07:00 London, 09:00 Helsinki, 17 February 2017 - Afarak Group Plc ("Afarak" or "the Company") (LSE: AFRK, OMX: AFAGR) Interim Report AFARAK GROUP PLC'S FINANCIAL STATEMENTS REVIEW FOR 1 JANUARY - 31 DECEMBER 2016
FULL YEAR HIGHLIGHTS (January-December 2016)
Afarak's performance in 2016 highlights its strong fundamentals. The Company registered a positive operational result despite another challenging year, particularly its first half. Nevertheless, due to strategic planning and timely capital investments, the Company was well-positioned to benefit from the market upswing towards the end of the year.
Investor highlights
- Capital redemption of EUR 2.6 (5.1) million approved and paid during the second quarter
- Capital redemption of EUR 2.6 (0.0) million approved and paid during the third quarter
Financial highlights
- Revenue totalled EUR 153.6 (FY/2015: 187.7) million
- EBITDA was EUR 5.5 (FY/2015: 17.2) million and the EBITDA margin was 3.6% (FY/2015: 9.2%)
- EBIT was EUR -1.0 (FY/2015: 9.9) million and the EBIT margin was -0.7% (FY/2015: 5.3%)
- Profit for the year from continuing operations totalled EUR -2.8 (FY/2015: 7.8) million
- Cash flow from operations was EUR 9.0 (FY/2015: 12.5) million
- The Company repaid a total of EUR11.8 million of its external debt resulting in a debt-to-equity ratio of 2.1% (FY/2015: 8.2%)
Operational highlights
- Processed material sold decreased by 8.2% to 97,095 (FY/2015: 105,777) tonnes
- Full year ferrochrome production was reduced by 7.6% to 95,739 (FY/2015: 103,591) tonnes
- Tonnage mined decreased by 43.2% to 262,266 (FY/2015: 461,781) tonnes
Q4 HIGHLIGHTS (October-December 2016)
Afarak registered a stronger performance in the fourth quarter on the back of a bullish market.
Financial highlights
- Revenue totalled EUR 44.4 (Q4/2015: 49.2) million
- EBITDA increased by 16.2% to EUR 4.3 (Q4/2015: 3.7) million and the EBITDA margin was 9.6% (Q4/2015: 7.5%)
- EBIT increased by 50% to EUR 2.7 (Q4/2015: 1.8) million and the EBIT margin was 6.1% (Q4/2015: 3.7%)
- Profit from continuing operations totalled EUR 1.7 (Q4/2015: 0.8) million
- Cash flow from operations was EUR 7.7 (Q4/2015: 0.4) million
- The Company repaid EUR 4.2 million of external debt (Q4/2015: 2.6) million
Operational highlights
- The Company substituted low profit production for higher yielding material. As a result, processed material sold totalled 23,906 (Q4/2015: 31,137) tonnes
- Ferrochrome production was reduced by 21.1% to 22,833 (Q4/2015: 28,938) tonnes to optimise working capital
- Tonnage mined increased by 20.2% to 114,898 (Q4/2015: 95,587) tonnes
MARKET SENTIMENT FOR Q1 2017
The prices of chrome ore and ferrochrome are expected to remain strong in quarter one 2017, positively affecting Afarak's financial performance. We expect significantly better results in Q1 2017 compared to the Q1 2016 results.
DIVIDEND PROPOSAL Due to the net loss for the year 2016, the Board of Directors will propose to the Annual General Meeting, which will be held on 23 May 2017 that no capital redemption or dividend would be distributed. In line with the Group's policy, distributions to shareholders will be reviewed at the time of the half year announcement.
| KEY FIGURES (EUR million) | Q4/16 | Q4/15 | Change | FY2016 | FY2015 | Change |
| Revenue | 44.4 | 49.2 | -9.7% | 153.6 | 187.7 | -18.2% |
| EBITDA | 4.3 | 3.7 | 5.5 | 17.2 | ||
| EBITDA margin | 9.6% | 7.5% | 3.6% | 9.2% | ||
| EBIT | 2.7 | 1.8 | -1.0 | 9.9 | ||
| EBIT margin | 6.1% | 3.7% | -0.7% | 5.3% | ||
| Earnings before taxes | 1.5 | 0.5 | -3.1 | 6.5 | ||
| Earnings margin | 3.4% | 0.9% | -2.0% | 3.5% | ||
| Profit from continuing operations | 1.7 | 0.8 | -2.8 | 7.8 | ||
| Profit from discontinued operations | 0.4 | 0.8 | 1.9 | 0.8 | ||
| Profit | 2.0 | 1.6 | -0.9 | 8.5 | ||
| Earnings per share, basic, EUR | 0.01 | 0.01 | 0.00 | 0.03 |
Commenting on the full year and fourth quarter results of 2016, Guy Konsbruck, CEO, said: "Throughout 2016, Afarak faced largely depressed market conditions, affecting most chrome and ferrochrome producers. During the past year, a good number of South African producers either went into business rescue or reduced their ferrochrome output.
With prices gravitating downwards, our sales volumes were hit hard, particularly in the speciality segment. Our mining and production volumes were also lower due to the closure of Mecklenburg, safety stoppages at the mines and the temporary closure of Mogale Alloys. In response to these conditions, Afarak focused its efforts on prudent capital management, debt collection, optimising production, inventory management - including the decision to temporarily stop production in our German smelter EWW, which created an opportunity for successful placing of TMS' chrome ore onto the higher priced market during Q4.
In the second half of 2016, Afarak confirmed its agility and responsiveness to expected market conditions. With a recovery in market prices and a strengthening in demand; Afarak was able to respond in a timely and effective manner. As benchmark prices reached an eight-year high in December, Afarak brought on stream three projects that enabled it to benefit from the upswing. The Mogale plant is now operating as a swing plant and switched one of its silicomanganese furnaces to ferrochrome enabling better margins in the current market. Mecklenburg restarted opencast mining and the shaking table project at the Ilitha mine is now in full production. These factors have allowed Afarak to register a strong performance in the fourth quarter and confirmed the Company's entrepreneurial nature in identifying and reaping opportunities.
Strong prices are expected to remain in quarter one 2017. It is however difficult to predict the longer term outlook. Afarak will continue concentrating on its core activity, ferrochrome specialties. We shall further strengthen our in-house ore capacities, so as to be more independent from third parties. We have created the basis to broaden our product range for 2017.
During my first month at Afarak I have met and interacted with our team and was impressed by the skill-sets and technical competence as well as the willingness to improve processes and efficiency. On behalf of Afarak Group, I would like to extend my thanks to all our colleagues who played an important role in achieving this positive result in 2016 given the external environment." Disclosure procedure 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 Q4/2016 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.afarak.com. AFARAK GROUP PLC Guy Konsbruck CEO
For additional information, please contact: Afarak Group Plc Guy Konsbruck, CEO, +356 2122 1566, Guy.Konsbruck@afarak.com
Predrag Kovacevic, CFO, +356 2122 1566, pedja.kovacevic@afarak.com Melvin Grima, Finance Director, +356 2122 1566, melvin.grima@afarak.com Jean Paul Fabri, PR & Communications Manager, +356 2122 1566, jp.fabri@afarak.com
Financial reports and other investor information are available on the Company's website: www.afarak.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 FerroAlloys business in South Africa. The Company is listed on NASDAQ Helsinki (AFAGR) and the Main Market of the London Stock Exchange (AFRK). Distribution: NASDAQ Helsinki London Stock Exchange main media www.afarak.com
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the publication of this announcement via Regulatory Information Service ('RIS'), this inside information is now considered to be in the public domain.
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