07:00 London, 09:00 Helsinki, 17 November 2017 - Afarak Group Plc ("Afarak" or "the Company") (LSE: AFRK, NASDAQ: AFAGR)
AFARAK GROUP: INTERIM REPORT Q3/2017
Resilient performance in Q3, Group EBITDA at EUR -2.2 million.
HIGHLIGHTS IN THE THIRD QUARTER OF 2017
In line with seasonal trends, Afarak's third quarter EBITDA stood at EUR -2.2 million, compared to EUR -2.8 million a year earlier. Strong revenue growth, compared to the same quarter in 2016, was mainly driven by higher ferrochrome prices and strong market fundamentals. However, higher costs of production in line with seasonal effects and a sharp increase in cost of raw materials negatively affected profitability.
- Benchmark price for charge chrome for the third quarter was higher than that of a year earlier, though significantly lower than that in the second quarter of this year. Year-on-year performance was, as a result, better, but below that registered in quarter two, reflecting seasonal trends. This was in line with the market sentiment expressed in quarter two
- Revenue increased strongly by 52.7% to EUR 44.2 (Q3/2016: 28.9) million on account of higher sales volumes and prices
- Processed material sold increased by 52.8% to 27,538 (Q3/2016: 18,023) tonnes, reflecting strong demand in both the speciality and ferroalloys segment
- Tonnage mined increased significantly to 153,286 (Q3/2016: 45,487) tonnes, on account of increased activity in South Africa
- Management invested extensively in the Mogale plant in South Africa in preparing the P4 furnace to restart in quarter four and relining P1-2-3 furnaces
- Seasonal shutdowns, higher winter electricity tariffs in South Africa and higher raw material costs negatively affected profitability
- EBITDA stood at EUR -2.2 (Q3/2016: -2.8) million and the EBITDA margin was -4.9% (Q3/2016: -9.8%)
- EBIT was EUR -4.2 (Q3/2016: -4.5) million, with the EBIT margin at -9.4% (Q3/2016: -15.7%)
- Profit for the period from continuing operations totalled EUR -3.9 (Q3/2016: -3.2) million, with cash flow from operations standing at EUR -0.4 (Q3/2016: -5.5) million. Cash and cash equivalents at 30 September increased, however, to EUR 13.6 (30 September 2016: 7.0) (30 June 2017: 11.7) million. Net interest-bearing debt was EUR -2.1 (0.8) (30 June 2017: -5.0) million
- Charge chrome benchmark price for quarter four increased strongly by 26.4% to USD 1.39/lb
Key Group figures
| Q3/17 | Q3/16 | Q1-Q3/17 | Q1-Q3/16 | 2016 | ||
| Revenue | EUR million | 44.2 | 28.9 | 148.2 | 109.2 | 153.6 |
| EBITDA | EUR million | -2.2 | -2.8 | 15.4 | 1.2 | 5.5 |
| EBIT | EUR million | -4.2 | -4.5 | 10.2 | -3.7 | -1.0 |
| Earnings before taxes | EUR million | -5.4 | -4.2 | 2.5 | -4.6 | -3.1 |
| Profit from continuing operations | EUR million | -3.9 | -3.2 | 1.7 | -4.5 | -2.8 |
| Profit from discontinued operations | EUR million | 0.0 | 1.0 | 1.5 | 1.5 | 1.9 |
| Profit | EUR million | -3.9 | -2.2 | 3.2 | -3.0 | -0.9 |
| Earnings per share | EUR | -0.01 | -0.01 | 0.01 | -0.01 | 0.00 |
| EBITDA margin | % | -4.9 | -9.8 | 10.4 | 1.1 | 3.6 |
| EBIT margin | % | -9.4 | -15.7 | 6.9 | -3.4 | -0.7 |
| Earnings margin | % | -12.1 | -14.6 | 1.7 | -4.2 | -2.0 |
| Personnel (end of period) | 912 | 785 | 912 | 785 | 813 |
MARKET SENTIMENT FOR THE FOURTH QUARTER 2017
The charge chrome benchmark price increased from USD 1.10/lb in the third quarter to USD 1.39/lb in the fourth quarter and is expected to contribute to an improved performance of the Group. Quarter four results are expected to be in line with last year on account of higher raw material costs. However, full year results will be stronger than those registered in 2016 given the productivity and capacity improvements that were implemented during the year
CEO GUY KONSBRUCK
"Afarak's third-quarter results reflect the annual seasonal fluctuations. The summer period in Europe entails a weakening in demand and a related shutdown of many plants. Our plant in Germany was closed for just two weeks during the quarter. In South Africa, higher winter electricity tariffs typically lead to maintenance shutdowns during the same period. During the quarter, we extended the closure of our plant in Mogale to 4 weeks as we wanted to perform major and necessary maintenance works.
In addition to the seasonal effects, our quarter three result was negatively impacted by quite a challenging business environment in South Africa. Just as third-party ores saw a steep price increase, thus impacting our cost of production for some grades in Mogale, the benchmark for charge chrome dropped drastically and unexpectedly to USD 1.10, resulting in much lower margins than expected. During the quarter, we were also faced with unusually bad weather conditions in South Africa which created port congestions and delays in shipments. All these challenges negatively affected our profitability of both the ferroalloys segment and the Group.
Nevertheless, despite all this, the third quarter EBITDA results for 2017 improved from a year earlier.
In our speciality alloys segment, despite a short shutdown in Germany, we performed well, both on an operational and financial level. In Turkey, our mining performance continues to improve. At EWW productivity continued to increase and our interventions focused on improving process control and laboratory facilities.
The ferroalloys segment in South Africa faced a very challenging period, as described above. We took the opportunity to invest extensively in furnace relining of P1-2-3 furnaces as well as to prepare P4 furnace to start up in the fourth quarter. P4 had not been in operation for several years and will now, moving forward, allow us to produce a broader range of alloys, making Afarak the only high carbon ferrochrome producer in South Africa.
Our mines continue to register positive performance, increasing efficiencies and productivity. Management is focused on expanding our mining capacity in South Africa in order to further consolidate our vertical integration.
On behalf of management, I would like to thank the teams across all our operations for their commitment and effort during this challenging period, which saw more ferrochrome producers in South Africa file for business rescue. Despite the difficult environment, Afarak continues to display resilience and adaptability. Our actions and interventions to enhance the Company's operations and structures continue to pay off.
The Company also continued investing in sustainability initiatives. We are fully focused on enhancing health and safety in South Africa and the improvement programme we rolled out in this regard is already yielding positive results. We continue to support our host communities and I am proud of our contribution to improving people's daily lives.
Moving forward, the increase in the fourth quarter benchmark price for ferrochrome is expected to contribute to an improved performance of the Group. I am confident that 2017 will be a positive year for Afarak not only from a results perspective but more importantly, in making the organisation even more resilient, vertically-integrated and better placed to exploit market opportunities in the years to come."
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 Q3/2017 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.
INVESTOR CONFERENCE CALL
Management will host an investor conference call in English on Friday 17 th November 2017 at 14.30 Finnish time, 12.30 UK time. Please dial-in at least 10 minutes beforehand, quoting the reference: 1216375.
Finnish number +358 (0) 9 7479 0361 UK number +44 (0) 330 336 9105
Participants can also download the Quarter 3 Investor Call Presentation from the Presentation page on the Investors Section on the Afarak website ( http://www.afarak.com/en/investors/presentations/) .
AFARAK GROUP PLC Guy Konsbruck CEO
For additional information, please contact:
Afarak Group Plc
Guy Konsbruck, CEO, +356 2122 1566, guy.konsbruck@afarak.com Jean Paul Fabri, PR 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 specialist alloy 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
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