Afarak Group Plc Afarak Group: Interim Report Q3/2017

 
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 [phone] 
 
   UK number [phone] 
 
   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, [phone], [e-mail] 
 
   Jean Paul Fabri, PR Manager, [phone], [e-mail] 
 
   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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