Quarterly Report • Sep 30, 2013
Quarterly Report
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09:01 London, 09:01 Helsinki, 8 November 2013 - Afarak Group Plc ("Afarak" or "the Company") (LSE: AFRK, OMX: AFAGR) Interim Report
| KEY FIGURES (EUR million) | Q3/13 | Q3/12 | Change | Q1- Q3/13 |
Q1- Q3/12 |
Change | FY/12 |
|---|---|---|---|---|---|---|---|
| Revenue | 30.7 | 27.8 | 10.4% | 93.8 | 104.4 | -10.1% | 128.6 |
| EBITDA | 2.9 | -2.2 | 13.3 | 2.5 | 436.7% | 9.2 | |
| EBITDA margin | 9.4% | -8.0% | 14.1% | 2.4% | 7.2% | ||
| EBIT | -3.1 | -9.0 | -5.1 | -17.4 | -16.8 | ||
| EBIT margin | -10.2% | -32.3% | -5.5% | -16.6% | -13.0% | ||
| Earnings before taxes | -2.8 | -9.3 | -8.1 | -15.6 | -19.6 | ||
| Earnings margin | -9.1% | -33.5% | -8.6% | -15.0% | -15.2% | ||
| Profit | -1.9 | -6.1 | -3.7 | -10.4 | -16.6 | ||
| Earnings per share, basic, EUR | -0.01 | -0.02 | -0.02 | -0.04 | -0.06 |
"I am pleased to report that the positive trend started in H1 has continued, although at a slower pace into the third quarter due to the seasonal market slowdown for the summer period. There has been significant improvement compared to the same period last year and in the third quarter we have managed to achieve an increase over last year's revenue and an improvement in profitability despite difficult market conditions. This was achieved by focusing on value added speciality products, increase in the sales of ferrochrome, expansion in mining production and lowering our cost base.
Processing volumes improved in the third quarter when compared to the equivalent period last year as a result of having EWW and Mogale Alloys in full operation during this period. Despite the fact that the ferrochrome market remains difficult to predict, we have seen some positive growth in that segment and secured a higher margin.
In the longer term I firmly believe that ferrochrome, particularly the speciality and super alloys segment, will again be in high demand. At the same time we are not waiting for the market to change, but are continuously evaluating different initiatives that could strengthen our position and provide new growth opportunities. A reflection of this is our commitment to investing in the ferroalloy refining and granulation equipment at Mogale Alloys so that part of the current ferrochrome production can be converted to granulated medium carbon ferrochrome.
In addition we have significantly restructured our organisation and the way we work to streamline costs. Our focus remains on generating cash and increasing profits.
Afarak follows the disclosure procedure enabled by Disclosure obligation of the issuer (7/2013) published by the Finnish Financial Supervision Authority, and hereby publishes its Q3/2013 interim report enclosed to this stock exchange release. The Interim Report is attached to this release and is also available on the Company's website at www.afarakgroup.com.
Management will host an investor conference call in English on 8 November 2013 at 14:00 Finnish time, 12:00 UK time. Please dial-in at least 10 minutes beforehand, quoting the reference: 44732.
Finnish number +358 (0)800 919 339
UK number +44 (0) 800 22 90 900
AFARAK GROUP PLC Danko Koncar CEO
For additional information, please contact:
Afarak Group Plc Danko Koncar, CEO, +44 (0)20 7376 1175, [email protected]
Investec Bank Plc Jeremy Wrathall, +44 (0)20 7597 5970 George Price, +44 (0)20 7597 5970
Financial reports and other investor information are available on the Company's website: www.afarakgroup.com.
Afarak Group is a chrome mining and minerals producer focused on delivering sustainable growth with a speciality alloys business in southern Europe and a ferro alloys business in southern Africa. The Company is listed on NASDAQ OMX Helsinki (AFAGR) and the Main Market of the London Stock Exchange (AFRK). www.afarakgroup.com
Distribution: NASDAQ OMX Helsinki London Stock Exchange main media www.afarakgroup.com
This Interim Report is prepared in accordance with the IAS 34 standard and is unaudited. All the corresponding comparable figures of 2012 are presented in brackets, unless otherwise explicitly stated.
Sales from processing:
| Tonnes | Q3/13 | Q3/12 | Q1-Q3/13 | Q1-Q3/12 | FY/12 |
|---|---|---|---|---|---|
| Processing, Speciality Alloys | 4,921 | 5,251 | 16,527 | 19,010 | 27,324 |
| Processing, FerroAlloys | 6,438 | 5,800 | 20,514 | 37,422 | 39,125 |
| Processing, Total | 11,359 | 11,051 | 37,041 | 56,432 | 66,449 |
The Group's sales from processing, which include all the products produced at the Mogale Alloys and Elektrowerk Weisweiler GmbH processing plants, were 11,359 (Q3/2012: 11,051) tonnes, an increase of 2.8% compared to the equivalent period in 2012. This marginal increase is attributable to the decision to remain disciplined and not to compromise the sales prices or margins in a weak market.
Until a few years ago, South African ferrochrome smelters dominated worldwide ferrochrome production. However, since then China has been able to purchase substantial volumes of chrome ore and UG2 by-product from the platinum industry which is then refined into ferrochrome by Chinese smelters. China itself does not have substantial chrome ore reserves. If China continues with this strategy, the ferrochrome price gap between Europe and China could increase. In China, the market is driven by the buyside, mills purchase at spot market prices, while European and Japanese mills pay higher contract-based benchmark prices. The price difference has been, at times up to 20 US c/lb Cr.
South Africa's power supplier ESKOM announced earlier this year that it would stop the policy of baybacks of electricity. Falling production volumes is expected to cause an increase in shipments of chrome ore to China for processing. China will need to further increase its own ferrochrome production, requiring more chrome ore, in order to sustain any new projects.
The price difference for ferrochrome between South African producers selling to China and to the rest of the world has narrowed in Q3 as a result of the South African smelters increasing production whilst Chinese producers have been cutting back on their production.
After a good start in Q2 ferrochrome market, we have seen a seasonal slowdown in the summer period in the European stainless steel market, and therefore the Q3 contract price between South African ferrochrome smelters and European stainless steel mills fell back to same as in Q1/13; 112.5 USc/lb in Q3/13 (reduction -14.5 USc/lb Cr compared to Q2/13 (127USc/lb Cr). In spite of this decrease, the spot market prices, especially Indian and Russian/Kazakh material, remain below this level and market conditions remain subdued despite of some signs of higher prices paid in China.
The world average stainless steel transaction values increased for most products in September. Higher nickel costs during August helped US and Asian mills to lift market values. Decreases in European selling prices were noted because of lower alloy surcharges. There was a modest improvement in global market activity after the return from the summer holidays.
Regardless of a declining demand (y-o-y) in the first half of 2013, the European market began to stabilise in Q3 although stainless steel players remain hesitant about increasing margins and/or volumes for the rest of 2013. Irrespectively of the positive early indicators of recovery such as the PMI, it is considered doubtful that these will stimulate a recovery in the European stainless steel market in 2013. The Board believes however, that global demand for stainless steel is expected to grow steadily in the near term. Attempts by western mills to lift basis numbers may prove difficult as sales traditionally slow towards the year end. However, customers are likely to increase purchase volumes later in the Q4 for delivery early in 2014. This could result in some upward price movement prior to the New Year.
At Afarak, the deliveries to superalloy producers remain strong, and the Company has signed several new long term agreements. Furthermore, there are other positive indicators for securing additional long term agreements for other special grades produced by Afarak, including SiMn Low Phosphorus.
| EUR million | Q3/13 | Q3/12 | Change | Q1- Q3/13 |
Q1- Q3/12 |
Change | FY/12 |
|---|---|---|---|---|---|---|---|
| Revenue | 30.7 | 27.8 | 10.4% | 93.8 | 104.4 | -10.1% | 128.6 |
| EBITDA | 2.9 | -2.2 | 13.3 | 2.5 | 436.7% | 9.2 | |
| EBITDA margin | 9.4% | -8.0% | 14.1% | 2.4% | 7.2% | ||
| EBIT | -3.1 | -9.0 | -5.1 | -17.4 | -16.8 | ||
| EBIT margin | -10.2% | -32.3% | -5.5% | -16.6% | -13.0% | ||
| Profit | -1.9 | -6.1 | -3.7 | -10.4 | -16.6 |
Revenue for the third quarter 2013 increased by 10.4% to EUR 30.7 (27.8) million compared to the equivalent period in 2012. This increase in revenue was mainly attributable to the increase in sales volumes in the ferroalloys segment. EBITDA for the third quarter 2013 improved substantially compared to the equivalent period in 2012 to EUR 2.9 (-2.2) million. This was not only attributable to improved profitability in the Ferroalloys segment but also to a reduction in costs across all our operations. Weakening of the South African Rand also effected the group results as it helped reduce our production costs in South Africa. EBITDA was also positively affected by EUR 0.3 (0.0) million as the joint venture share of profits includes net financial income relating to unrealised exchange difference. EBIT was negatively effected with amortisation and depreciation charges which amounted to EUR 6.0 (6.7) million in Q3, this is expected to change as IFRS depreciation will reduce by EUR 1.2 million per month as from November 2013.
Earnings per share was EUR -0.01 (-0.02).
The Group's liquidity, as at 30 September 2013, was EUR 13.1 (39.7) (30 June 2013: 17.7) million. Operating cash flow in the third quarter was EUR -1.8 (-2.9) million. Afarak's gearing at the end of the third quarter was -5.4% (8.0%) (31 December 2012: -5.4%). Net interest-bearing debt was EUR -10.5 (18.5) (31 December 2012: -11.4) million.
Total assets on 30 September were EUR 280.2 (370.4) (31 December 2012: 304.2) million. The equity ratio was 69.4% (62.0%) (31 December 2012: 69.2%). Decrease in total assets value during quarter three was mainly due to the translation of the South African Rand denominated assets as the currency continued weakening in this quarter.
Capital expenditure for the third quarter 2013 totalled EUR 2.4 (0.6) million which relates primarily to the advance payments made in relation to ferroalloy refining and granulation equipment at Mogale Alloys as well as sustaining capital expenditure at the Speciality Alloys segment.
At the end of the third quarter 2013, Afarak had 747 (784) employees. The average number of employees
during the third quarter of 2013 was 740 (771).
Number of employees by segment *:
| 30.9.2013 | 30.9.2012 | Change | 31.12.2012 | |
|---|---|---|---|---|
| Speciality Alloys | 428 | 428 | 0.0 % | 423 |
| FerroAlloys | 316 | 346 | -8.7 % | 335 |
| Other operations | 3 | 10 | -70.0 % | 10 |
| Group total | 747 | 784 | -4.7 % | 768 |
*Including personnel of joint ventures.
The Group's target is to introduce standardised health, safety and environmental policies and procedures across the Group's operations and continue its programme focused on pro-active safety and environmental measurements as part of its aim to achieve "Zero Harm". This standardisation process is on-going and is expected to be finalised during 2013.
In the third quarter of 2013 the results obtained in decreasing the lost time injury frequency were satisfactory with only minor incidents reported. Afarak continues all efforts, including training, to further improve the safety performance.
Afarak aims to conduct its business in a sustainable way and to preserve the environment by minimising the environmental impact of its operations. The Group has programmes on all sites to monitor and address its impact on the environment.
The Speciality Alloys business consists of Türk Maadin Şirketi A.S ("TMS"), the mining and beneficiation operation in Turkey, and Elektrowerk Weisweiler GmbH ("EWW"), the chromite concentrate processing plant in Germany. TMS supplies EWW with high quality chromite concentrate which produces speciality products including Specialised Low Carbon and Ultra Low Carbon Ferrochrome. Excess chrome ore from TMS is exported.
| Tonnes | Q3/13 | Q3/12 | Change | Q1-Q3/13 | Q1-Q3/12 | Change | FY/12 |
|---|---|---|---|---|---|---|---|
| Mining* | 18,810 | 19,066 | -1.3 % | 51,867 | 56,049 | -7.5 % | 72,098 |
| Processing | 6,719 | 5,166 | 30.1 % | 18,312 | 19,390 | -5.6 % | 25,129 |
* Including both chromite concentrate and lumpy ore production
Production decreased to 18,810 (19,066) tonnes for the third quarter 2013, compared to the equivalent period in 2012. This was mainly due to a decision to reduce work shifts in order to better respond to reduced demand in the market. There has been a substantial increase in processing when compared to the equivalent period in 2012 due to the fact that there was no maintenance shutdown at EWW during this quarter as it was held in June as opposed to July. Mining at TMS operated at normal levels.
| EUR million | Q3/13 | Q3/12 | Change | Q1-Q3/13 | Q1-Q3/12 | Change | FY/12 |
|---|---|---|---|---|---|---|---|
| Revenue | 17.6 | 17.9 | -1.5% | 54.6 | 61.4 | 11.1% | 76.5 |
| EBITDA | 2.5 | 1.8 | 33.2% | 8.5 | 9.6 | -11.3% | 11.0 |
| EBITDA margin | 13.9% | 10.3% | 15.6% | 15.6% | 14.3% | ||
| EBIT | -1.9 | -2.7 | -4.6 | -3.6 | -6.7 | ||
| EBIT margin | -10.8% | -15.3% | -8.4% | -5.8% | -8.7% |
Revenue for the third quarter decreased by a marginal 1.5% to EUR 17.6 (17.9) million and EBITDA increased by 33.2% to EUR 2.5 (1.8) million compared to the equivalent period in 2012. The decrease in revenue was due to lower sales volumes and decreased sales prices. Improvement in EBIDTA margin was due to lower cost of production at EWW.
As at 30 September 2013, the business had 428 (428) employees.
The FerroAlloys business consists of the processing plant Mogale Alloys and the joint ventures Stellite mine and Mecklenburg mine in South Africa. The business produces chrome ore, Charge Chrome and Silico Manganese for sale to global markets.
Production:
| Tonnes | Q3/13 | Q3/12 | Change | Q1-Q3/13 | Q1-Q3/12 | Change | FY/12 |
|---|---|---|---|---|---|---|---|
| Mining* | 103,763 | 22,783 | 455.4 % | 292,257 | 116,161 | 151.6 % | 140,346 |
| Processing | 18,855 | 15,404 | 22.4 % | 31,140 | 36,166 | -13.9 % | 50,522 |
* Including both chromite concentrate and lumpy ore production by the joint ventures
Production in this segment increased substantially to 103,763 (22,783) tonnes in the third quarter of 2013 when compared to the same period in 2012. The production at the Stellite mine and Mecklenburg mine continued at a slightly slower pace from the previous quarter with an average monthly production of 35,000 tonnes. Mogale Alloys operated at normal levels during this period producing some stainless steel alloy instead of ferrochrome in order to maximise profit margins.
| EUR million | Q3/13 | Q3/12 | Change | Q1-Q3/13 | Q1-Q3/12 | Change | FY/12 |
|---|---|---|---|---|---|---|---|
| Revenue | 13.1 | 9.9 | 31.7% | 39.1 | 42.9 | -8.8% | 52.1 |
| EBITDA | 0.9 | -3.6 | 8.2 | -2.1 | 3.5 | ||
| EBITDA margin | 7.0% | -36.6% | 20.9% | -4.8% | 6.7% | ||
| EBIT | -0.7 | -5.8 | 2.9 | -8.7 | -4.8 | ||
| EBIT margin | -5.7% | -58.5% | 7.5% | -20.3% | -9.3% |
* Revenue of the joint ventures is not included in the Group's revenue
Revenue for the third quarter improved to EUR 13.1 (9.9) million compared to the equivalent period in 2012, representing an increase of 31.7%. The increase in revenue was mainly due to the increase in ferrochrome sales volumes and the resumed production at Mogale. EBITDA for the third quarter increased to EUR 0.9 (- 3.6) million. The increase in EBITDA compared to the equivalent period in 2012 was driven by the improved demand for chrome ore, and the reduction in cost of production due to weakening of the South African Rand. EBITDA was positively affected by EUR 0.3 (0.0) million as the joint venture share of profits includes net financial income relating to unrealised exchange difference.
The share of profit from joint ventures is made up as follows:
| EUR million | Q3/13 | Q3/12 | Change | Q1-Q3/13 | Q1-Q3/12 | Change | FY/12 |
|---|---|---|---|---|---|---|---|
| Revenue | 2.7 | 1.1 | 141.4% | 6.8 | 6.2 | 8.7% | 6.6 |
| EBITDA | 0.2 | -0.4 | 0.5 | -3.0 | -1.6 | ||
| EBITDA margin | 8.6% | -34.8% | 7.4% | -48.3% | -24,6 % | ||
| EBIT | -0.2 | -0.7 | -0.3 | -3.7 | -2.4 | ||
| EBIT margin | -6.2% | -63.8% | -4.4% | -59.8% | -36,2 % | ||
| Financial income and expense |
0.3 | 0.0 | -2.0 | -0.5 | -1.0 | ||
| Profit for the period |
0.0 | -0.9 | -2.4 | -5.5 | -4.7 |
Afarak's share of joint ventures revenue for the third quarter improved to EUR 2.7 (1.1) million compared to the equivalent period in 2012, representing an increase of 141.4%. The increase in revenue was mainly due to the increased sales volumes of the Mecklenburg mine material . EBITDA for the third quarter increased to EUR 0.2 (-0.4) million. Increase in EBITDA compared to the equivalent period in 2012 was driven by the improved demand for chrome ore as well as improved mining methods helped in lowering mining costs.
As at 30 September 2013, the business had 316 (346) employees.
For the third quarter of 2013, the EBITDA from unallocated items was EUR -0.2 (-1.4) million including a EUR 0.0 (0.2) million non-cash expense for the share-based payments. The improvement in EBITDA was mainly due to the restructuring at headquarters level that took place in the first quarter of 2013.
The Company held an Extraordinary General Meeting ("EGM") on 5 July 2013. The EGM resolved that that the non-executive Board Members who serve on the Board's Committees shall be paid additional EUR 1,500 per month for the committee work. The director's monthly remuneration fee of EUR 3,000 remained unchanged. Furthermore, the EGM resolved to change the name of the Company and the article 1 of the Company's Articles of Association was amended to the following:
1) Company name and domicile The name of the company is Afarak Group Oyj and domicile is Helsinki. The company name in English is Afarak Group Plc.
On 1 July 2013 Mogale Alloys has entered into a contract in relation to the installation of ferroalloy refining and granulation equipment. The equipment complements Mogale's current four furnaces producing low phosphor ferrochrome and low phosphor silicomanganese. Once the installations are complete, a significant part of the current ferrochrome production can be converted to granulated medium carbon ferrochrome. This is in line with the Company's goal to provide niche products into mature markets to increase profitability and optimise shareholder value. The project commenced in July 2013 and first production of speciality alloys will commence in Q3 2014.
On 10 July 2013, the Company had announced that it is contemplating a directed share issue to Singaporean Sail Resources Pte. The share issue would consist of up to five million new ordinary shares. The shares will be offered in derogation of the pre-emptive subscription right of shareholders and the implementation of the share issue would be pursuant to the authorisation granted to the Company's Board of Directors at the Company's Annual General Meeting on 8 May 2013. The Board of Directors aimed to resolve on the terms and conditions of the share issue by the end of July 2013 but the negotiations of the final terms and conditions are still on-going and the Company expects to complete the negotiations in near future.
On 18 July 2013, the Company's new name was registered in the Finnish Trade Register.
On 19 July 2013, the Company's NASDAQ OMX Helsinki Tradable Instrument Display Mnemonic ("TIDM") changed from RUG1V to AFAGR and London Stock Exchange TIDM changed from RKKI.L to AFRK.L. The ISIN and SEDOL numbers, being FI0009800098 and B28LN87 respectively, remained unchanged.
On 1 November 2013, the Company announce an updated Resources and Reserves Statement for our assets in South Africa. Total chrome ore resources have increased significantly from 38.5 million tons to 61.3 million tons with an average chrome oxide ("Cr2O3") grade of 36.71%.The current reserves of chrome ore are 8.4 million tons with an average Cr2O3 grade of 37.54%.
Furthermore, the Company was pleased to publish for the first time a mineral resources and reserves statement for Platinum Group Metals ("PGMs 2E +Au"). Total resources of PGMs are stated as 2.67 million ounces of platinum, palladium plus gold.
Afarak Group Plc's shares are listed on NASDAQ OMX Helsinki (AFAGR) and on the Main Market of the London Stock Exchange (AFRK).
On 30 September 2013, the registered number of Afarak Group Plc shares was 248,432,000 (248,432,000) and the share capital was EUR 23,642,049.60 (23,642,049.60).
On 30 September 2013, the Company had 4,297,437 (4,414,682) own shares in treasury, which was equivalent to 1.73% (1.78%) of the issued share capital. The total amount of shares outstanding, excluding the treasury shares held by the Company on 30 September 2013, was 244,134,563 (244,017,318).
At the beginning of the period under review, the Company's share price was EUR 0.42 on NASDAQ OMX Helsinki and GBP 0.34 on the London Stock Exchange. At the end of the review period, the share price was EUR 0.36 and GBP 0.35 respectively. During the third quarter of 2013 the Company's share price on NASDAQ OMX Helsinki ranged from EUR 0.36 to 0.44 per share and the market capitalisation, as at 30 September 2013, was EUR 89.4 (1.1.2013: 111.8) million. For the same period on the London Stock Exchange the share price range was GBP 0.34 to 0.35 per share and the market capitalisation was GBP 87.0 (1.1.2013: 87.0) million, as at 30 September 2013.
Based on the resolution at the AGM on 8 May 2013, the Board is authorised to buy-back up to a maximum of 15,000,000 of its own shares. This authorisation is valid until 8 November 2014. The Company did not carry out any share buy-backs during the third quarter of 2013.
Afarak Group Plc was notified on 18 September 2013 that Dr Alfredo Parodi, an independent non-executive director of the Company is the beneficial owner of 22,600 ordinary shares in the Company representing approximately 0.009 per cent of the total issued number of Shares. The Shares were acquired prior to his appointment as an independent non-executive director.
The changes in the key risks and uncertainties are set out below. Further details of the risks and uncertainties have been published in the Group's 2012 Financial Statements.
Afarak´s financial performance is dependent on the general market conditions of the mining, smelting and minerals processing business. Global financial markets have been very volatile, exacerbated by the Eurozone crisis, and there is uncertainty as to how commodity prices will respond for the rest of 2013, which could considerably impact the Company's revenue and financial performance in 2013.
Changes in foreign exchange rates, if adverse, could have a substantial negative impact on the Group's profitability, in particular changes in US Dollar/South African Rand. In order to better manage its foreign exchange US Dollar/South African Rand exposure, the Group has entered into forward contract arrangements.
Afarak's processing operations in Germany and South Africa are intensive users of energy, primarily electricity. Fuel and energy prices globally have been characterised by volatility and cost inflation. In South Africa the majority of the electricity supply, price and availability are controlled by one entity, Eskom. Increased electricity prices and/or reduced or uncertain electricity supply or allocation may negatively impact Afarak's current operations, which could have an impact on the Group's financial performance.
The global economic outlook continues to be uncertain in 2013. Despite the Eurozone crisis continues, there are signs of an increase in the demand for commodities. The ferroalloy market however, is still expected to continue to be volatile during the year with signs of improvement expected at the end of the year or the first quarter of next year. The Group is preparing for significant price fluctuations and will continue to adapt its production levels accordingly. The Company is also continuing its cost saving initiatives and restructuring of functions and this is expected to bring material costs savings in 2013 compared to previous financial year. In light of this the Group expects its financial performance for the full year 2013 to significantly improve compared to 2012.
Fluctuations of exchange rates between the Euro, the South African Rand, the Turkish Lira and the US Dollar can significantly impact the Company's financial performance.
| Closed period | Reporting date | |
|---|---|---|
| Full Year Results 2013 | 1.1.-14.2.2014 | 14 February 2014 |
| Q1 Interim Report 2014 | 7.4.-8.5.2014 | 8 May 2014 |
| Q2 Interim Report 2014 | 15.7.-14.8.2014 | 14 August 2014 |
| Q3 Interim Report 2014 | 10.10.-10.11.2014 | 10 November 2014 |
| Q1-Q3/2013 | Speciality | Ferro | Unallocated | Eliminations | Group |
|---|---|---|---|---|---|
| 9 months | Alloys | Alloys | items | total | |
| EUR '000 | |||||
| Revenue | 54,597 | 39,133 | 256 | -228 | 93,758 |
| EBITDA | 8,504 | 8,193 | -3,193 | -253 | 13,251 |
| EBIT | -4,584 | 2,919 | -3,231 | -253 | -5,148 |
| Segment's assets | 140,789 | 106,358 | 92,658 | -59,565 | 280,239 |
| Segment's liabilities | 84,308 | 45,252 | 12,889 | -56,650 | 85,800 |
| Q1-Q3/2012 | Speciality | Ferro | Unallocated | Eliminations | Group |
|---|---|---|---|---|---|
| 9 months | Alloys | Alloys | items | total | |
| EUR '000 | |||||
| Revenue | 61,438 | 42,890 | 627 | -570 | 104,385 |
| EBITDA | 9,584 | -2,050 | -5,081 | 16 | 2,469 |
| EBIT | -3,573 | -8,691 | -5,113 | 16 | -17,360 |
| Segment's assets | 182,986 | 169,296 | 32,375 | -14,296 | 370,362 |
| Segment's liabilities | 49,528 | 98,472 | 6,141 | -13,302 | 140,838 |
| FY 2012 12 months EUR '000 |
Speciality Alloys |
Ferro Alloys |
Unallocated items |
Eliminations | Group total |
|---|---|---|---|---|---|
| Revenue | 76,456 | 52,050 | 912 | -836 | 128,582 |
| EBITDA | 10,954 | 3,504 | -5,259 | 29 | 9,229 |
| EBIT | -6,677 | -4,820 | -5,300 | 29 | -16,768 |
| Segment's assets | 172,655 | 125,222 | 21,308 | -14,945 | 304,240 |
| Segment's liabilities | 53,975 | 48,360 | 5,669 | -14,329 | 93,674 |
| Q1- | Q1- | ||||
|---|---|---|---|---|---|
| EUR '000 | Q3/13 | Q3/12 | Q3/13 | Q3/12 | FY/12 |
| Revenue | 30,733 | 27,848 | 93,758 | 104,385 | 128,582 |
| Other operating income | 316 | 452 | 11,665 | 9,251 | 13,000 |
| Operating expenses | -28,363 | -29,655 | -90,002 | -105,660 | -127,620 |
| Depreciation and amortisation | -6,048 | -6,767 | -18,398 | -19,829 | -25,997 |
| Items related to associates (core) | 2 | 1 | 4 | 6 | 6 |
| Share of profit from joint ventures | 225 | -878 | -2,174 | -5,513 | -4,740 |
| Operating profit | -3,136 | -8,999 | -5,148 | -17,360 | -16,768 |
| Financial income and expense | 328 | -327 | -2,925 | 1,739 | -2,822 |
| Profit before tax | -2,808 | -9,327 | -8,072 | -15,621 | -19,590 |
| Income tax | 943 | 3,238 | 4,348 | 5,192 | 2,957 |
| Profit for the period | -1,864 | -6,088 | -3,725 | -10,429 | -16,633 |
| Profit attributable to: | |||||
| Owners of the parent | -1,659 | -5,511 | -3,722 | -8,859 | -15,493 |
| Non-controlling interests | -205 | -577 | -2 | -1,570 | -1,141 |
| Total | -1,864 | -6,088 | -3,725 | -10,429 | -16,633 |
| Earnings per share for profit | |||||
| attributable to the shareholders | |||||
| of the parent company, EUR | |||||
| Basic earnings per share, EUR | -0.01 | -0.02 | -0.02 | -0.04 | -0.06 |
| Diluted earnings per share, EUR | -0.01 | -0.02 | -0.02 | -0.04 | -0.06 |
| EUR '000 | Q3/13 | Q3/12 | Q1- Q3/13 |
Q1- Q3/12 |
FY/12 |
|---|---|---|---|---|---|
| Profit for the period | -1,864 | -6,088 | -3,725 | -10,429 | -16,633 |
| Other comprehensive income | |||||
| Remeasurements of defined benefit pension | |||||
| plans | 0 | 0 | 0 | 0 | -4,904 |
| Exchange differences on | |||||
| translating foreign operations | -3,634 | -2,761 | -16,958 | -1,732 | -6,096 |
| Income tax relating to other | |||||
| comprehensive income | 1,103 | 330 | 5,927 | 691 | 1,991 |
| Other comprehensive income, net of tax | -2,531 | -2,431 | -11,030 | -1,041 | -9,009 |
| Total comprehensive income for the period | -4,395 | -8,519 | -14,755 | -11,470 | -25,642 |
| Total comprehensive income attributable to: | |||||
| Owners of the parent | -4,030 | -7,675 | -13,539 | -9,729 | -23,853 |
| Non-controlling interests | -365 | -844 | -1,216 | -1,741 | -1,789 |
| EUR '000 | 30.9.2013 | 30.9.2012 | 31.12.2012 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Investments and intangible assets | |||
| Goodwill | 63,797 | 100,191 | 68,990 |
| Investments in associates | 76 | 77 | 75 |
| Other intangible assets | 26,592 | 49,675 | 43,539 |
| Investments and intangible assets total | 90,465 | 149,944 | 112,603 |
| Property, plant and equipment | 37,577 | 42,995 | 41,108 |
| Other non-current assets | 58,253 | 63,875 | 55,343 |
| Non-current assets total | 186,295 | 256,814 | 209,054 |
| Current assets | |||
| Inventories | 46,622 | 44,494 | 50,455 |
| Receivables | 34,171 | 29,323 | 30,573 |
| Cash and cash equivalents | 13,151 | 39,731 | 14,158 |
| Current assets total | 93,944 | 113,548 | 95,186 |
| Total assets | 280,239 | 370,362 | 304,240 |
| EQUITY AND LIABILITIES | |||
| Equity attributable to owners of the parent | |||
| Share capital | 23,642 | 23,642 | 23,642 |
| Share premium reserve | 25,740 | 25,740 | 25,740 |
| Paid-up unrestricted equity reserve | 242,725 | 245,128 | 245,167 |
| Translation reserves | -1,772 | 10,631 | 8,045 |
| Retained earnings | -101,846 | -85,577 | -99,192 |
| Equity attributable to owners of the parent | 188,489 | 219,564 | 203,402 |
| Non-controlling interests | 5,950 | 9,959 | 7,163 |
| Total equity | 194,439 | 229,523 | 210,566 |
| Liabilities | |||
| Non-current liabilities | |||
| Deferred tax liabilities | 8,934 | 19,485 | 16,906 |
| Provisions | 11,689 | 14,268 | 12,893 |
| Share of joint ventures' losses | 14,820 | 10,882 | 11,805 |
| Pension liabilities Financial liabilities |
15,833 83 |
57,359 11,706 |
15,815 114 |
| Non-current liabilities total | 51,359 | 113,700 | 57,533 |
| Current liabilities | |||
| Advances received | 0 | 195 | 0 |
| Other current liabilities | 34,441 | 26,943 | 36,141 |
| Current liabilities total | 34,441 | 27,139 | 36,141 |
| Total liabilities | 85,800 | 140,838 | 93,674 |
| Total equity and liabilities | 280,239 | 370,362 | 304,240 |
| EUR '000 | 30.9.2013 | 30.9.2012 | 31.12.2012 |
|---|---|---|---|
| Cash and cash equivalents | 13,151 | 39,731 | 14,158 |
| Interest-bearing receivables | |||
| Current | 4,556 | 3,081 | 6,005 |
| Non-current | 44,395 | 55,971 | 48,501 |
| Interest-bearing receivables | 44,951 | 59,051 | 54,507 |
| Interest-bearing liabilities | |||
| Current | 2,565 | 894 | 2,719 |
| Non-current | 83 | 57,306 | 64 |
| Interest-bearing liabilities | 2,648 | 58,201 | 2,782 |
| NET TOTAL | 59,454 | 40,582 | 65,882 |
| EUR '000 | Property, plant and equipment |
Intangible assets |
|---|---|---|
| Acquisition cost 1.1.2013 | 98 453 | 252 654 |
| Additions | 5 562 | 3 262 |
| Disposals | -135 | -4 |
| Reclass between items | 801 | -253 |
| Effect of movements in exchange rates | -10 186 | -23 896 |
| Acquisition cost 30.9.2013 | 94 495 | 231 764 |
| Acquisition cost 1.1.2012 | 98 014 | 299 162 |
| Additions | 3 965 | 8 824 |
| Disposals * | -594 | -30 255 |
| Reclass between items | 551 | 113 |
| Effect of movements in exchange rates | -3 483 | -25 191 |
| Acquisition cost 31.12.2012 | 98 453 | 252 654 |
* Including changes in earn-out liabilities and in contingent purchase considerations
| EUR '000 | Q1-Q3/13 | Q1-Q3/12 | FY/12 |
|---|---|---|---|
| Profit for the period | -3,725 | -10,429 | -16,633 |
| Adjustments to profit for the period | 21,526 | 17,890 | 29,570 |
| Changes in working capital | -6,648 | 5,819 | -6,003 |
| Discontinued operations | 0 | -370 | -743 |
| Net cash from operating activities | 11,154 | 12,910 | 6,191 |
| Acquisition of subsidiaries and associates, net of cash acquired |
-404 | -25,081 | -25,070 |
| Capital expenditure and other investing activities |
-8,756 | -3,732 | -4,512 |
| Proceeds from repayments of loans and loans given |
118 | -3,059 | -3,919 |
|---|---|---|---|
| Net cash used in investing activities | -9,042 | -31,873 | -33,501 |
| Capital Redemption | -2,442 | 0 | 0 |
| Proceeds from borrowings | 0 | 54 | 59 |
| Repayment of borrowings, and other financing activities |
-149 | -5,172 | -22,294 |
| Net cash used in financing activities | -2,591 | -5,118 | -22,234 |
| Net increase in cash and cash equivalents | -479 | -24,081 | -49,545 |
| EUR '000 | A | B | C | D | E | F | G | H |
|---|---|---|---|---|---|---|---|---|
| Equity at 31.12.2011 | 23 642 | 25 740 | 245 128 | 11 501 | -80 185 | 225 826 | 14 348 | 240 173 |
| Total comprehensive income 1-9/2012 |
-870 | -8 859 | -9 729 | -1 741 | -11 470 | |||
| Share-based payments Acquisitions and |
683 | 683 | 685 | |||||
| disposals of subsidiaries | 2 784 | 2 784 | -2 649 | 135 | ||||
| Equity at 30.9.2012 | 23 642 | 25 740 | 245 128 | -10 631 | -85 577 | 219 564 | 9 957 | 229 523 |
| Total comprehensive income 10-12/2012 |
-2 586 | -11 538 | -14 125 | -48 | -14 172 | |||
| Share-based payments | 39 | 183 | 222 | -1 | 221 | |||
| Acquisitions and disposals of subsidiaries |
-2 260 | -2 260 | -2 746 | -5 006 | ||||
| Equity at 31.12.2012 | 23 642 | 25 740 | 245 167 | 8 045 | -99 192 | 203 402 | 7 162 | 210 565 |
| Total comprehensive income 1-9/2013 |
-9 817 | -3 722 | -13 539 | -1 215 | -14 754 | |||
| Share-based payments | -2 441 | 1 068 | 1 068 | 2 | 1 070 | |||
| Capital redemption | -2 441 | 0 | -2 441 | |||||
| Equity at 30.9.2013 | 23 642 | 25 740 | 242 725 | -1 772 | -101 846 | 188 489 | 5 948 | 194 438 |
| EUR '000 | Q1-Q3/13 | Q1-Q3/12 | FY/12 |
|---|---|---|---|
| Sales to joint ventures | 35 | 514 | 564 |
| Sales to other related parties | 26 | 75 | 98 |
| Purchases from joint ventures | -8,201 | -3, 689 | -4,342 |
| Financing income from joint ventures | 845 | 1,592 | 1,889 |
| Financing expense to other related parties | -76 | -80 | -104 |
| Loan receivables from joint ventures | 35,508 | 36,451 | 37,120 |
| Loan receivables from other related parties | 10,215 | 10,000 | 10,293 |
|---|---|---|---|
| Trade and other receivables from joint ventures | 4,927 | 4,539 | 4,821 |
| Trade and other receivables from other related | |||
| parties | 12 | 0 | 44 |
| Trade and other payables to joint ventures | 1,817 | 506 | 0 |
| Q1-Q3/13 | Q1-Q3/12 | FY/12 | |
|---|---|---|---|
| Return on equity, % p.a. | -2.5% | -5.9% | -7.4% |
| Return on capital employed, % p.a. | -0.2% | -5.7% | -4.5% |
| Equity ratio, % | 69.4% | 62.0% | 69.2% |
| Gearing, % | -5.4% | 8.0% | -5.4% |
| Personnel at the end of the period | 747 | 784 | 768 |
The balance sheet date rate is based on exchange rate published by the European Central Bank for the closing date. The average exchange rate is calculated as an average of daily rates from the European Central Bank during the year.
The key exchange rates applied in the accounts:
Average rates
| Q1-Q3/13 | Q1-Q3/12 | FY/12 | |
|---|---|---|---|
| TRY | 2.4598 | 2.3090 | 2.3135 |
| USD | 1.3171 | 1.2808 | 1.2848 |
| ZAR | 12.5015 | 10.3092 | 10.5511 |
Balance sheet rates
| 30.9.2013 | 30.9.2012 | 31.12.2012 | |
|---|---|---|---|
| TRY | 2.7510 | 2.3203 | 2.3551 |
| USD | 1.3505 | 1.2930 | 1.3194 |
| ZAR | 13.5985 | 10.7125 | 11.1727 |
Financial ratios and indicators have been calculated with the same principles as applied in the 2012 financial statements. These principles are presented below.
Return on equity, % = Profit for the period / Total equity (average for the period) * 100
Return on capital employed, % = (Profit before taxes + financing expenses) / (Total assets - interest-free liabilities) average * 100
Equity ratio, % = Total equity / (Total assets - prepayments received) * 100
Gearing, % = (Interest-bearing debt - liquid funds) / Total equity * 100
Net interest-bearing debt = Interest-bearing debt - liquid funds
Earnings per share, basic, EUR = Profit attributable to owners of the parent company / Average number of shares during the period
Earnings per share, diluted, EUR = Profit attributable to owners of the parent company / Average number of shares during the period, diluted
Operating profit (EBIT) = Operating profit is the net of revenue plus other operating income, plus gain/loss on finished goods inventory change, minus employee benefits expense, minus depreciation, amortisation and impairment and minus other operating expense. Foreign exchange gains or losses are included in operating profit when generated from ordinary activities. Exchange gains or losses related to financing activities are recognised as financial income or expense.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) = Operating profit + depreciation + amortisation + impairment losses
This Interim Report is prepared in accordance with the IAS 34 standard. The Company applies new or amended IFRS standards and interpretations from their effective date or after they have been endorsed for application within the EU. The revised standard, IAS 19 Employee Benefits, became effective from the beginning of the financial year 2013. The Company has also resolved to begin to apply the new standards IFRS 10, IFRS 11 and IFRS 12 as well as the revised standards IAS 27 and IAS 28 in the financial statements for the year 2013. The changes in the standards are applied retrospectively. Consequently, Afarak has restated its financial information for 2012. The restated financial information has been published in a stock exchange release on 7 May 2013.
The preparation of the Interim Report in accordance with IFRS requires management to make estimates and assumptions that affect the valuation of the reported assets and liabilities and other information, such as contingent liabilities and the recognition of income and expenses in the income statement. Although the estimates are based on the management's best knowledge of current events and actions, actual results may differ from the estimates.
The figures in the tables have been rounded off, which must be considered when calculating totals. Average exchange rates for the period have been used for income statement conversions, and period-end exchange rates for balance sheet.
The Interim Report data are unaudited.
| Q3/13 | Q3/12 | Q1-Q3/13 | Q1-Q3/12 | FY/12 | ||
|---|---|---|---|---|---|---|
| Share price development in London Stock Exchange |
||||||
| Average share price* | EUR | 0.41 | 0.48 | 0.43 | 0.55 | 0.54 |
| GBP | 0.35 | 0.38 | 0.37 | 0.45 | 0.43 | |
| Lowest share price* | EUR | 0.41 | 0.40 | 0.39 | 0.39 | 0.39 |
| GBP | 0.35 | 0.32 | 0.33 | 0.32 | 0.32 | |
| Highest share price* | EUR | 0.41 | 0.67 | 0.47 | 1.06 | 1.06 |
| GBP | 0.35 | 0.53 | 0.40 | 0.86 | 0.86 | |
| Share price at the end of the period** |
EUR | 0.42 | 0.48 | 0.42 | 0.48 | 0.43 |
| GBP | 0.35 | 0.38 | 0.35 | 0.38 | 0.35 | |
| Market capitalisation at the end of the period** |
EUR million |
104.0 | 118.3 | 104.0 | 118.3 | 106.5 |
| GBP million |
87.0 | 94.4 | 87.0 | 94.4 | 87.0 | |
| Share trading development |
||||||
| Share turnover | thousand shares |
0 | 187 | 45 | 243 | 288 |
| Share turnover | EUR thousand |
0 | 90 | 19 | 133 | 154 |
| Share turnover | GBP thousand |
0 | 71 | 16 | 108 | 125 |
| Share turnover | % | 0.0% | 0.1% | 0.0% | 0.1% | 0.1% |
Share-related key figures
| Share price development in NASDAQ OMX Helsinki |
||||||
|---|---|---|---|---|---|---|
| Average share price | EUR | 0.39 | 0.50 | 0.42 | 0.75 | 0.67 |
| Lowest share price | EUR | 0.36 | 0.38 | 0.36 | 0.38 | 0.38 |
| Highest share price | EUR | 0.44 | 0.71 | 0.48 | 1.02 | 1.02 |
| Share price at the end of the period |
EUR | 0.36 | 0.48 | 0.36 | 0.48 | 0.45 |
| Market capitalisation at the end of the period |
EUR million |
89.4 | 119.2 | 89.4 | 119.2 | 111.8 |
| Share trading development |
||||||
| Share turnover | thousand shares |
1,310 | 1,553 | 3,304 | 4,191 | 5,600 |
| Share turnover | EUR thousand |
504 | 781 | 1,392 | 3,149 | 3,773 |
| Share turnover | % | 0.5% | 0.6% | 1.3% | 1.7% | 2.3% |
* Share prices have been calculated on the average EUR/GBP exchange rate published by Bank of Finland.
** Share price and market capitalisation at the end of the period have been calculated on the EUR/GBP exchange rate published by Bank of Finland at the end of the period.
Formulas for share-related key indicators
Average share price = Total value of shares traded in currency / Number of shares traded during the period
Market capitalisation, million = Number of shares * Share price at the end of the period
This report contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company.
Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. Save as required by law (including the Finnish Securities Markets Acts (746/2012), as amended, or by the Listing Rules or the Disclosure and Transparency Rules of the UK Financial Services Authority), the Company undertakes no obligation to update any forward-looking statements in this report that may occur due to any changes in the Directors' expectations or to reflect events or circumstances after the date of this report.
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