Afarak Group Plc Afarak Group: Interim Report Q3/2017
November 17 2017 - 1:00AM
UK Regulatory
TIDMAFAGR
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
Afarak_Q3 2017: http://hugin.info/143997/R/2150421/825413.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Afarak Group via Globenewswire
http://www.afarakgroup.com
(END) Dow Jones Newswires
November 17, 2017 02:00 ET (07:00 GMT)
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