining a suitable level of shareholder returns.

Related party transactions

Related party transactions are disclosed in Note 19 Related party disclosure to the accounts.

 

Operational review

Health and safety

LTIFR	1H 2022 (6M)	1H 2021 (6M)	2021 (12M)
- FPM	0.66	0.48	0.43
- FYM	0.48	-	0.50
- FBM	6.16	-	-
Ukraine	0.71	0.39	0.43
- First-DDSG (inland waterway logistics)	-	-	-
Group	0.67	0.37	0.41

Table 5: lost time injury frequency rate by business unit

Despite the ongoing conflict in Ukraine, Ferrexpo continues to maintain its strong safety record, with no fatalities in 1H 2022 (FY 2021: none), and a lost time injury frequency rate ("LTIFR")[22] of 0.67 (FY 2021: 0.41). Ferrexpo records total injuries (being lost time injuries plus those requiring first aid care) at its operations in Ukraine and registered a total recordable injury frequency rate in Ukraine of 0.72 (1H 2021: 0.39) for the six months to June 2022. The relatively high LTIFR recorded at FBM reflects a single LTI occurring at a relatively small operation, with this subsidiary not recording a lost time injury in the previous seven years.

The Group's achievement of consistently maintaining a low incidence of safety incidents across the Group is the culmination of a multi-year project seeking to implement a strong safety culture at the Group's operations, including workforce engagement and training on safety topics and regular monitoring of leading and lagging indicators of safety. Through this approach, Ferrexpo continues to operate below its historic trailing average LTIFR of 0.83[23]. Ferrexpo's operations also continue to operate with a lower LTIFR than the Group's iron ore producing peers in Western Australia, where the LTIFR was 1.1 in the 12 months to June 2021 (latest available data)[24].

In addition to progress made in safety at its operations, in July 2022 the Group has completed an external assurance process for its safety and greenhouse gas emissions in 2021, with further details of this process provided in the section titled 'External Assurance Process'.

Impact of conflict in Ukraine

Following the outset of the war, the government of Ukraine has proceeded to call up individuals to serve in the military in waves of conscription, and as such, approximately 6% of the Group's employee workforce are currently serving in the Ukrainian military. The Group regrets to inform that it has been notified that six employees serving at the front have lost their lives in the conflict. The Group is providing support to family members of individuals killed in the fighting.

Pellet production and pellet quality

The Group continues to operate in Ukraine and deliver its products to customers, despite the ongoing conflict in Ukraine. The Group's operations are situated in central Ukraine and are therefore not in areas directly affected by Russia's invasion, and the major impact of the conflict has been on the Group's ability to ship products, particularly in light of Russia's ongoing blockade of Ukraine ports and access to the Black Sea. As a result of this, from the outset of Russia's invasion on 24 February 2022 until the end of the period (30 June 2022), the Group has been predominantly restricted to exports into Europe via either rail or its inland waterway business on the River Danube ("First-DDSG").

The Group announced its production for the first half of 2022 on 7 July 2022, with pellet production of 4.8 million tonnes, representing a 14% decline on a year on year basis. The decline in production in 1H 2022 relates to the logistics constraints that the Group is currently experiencing, with the Group's operations producing sufficient iron ore pellets to meet accessible demand. Throughout the period, the Group has operated with between one and all of its four pelletiser lines, each of which being capable of producing approximately 3.0-3.5 million tonnes of pellets a year (depending on pellet types being produced). As of the end of July, the Group is currently operating one pelletiser line, with additional sales to draw down on existing stockpiles of the Group's products.

Despite the ongoing war in Ukraine, the Group has continued its focus on high grade production, with 100% of production being high grade (2021: 100%). The Group also produced 90 kilotonnes ('kt') of higher grade direct reduction, which are used in lower emissions methods of steelmaking and therefore carry a materially lower Scope 3 footprint for Ferrexpo. For more information on the different methods of steelmaking and their emissions footprint, please the case study provided on page 10 of the Group's 2021 Annual Report and Accounts.

The Group's production facilities continue to operate with minimal impact from Covid-19 to date, and the Group continues to monitor its workforce. In addition, the infection rate in the local communities surrounding the Group's operations remains low, albeit the Group notes that testing rates have declined since the outset of Russia's invasion of Ukraine in February 2022.

As announced in the Group's full year results on 22 April 2022, Ferrexpo has taken the decision to temporarily suspend activities relating to growth projects that will deliver additional value over the medium to long-term, on the basis of preserving the Group's cash balance and retaining management's focus on maintaining production activities. Ferrexpo did, however, complete construction of its medium and fine crushing plant in 1H 2022, which is a project that has been underway for more than two years and delivers an immediate opportunity for volume growth and quality improvements, once the Group is able to increase production volumes again. For more information on current progress made in relation to expansion projects, please see the section titled 'Capital investment^A'.

(Thousand tonnes, unless stated otherwise)	Product Grade Fe	1H 2022	1H 2021	Change
Total commercial production (pellets and commercial concentrate)		4,816	5,713	(16%)
Including: total pellet production		4,797	5,563	(14%)
Pellet production comprised of:
o  Direct Reduction Pellets	67%	90	135	(33%)
o  Ferrexpo Premium Pellets	65%	4,707	5,428	(13%)
o  Ferrexpo Basic Pellets	62%	-	-	-
Including: commercial concentrate production	67%	19	150*	(88%)

Table 6: iron ore production in 1H 2022 and 1H 2021.

* Note that as of 4Q 2021, the Group now defines commercial concentrate tonnes as tonnes sold, rather than shipments to the Group's berth, changing the figure in the above table from 149kt to 150kt.

Technology and innovation

Part of the Group's strategy is to utilise modern technology to update and expand its operations, and this focus remains despite the ongoing war in Ukraine. In 1H 2022, the Group's Executive Committee met and approved the first stage of the electrification of the mining fleet, representing planning activities for the installation of a trolley-assist network up the haul ramp at its mines. Detailed engineering work is now underway for the conversion of 11 trucks to be electric-drive so that they could serve as a trial for this technology on a larger scale at Ferrexpo's operations. If successful, the Group intends to expand this project to include additional trucks and/or additional mines in the deployment of this technology, which is expected to have material benefits to the following aspects of the Group's operations:

·    Cycle times and productivity: electric-drive trucks operating up-ramp on a trolley-assist network are able to fully utilise the power of the truck's engine and therefore are expected to travel 10-20% faster up the haul ramp. This will reduce cycle times, meaning each truck will be capable of transporting more rock during each shift.

·    Diesel consumption rates and greenhouse gas emissions: during the fully-loaded, up-ramp part of a haul truck's cycle, each truck will consume approximately 50% of its diesel consumption. By operating using clean electricity, the Group expects to have a material saving on the mining department's greenhouse gas emissions ("CO₂e"), since diesel consumption represents the main source of emissions in mining activities, with diesel representing 40% of Scope 1 CO₂e emissions in 2021 (2020: 40%).

Elsewhere in the Group's operations, Ferrexpo continues to note positive results from the performance of its five megawatt ("5MW") solar power plant, which was completed and initiated in July 2021.

Exploration projects

The Group possesses a number of licences relating to exploration-stage projects located to the north of Ferrexpo's existing mining operations, which are along strike from the main orebody. Given the current situation in Ukraine, the Group is focused on desk-based work relating to existing drilling on these licences, and it is expected that the Group will resume field work when it is practical to do so.

 

Capital investment^A during 1H 2022

A summary of capital investment^A projects in 1H 2022 is shown in the table below. For further information on capital investment^A made during the period, please see the section titled 'Financial Review (Capital investment^A)'.

	Description	Status	Expected completion	Total cost	Spend in 1H 2022	Remaining spend
Concentrate stockyard	Decoupling of concentrator & pellet plant by providing concentrate storage capacity	Сomplex in operation from February 2021. Remaining works include automation and minor completion tasks.	2H 2022	US$42M	US$1M	US$2M
Further Growth Projects
Press filtration plant	Replacement of disc filtration to reduce moisture in balling plant.	Construction & assembly works underway.	Phase 1 is expected to complete in 2H 2022	US$129M	US$10M	US$17M
Medium-and Fine Crushing (MFC-2)	2 new tracts with average capacity of 800t/h each	Tie-in works underway.	2H 2022	US$40M	US$2M	US$1M
Wave 1 Expansion (pelletiser)	3 MTPA of additional pellets	Equipment procurement.	Reduced activity*	US$181M	US$13M	US$138M
Wave 1 Expansion (concentrator)	4.1 MTPA of additional concentrate (for delivery to pelletiser).	Equipment procurement.	Reduced activity*	US$240M	US$9M	US$185M
Logistics
Rail cars	Continuation of programme to replace state rail cars. Number of rail cars ordered - 183	80 railcars supplied, further 103 expected to be supplied before September 2022	2H 2022	US$11M	US$1M	US$1M

Table 7: selected growth capital investment projects in 1H 2022

* Owing to the conflict in Ukraine, the Group has paused meaningful expenditures and activities related to the Wave 1 Expansion and will resume these investments following a cessation of hostilities and/or risk to the Group. Please see section below for more information.

Capital investment for future growth ("Wave 1 Expansion")

As announced in the Group's Annual Report and Accounts for 2021, as a result of Russia's invasion of Ukraine in 2022, the Group has reduced its activities on the Wave 1 Expansion, which represents the next major phase of growth for Ferrexpo. The Wave 1 Expansion is the combination of investment projects in mining, beneficiation and pelletisation that we collectively provide three million tonnes of additional pellet capacity.

In 1H 2022, the Group completed its construction of the Medium and Fine Crushing Plant ("MFC-2"), which will add capacity to the Group's beneficiation plant (concentrator), once operations return to full capacity. This project adds throughput capacity to the processing plant.

Marketing

As a consequence of Russia's invasion of Ukraine and the constraints on logistics within Ukraine, the Group's sales of its products fell by 21% to 4.4 million tonnes in 1H 2022. Further to this decrease, during the majority of 1H 2022, the Group has been largely restricted to sales to European customers following Russia's blockade of Ukrainian Black Sea ports, as demonstrated in Table 8 below by the 19 percentage point increase in sales to Europe. Remaining sales to destinations outside of Europe are a reflection of the Group's logistics prior to the conflict in Ukraine.

Market regions	1H 2022	1H 2021	Movement (percentage points)
Europe, including Turkey (BF pellet)	79%	60%	+19pp
North East Asia (BF pellet market)	5%	8%	(3pp)
China & South East Asia (BF pellet market)	16%	29%	(13pp)
Middle East & North Africa (DR pellet market)	--	2%	(2pp)
North America (DR pellet market)	--	2%	(2pp)
Total sales volume	4,373	5,567	-

Table 8: sales volume by market regions

Note for above table: geographic groupings of countries were aligned in the Group's Annual Report and Account for 2021 to the type of pellet typically served to each market. The above table maintains this new categorisation of the Group's sales mix and therefore the figures presented for 1H 2021 are restated as a result.

 

Responsible Business activities

Responsible Business Report 2021

The Group is proud to report the publication of its 7^th annual Responsible Business Report, which is published in accordance with the Global Reporting Initiative framework and is available on the Group's website at:

 

www.ferrexpo.com/investors/results-reports-and-presentations/

Safety

The Group is pleased to report that there were no fatalities at its operations in 1H 2022, and the Group's operations continue to perform materially below the five-year trailing average for its lost time injury frequency rate. For further information, please see the section titled 'Operational Review (Health and safety)'.

Community Support

Since the early stages of Russia's invasion of Ukraine in 2022, the Group has sought to utilise its position as a business in Ukraine to help source and direct aid to those that need it most, throughout the country. In response to the humanitarian crisis in Ukraine, the Group has established the dedicated Ferrexpo Humanitarian Fund, which currently has approved funding of US$15 million. Through this fund, the Group has sought to respond to humanitarian requests and meeting needs of humanitarian projects through a rigorous review and approval process, and as of July 2022, over 70 individual memorandums have been approved by the Health, Safety, Environment and Community ("HSEC") Committee.

The Group will continue to use its local knowledge and expertise to support the people of Ukraine with humanitarian support for as long as it is required.

Pathway to low carbon production

Despite Russia's invasion of Ukraine, the Group continues to pursue its efforts to reduce its greenhouse gas ("GHG") emissions footprint and retain any gains made in previous years. In April 2022, the Group announced as part of its Full Year Results for 2021 that it had achieved a 30% reduction in GHG emissions since its baseline year of 2019.

As referenced in the Group's Annual Report and Accounts for 2021, to further build confidence around the reporting of sustainability topics, the Group has now completed an external assurance process on its reporting of GHG emissions, as well as key safety metrics. For more information on this process, please see the section titled 'External Assurance Process'.

In terms of progress made by Ferrexpo in reducing its GHG emissions footprint in 2022, the Group's Scope 1 and 2 emissions are provided in the table below.

	1H 2022	1H 2021	Change
Absolute emissions (tonnes CO2e)
Scope 1 (direct emissions, principally diesel and natural gas)	246	329	-25%
Scope 2 (indicate emissions, reflecting electricity consumption)	209	269	-22%
Group total	455	598	-24%
Unit emissions (kg CO2e per tonne of production)
Scope 1	51	58	-11%
Scope 2	43	47	-8%
Group total	95	105	-10%

Table 9 - Ferrexpo greenhouse gas emissions

As shown in Table 9 above, the Group has reduced its emissions in 2022. This progress has been achieved through a combination of factors, which includes the following:

·    Clean power purchasing. In 1H 2022, the Group maintained its high level of clean power purchasing, with 48% of electricity consumption coming from clean sources (1H 2022: 41%), and includes a month whereby Ferrexpo's main operating entity (FPM) successfully purchased 100% of its electricity from clean sources, which represents a first for FPM. The Group intends to maintain a high level of clean power purchasing in 2H 2022.

·    Biofuel (sunflower husk) consumption. The Group utilises sunflower husks in its pelletiser as a substitute for natural gas, with emissions associated with biofuels reported separate to Scope 1 emissions under the Global Reporting Initiative for sustainability reporting. In previous years, the Group has achieved more than 20% substitution of the Group's pelletiser energy to be from sunflower husks, and in 1H 2022 the Group sourced the equivalent of 21% of pelletiser energy from sunflower husks (FY 2021: 18% sunflower husks). The increase seen in 2022 relates to the operational teams gaining an improved understanding of producing the Group's latest product - higher grade direct reduction pellets, production of which previously necessitated lower sunflower husk consumption rates to maintain the quality of this pellet type.

·    Reduced mining activities. In response to the ongoing war in Ukraine, Ferrexpo has reduced its mining operations to preserve its balance sheet strength, and has therefore temporarily reduced the development mining of waste ("pre-stripping"). As such, whilst pellet production decreased by 27% in 1H 2022, the consumption of diesel fell by a greater amount (34%), reflecting a lower rate of pre-stripping activity at in mining operations. The Group intends to return to its previous level of waste movement once the conflict risks associated with Russia's invasion of Ukraine have subsided.

The Group's Scope 3 emissions are dominated by the emissions generated by steelmaker in the conversion of iron ore to steel, with this activity representing 96% of Scope 3 emissions in 1H 2022 (2021: 95%), and more than 85% of total emissions (Scopes 1, 2 and 3 combined). Ferrexpo's Scope 3 emissions footprint was 1.25 tonnes CO₂ per tonne of production in 1H 2022, which represents a figure in line with 2021 due to the comparable sales mix of direct reduction and blast furnace pellets (the former having a 49% lower emissions footprint - see page 10 of the 2021 Annual Report and Accounts for more information). For more information on the Group's Scope 3 emissions footprint and associated calculation, please see the Responsible Business Report for 2021, which was published today at www.ferrexpo.com.

As part of the steel value chain, the Group understands the importance of the shift in thinking towards Green Steel, which is the production of steel without GHG emissions. Whilst the projects outlined above will reduce the Group's carbon footprint on a per tonne basis for Scope 1 and 2 emissions, over 90% of the Group's overall carbon footprint per tonne relates to Scope 3 emissions, which predominantly relate to the conversion of iron ore to steel. In the short term, steelmakers are incentivised to use iron ore pellets as they offer blast furnace steelmakers the opportunity to lower their carbon emissions by 40% for every tonne of sinter fines substituted, but this is an existing benefit that will not materially affect the Group's Scope 3 emissions. Longer term, the Group is planning to lower its Scope 3 emissions by producing more DR pellets, which are typically converted to steel using a combination of electricity and natural gas in the conversion process, and therefore have a materially lower carbon footprint.

External Assurance Process

As announced on 25 July 2022, the Group has completed an external assurance process (ISAE3000) on key sustainability metrics in safety and greenhouse gas emissions for the data presented in the 2021 Annual Report and Accounts. For more information on the information reviewed as part of this process, please see the Group's press release dated 25 July 2022 and associated Reporting Criteria document that is presented alongside the 2021 Annual Report and Accounts at www.ferrexpo.com (link).

Update on Principal Risks

Principal Risks are those considered to have the greatest potential impact on the Ferrexpo business, assessed on the basis of impact and probability. The Group considers that the Principal Risks facing the business, as highlighted on pages 56 to 72 of the 2021 Annual Report and Accounts (published in April 2022), remain relevant. An update on material developments that relate to the Group's Principal Risks since their publication in April 2022 is provided below.

Update since publication of Full Year Results announcement (22 April 2022)

Conflict risk

The primary consideration for Ferrexpo's risk profile at the present time is Russia's invasion of Ukraine, and the impact that this is having, and will continue to have, on Ferrexpo's business in Ukraine.

Since the Group published its Principal Risks in mid-April 2022, there has been no material change in the nature of the war in Ukraine, as Russia is continuing to attack Ukraine from similar positions as at the start of the conflict (with the exception of Russian forces withdrawing from the regions surrounding Kyiv and northern parts of Ukraine). Ferrexpo's operations continue to operate, albeit with limitations based on the amount of iron ore products that the Group can export due to the conflict in Ukraine - principally either: (a) Russia's blockade of Ukraine's Black Sea ports, which is a situation that has not changed since the publication of the Group's Full Year Results in April, or (b) damage and destruction of the Ukrainian railway network due to the actions of the Russian military, which is a factor that has increased in its impact and significance since mid-April 2022, as referenced in the Group's press release dated 13 June 2022. The damage inflicted on the Ukrainian railway network has, to date, resulted in the temporary disruption to the Group's ability to ship its products through: (a) shipments having to be re-routed via alternative routes, (b) the general slow-down of wagons transiting the railway network and (c) a reduction in the available carrying capacity for bulk commodities.

Consideration of significant judgements and material uncertainties

In the course of preparing financial statements, the Group's management team has had to make estimates and judgements that have the potential to create a significant impact on the Group's consolidated financial statements. The most critical accounting estimates and judgements are disclosed in Note 2 Summary of significant accounting policies of the 2022 interim condensed consolidated financial statements. The critical estimates presented are predominantly related to the computation of: (a) the computation of the value in use of the Group's non-current assets following Russia's invasion of Ukraine in February 2022; and (b) the timing of the expected use of the stockpiled, and fully impaired, low-grade ore in future periods.

Critical judgements made predominantly relate to: (a) the basis of preparation of the Group's interim condensed consolidated financial statements for 1H 2022 in respect of going concern assumptions made); and (b) the application of tax legislation in the jurisdictions the Group operates.

Stress testing and going concern assessment

The armed conflict in Ukraine remains ongoing, and continues to pose a threat to the Group's mining, processing and logistics operations within Ukraine. This factor therefore represents a material uncertainty in terms of the Group's ability to continue as a going concern. As part of management's going concern assessment, the Group continuously adjusts its long-term model in order to reflect the latest developments in terms of currently possible sales volumes and productions costs. The latest base case of the long-term model shows that the Group has sufficient liquidity to continue its operations at a reduced level for the entire period of the management's going concern assessment. See Note 2 Summary of significant accounting policies for further information on Group's going concern assessment and stress testing.

Outlook

The conflict in Ukraine continues to represent a significant threat to Ferrexpo's operations in Ukraine, should the war continue in its current configuration, or even escalate further. The outlook for Ukraine at present remains inherently unpredictable in the short to medium term, with a range of military, financial and other factors all having a significant influence on the outcome for the people of Ukraine and businesses deriving their revenues from Ukraine. In the near term, it is expected that the conflict will continue to put increasing strain on the economy of Ukraine, which is reportedly experiencing a monthly budget deficit of US$5 billion per month[25], and therefore businesses in Ukraine are facing increasing costs of doing business as the Ukrainian authorities seek to generate additional revenue. An example of such is the 70% increase in railway tariffs announced in June 2022 for all types of cargo that will add approximately US$7-9 per tonne of logistics costs to the Group's cost base from July 2022[26].

For further information, please see the section titled 'Iron Ore Market Review' as well as the Going Concern Statement on pages 25 and 26.

Ukraine country risk

The Group's mining and processing operations are located in Ukraine, which is a country currently under invasion by Russia - for more information, please see the section titled 'Conflict Risk', as well as the Principal Risks section of the 2021 Annual Report and Accounts.

The independence of the judicial system, and its immunity from economic and political influences in Ukraine, remains questionable, and the stability of existing legal frameworks may weaken further with future political changes in Ukraine. As a result, the Group is still exposed to an unclear fiscal and legal system in Ukraine affecting the risks around the Group's tax position, including risks relating to policies applied relating to transfer pricing, the timely return of VAT refunds and the independence of the legal system for any cases heard by the courts.

As referenced in the Group's 2021 Annual Report and Accounts, there are outstanding matters in Ukraine relating to the Group's controlling shareholder that remain unresolved, and there is a risk that assets owned or controlled (or alleged to be owned or controlled) by him may be subject to restrictions, in Ukraine or elsewhere, or that the Group may be impacted by or become involved in legal proceedings relating to these matters, in Ukraine or elsewhere.

As at the date of approval of these interim condensed consolidated financial statements, the share dispute lodged by four claimants to invalidate a share sale and purchase agreement concluded in 2002 remains ongoing. Following a statement of defence filed by Ferrexpo's Swiss subsidiary (Ferrexpo AG, "FAG") earlier in 2021, the relevant court in Ukraine ruled on 27 May 2021 in favour of FAG. The opposing parties filed their appeals in June 2021 and several hearings have been held at the court of appeal since then without a court decision made. The next hearing is expected to take place in August 2022.

Following the cancellation of the licence for Galeschynske deposit, which is a project in the exploration phase that is situated to the north of the Group's active mining operations, Ferrexpo Belanovo Mining has commenced a legal action in the Ukrainian courts system.

For further information on ongoing legal disputes, please see Note 17 Commitments, contingences and legal disputes of the accounts.

 

Global steel demand and realised prices for iron ore pellets

As noted in the Market Review section, cost inflation is putting significant pressure on the commodities industry in 2022. Prices for hot rolled coil, which represents an indicator of steel pricing in general, has fallen in 2022 by approximately 14%[27], whilst prices for energy have risen substantially during 2022, as illustrated by crude oil's 30%[28] rise year to date. As a result, global steel margins have contracted in 2022[29], pushing steel producers begin to prioritise lower grade raw materials as inputs, instead of higher grade products that would raise the productivity of a blast furnace.

The Group expects that the longevity of the conflict in Ukraine will play a significant role in the inflationary price environment currently being seen throughout the commodity space. The war in Ukraine is resulting in numerous supply-side disruptions in commodity markets, either through sanctions imposed on Russia, or shifts in Russian supply away from western nations, and therefore it can be expected that elevated energy costs, and therefore global inflation, will persist for the foreseeable future whilst the conflict in Ukraine continues.

Pellet premiums

Historically, pellet premiums have been correlated to steel mill profitability as they are the most productive source of iron in a blast furnace and thus trade at a price premium to other types of iron ores. When steel producer profitability is under pressure, the reduction in usage of higher cost raw materials could lead to lower demand for iron ore pellets and/or a fall in pellet premiums, which in turn will lower profitability for the Group.

Market mix

The Group is currently predominantly constrained to supplying European steel producers and is therefore closely linked to this particular market at the present time, and for as long as the Group's access to seaborne markets remains largely closed. Whilst the Group is working towards a solution to resume access to seaborne markets, these new logistics solutions will likely result in increased costs when compared to the Group's previous logistics pathways, and therefore reduced profitability for the Group.

Whilst the Group is closely linked to one region for steelmaking (Europe), it also faces increased risk in its exposure to a singular market in terms of the outlook for that market. Should the European steel sector face greater uncertainty and/or production cuts than other regions for steelmaking, such as China, the Group may not be able to react and pivot its sales in a similar fashion as it has done in the past, raising the risk profile of the Group.

Freight rates

The Group's logistics costs, on a per tonne basis, have risen in 2022 as a result of the conflict in Ukraine and the disruption to logistics networks that this has caused. As a result of rising logistics costs, the Group faces the possibility of reduced profitability as well as reduced flexibility in its response to higher freight rates (whereby in previous years, the Group could adapt its logistics network to potentially lower logistics costs).

 

Directors' Responsibility Statement

 

The Interim Report complies with the Disclosure and Transparency Rules ("DTR") of the United Kingdom's Financial Conduct Authority in respect of the requirement to produce a half-yearly financial report. The preparation of the Interim Report for the six months ended 30 June 2022 in accordance with applicable laws, regulations and accounting standards is the responsibility of, and has been approved by, the Directors.

 

We confirm that to the best of our knowledge:

·   the condensed set of consolidated financial statements has been prepared in accordance with IAS 34 as contained in UK adopted IFRS;

·   the Interim Management Report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements, and description of the principal risks and uncertainties for the remaining six months of the financial year, as required by DTR4.2.7R; and

·   the Interim Management Report includes a fair review of disclosures of material related party transactions that have occurred in the first six months of the financial year and of material changes in the related party transactions described in the 2021 Annual Report, as required by DTR 4.2.8R.

 

The Directors are also responsible for the maintenance and integrity of the Ferrexpo plc website.

 

A list of current Directors is maintained on the Ferrexpo plc website, which can be found at www.ferrexpo.com.

 

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

For and on behalf of the Board

 

 

 

Lucio Genovese

Non-executive Chair

 

Jim North

Chief Executive Officer and Executive Director

2 August 2022

 

 

Independent Review Report to Ferrexpo Plc

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six-month period ended 30 June 2022 which comprises of the Interim Consolidated Income Statement, the Interim Consolidated Statement of Comprehensive Income, the Interim Consolidated Statement of Financial Position, the Interim Consolidated Statement of Cash Flows, the Interim Consolidated Statement of Changes in Equity and the related Notes 1 to 21.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2022 is not prepared, in all material respects, in accordance with International Accounting Standard ('IAS') 34 "Interim Financial Reporting", as adopted for use in the United Kingdom and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity"issued for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards adopted for use in the United Kingdom ("UK adopted IFRS"). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard ('IAS') 34 "Interim Financial Reporting", as adopted for use in the United Kingdom.

Material Uncertainty Relating to Going Concern

We draw your attention to Note 2 Basis of preparation on pages 25 and 26, which indicates that management has assessed the ongoing armed conflict in Ukraine to pose a threat to the Group's mining, processing and logistics operations within Ukraine and on the ability of the Group to continue as a going concern due to the unpredictable duration and severity of such events and circumstances, which are outside of the Group's control. This indicates that a material uncertainty exists that may cast significant doubt upon the Group's ability to continue as a going concern. Our opinion is not modified in respect of these matters.

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting.

Responsibilities of Directors

The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority. In preparing the half-yearly financial report, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

This report is made solely to the Company in accordance with guidance contained in ISRE (UK) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in a review report and for no other purposes. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

 

 

MHA MacIntyre Hudson

Statutory Auditor

London

Interim Consolidated Income Statement

US$000	Notes	6 months ended 30.06.22 (unaudited)	6 months ended 30.06.21 (unaudited)	Year-ended 31.12.21 (audited)
Revenue	3/4	935,874	1,352,656	2,518,230
Operating expenses	5	(857,075)	(513,850)	(1,411,911)
Other operating income		5,563	4,421	9,499
Operating foreign exchange gains/(losses)	6	84,867	(38,022)	(37,808)
Operating profit		169,229	805,205	1,078,010
Share of (loss)/profit from associates		(195)	1,368	4,468
Profit before tax and finance		169,034	806,573	1,082,478
Finance income	7	209	254	637
Finance expense	7	(2,305)	(6,497)	(8,940)
Non-operating foreign exchange losses	6	(11,236)	(3,431)	(3,200)
Profit before tax		155,702	796,899	1,070,975
Income tax expense	8	(73,629)	(135,473)	(199,982)
Profit for the period/year		82,073	661,426	870,993
Profit attributable to:
Equity shareholders of Ferrexpo plc		82,070	661,417	870,987
Non-controlling interests		3	9	6
Profit for the period/year		82,073	661,426	870,993
Earnings per share:
Basic (US cents)	9	13.96	112.54	148.20
Diluted (US cents)	9	13.94	112.34	147.94

 

Interim Consolidated Statement of Comprehensive Income

US$000	Notes	6 months ended 30.06.22	6 months ended 30.06.21	Year ended 31.12.21
		(unaudited)	(unaudited)	(audited)
Profit for the period/year		82,073	661,426	870,993
Items that may subsequently be reclassified to profit or loss:
Exchange differences on translating foreign operations	6	(184,076)	95,770	82,196
Income tax effect		4,106	(3,688)	(3,313)
Net other comprehensive (loss)/income that may be reclassified to profit or loss in subsequent periods		(179,970)	92,082	78,883
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gains on defined benefit pension liability		12,729	1,304	9,882
Net other comprehensive income not being reclassified to profit or loss in subsequent periods		12,729	1,304	9,882
Other comprehensive (loss)/income for the period/year, net of tax		(167,241)	93,386	88,765
Total comprehensive (loss)/income for the period/year, net of tax		(85,168)	754,812	959,758
Total comprehensive income attributable to:
Equity shareholders of Ferrexpo plc		(85,152)	754,825	959,778
Non-controlling interests		(16)	(13)	(20)
		(85,168)	754,812	959,758

Interim Consolidated Statement of Financial Position

US$000	Notes	As at 30.06.22	As at 31.12.21	As at 30.06.21
		(unaudited)	(audited)	(unaudited)
Assets
Property, plant and equipment	10	933,106	1,216,693	1,107,143
Right-of-use assets	11	4,997	7,776	6,319
Goodwill and other intangible assets	12	10,875	43,586	43,195
Investments in associates		5,495	7,034	5,712
Inventories	14	7,846	8,414	230,000
Other taxes recoverable and prepaid	13	6,833	-	-
Other non-current assets		91,615	96,484	41,005
Deferred tax assets	8	27,285	32,946	37,830
Total non-current assets		1,088,052	1,412,933	1,471,204
Inventories	14	309,770	202,399	192,600
Trade and other receivables		104,897	192,363	209,694
Prepayments and other current assets		41,841	68,162	31,114
Income taxes recoverable and prepaid	8	456	636	1,130
Other taxes recoverable and prepaid	13	100,719	48,040	39,226
Cash and cash equivalents	3/15	176,766	167,291	234,669
Total current assets		734,449	678,891	708,433
Total assets		1,822,501	2,091,824	2,179,637
Equity and liabilities
Issued capital	19	121,628	121,628	121,628
Share premium		185,112	185,112	185,112
Other reserves	19	(2,165,772)	(1,986,131)	(1,973,463)
Retained earnings		3,488,649	3,510,793	3,525,374
Equity attributable to equity shareholders of Ferrexpo plc		1,629,617	1,831,402	1,858,651
Non-controlling interest		59	75	82
Total equity		1,629,676	1,831,477	1,858,733
Interest-bearing loans and borrowings	3/16	1,754	2,143	2,686
Defined benefit pension liability		12,501	26,074	33,279
Provision for site restoration		3,849	3,873	3,137
Deferred tax liabilities	8	687	141	262
Total non-current liabilities		18,791	32,231	39,364
Interest-bearing loans and borrowings	3/16	3,360	48,206	19,475
Trade and other payables		72,469	72,824	117,242
Accrued and contract liabilities		21,476	52,613	30,971
Income taxes payable	8	41,332	37,138	97,002
Other taxes payable		35,397	17,335	16,850
Total current liabilities		174,034	228,116	281,540
Total liabilities		192,825	260,347	320,904
Total equity and liabilities		1,822,501	2,091,824	2,179,637

The financial statements were approved by the Board of Directors on 2 August 2022.

Lucio Genovese                                                                           Jim North

Non-executive Chair                                                                      Chief Executive Officer and Executive Director

Interim Consolidated Statement of Cash Flows

US$000	Notes	6 months ended 30.06.22	6 months ended 30.06.21	Year ended 31.12.21
		(unaudited)	(unaudited)	(audited)
Profit before tax		155,702	796,899	1,070,975
Adjustments for:
Depreciation of property, plant and equipment, right-of-use assets and amortization of intangible assets	5	61,283	55,427	115,111
Finance expense	7	960	5,302	5,729
Finance income	7	(209)	(254)	(637)
Losses on disposal and liquidation of property, plant and equipment	5	1,128	2,975	4,695
Write-offs and impairments	5	254,366	3,060	235,618
Share of loss/(profit) from associates		195	(1,368)	(4,468)
Movement in allowance for doubtful receivables		4,188	410	690
Movement in site restoration provision		240	172	551
Employee benefits		2,045	2,229	4,936
Share-based payments		310	329	856
Operating foreign exchange (gains)/losses	6	(84,867)	38,022	37,808
Non-operating foreign exchange losses	6	11,236	3,431	3,200
Other adjustments		-	(5,508)	(4,914)
Operating cash flow before working capital changes		406,577	901,126	1,470,150
Changes in working capital:
Decrease/(increase) in trade and other receivables		102,499	(67,352)	(102,827)
Increase in inventories		(121,017)	(44,119)	(65,170)
(Decrease)/increase in trade and other payables (incl. accrued and contract liabilities)		(49,201)	(10,855)	40,186
Increase in other taxes recoverable and payable (incl. VAT)		(44,587)	(3,791)	(11,073)
Cash generated from operating activities		294,271	775,009	1,331,266
Interest paid		(591)	(6,326)	(7,031)
Income tax paid		(59,544)	(106,872)	(227,930)
Post-employment benefits paid		(1,171)	(1,231)	(2,475)
Net cash flows from operating activities		232,965	660,580	1,093,830
Cash flows (used in)/from investing activities
Purchase of property, plant and equipment and intangible assets		(102,008)	(142,451)	(360,869)
Proceeds from disposal of property, plant and equipment and intangible assets		83	328	1,030
Interest received		203	229	583
Dividends from associates		711	2,067	3,967
Net cash flows used in investing activities		(101,011)	(139,827)	(355,289)
Cash flows (used in)/from financing activities
Proceeds from borrowings and finance	16	-	15,346	42,126
Repayment of borrowings and finance	16	(42,146)	(257,433)	(257,430)
Principal elements of lease payments	16	(3,411)	(2,612)	(5,517)
Dividends paid to equity shareholders of Ferrexpo plc	9	(80,283)	(310,476)	(619,377)
Net cash flows used in financing activities		(125,840)	(555,175)	(840,178)
Net increase/(decrease) in cash and cash equivalents		6,114	(34,422)	(101,637)
Cash and cash equivalents at the beginning of the period/year		167,291	270,006	270,006
Currency translation differences		3,361	(915)	(1,078)
Cash and cash equivalents at the end of the period/year	15	176,766	234,669	167,291

 

Interim Consolidated Statement of Changes in Equity

For the financial year 2021 and the six months ended 30 June 2022		Attributable to equity shareholders of Ferrexpo plc
US$000	Issued  capital	Share  premium	Other reserves (Note 19)	Retained  Earnings	Total capital and reserves	Non-controlling interests	Total equity
At 31 December 2020 (audited)	121,628	185,112	(2,065,896)	3,250,534	1,491,378	95	1,491,473
Profit for the year	-	-	-	870,987	870,987	6	870,993
Other comprehensive income/(loss)	-	-	78,909	9,882	88,791	(26)	88,765
Total comprehensive income/(loss) for the year	-	-	78,909	880,869	959,778	(20)	959,758
Equity dividends to the shareholders of Ferrexpo plc (Note 9)	-	-	-	(620,610)	(620,610)	-	(620,610)
Share-based payments	-	-	856	-	856	-	856
At 31 December 2021 (audited)	121,628	185,112	(1,986,131)	3,510,793	1,831,402	75	1,831,477
Profit for the period	-	-	-	82,070	82,070	3	82,073
Other comprehensive (loss)/income	-	-	(179,951)	12,729	(167,222)	(19)	(167,241)
Total comprehensive (loss)/income for the period	-	-	(179,951)	94,799	(85,152)	(16)	(85,168)
Equity dividends paid to shareholders of Ferrexpo plc (Note 9)	-	-	-	(116,943)	(116,943)	-	(116,943)
Share-based payments	-	-	310	-	310	-	310
At 30 June 2022 (unaudited)	121,628	185,112	(2,165,772)	3,488,649	1,629,617	59	1,629,676

 

For the six months ended 30 June 2021		Attributable to equity shareholders of Ferrexpo plc
US$000	Issued  capital	Share  premium	Other reserves (Note 19)	Retained earnings	Total capital and reserves	Non-controlling interests	Total equity
At 31 December 2020 (audited)	121,628	185,112	(2,065,896)	3,250,534	1,491,378	95	1,491,473
Profit for the period	-	-	-	661,417	661,417	9	661,426
Other comprehensive income/(loss)	-	-	92,104	1,304	93,408	(22)	93,386
Total comprehensive income/(loss) for the period	-	-	92,104	662,721	754,825	(13)	754,812
Equity dividends paid to shareholders of Ferrexpo plc (Note 9)	-	-	-	(387,881)	(387,881)	-	(387,881)
Share-based payments	-	-	329	-	329	-	329
At 30 June 2021 (unaudited)	121,628	185,112	(1,973,463)	3,525,374	1,858,651	82	1,858,733