AFARAK GROUP PLC'S INTERIM REPORT FOR 1 JULY - ...

07:00 London, 09:00 Helsinki, 10 November 2014 - Afarak Group Plc ("Afarak" or "the Company") (LSE: AFRK, OMX: AFAGR) Interim Report

AFARAK GROUP PLC'S INTERIM REPORT FOR 1 JULY - 30 SEPTEMBER 2014

Q3 HIGHLIGHTS (July-September 2014):

- Revenue increased by 32.1% to EUR 40.6 (Q3/2013: 30.7) million
- Processed material sold increased by 131.9% to 26,347 (Q3/2013: 11,359) tonnes
- EBITDA was EUR 2.1 (Q3/2013: 2.9) million and the EBITDA margin was 5.1% (Q3/2013: 9.4%)
- EBIT was EUR 0.5 (Q3/2013: -3.1) million and the EBIT margin was 1.3% (Q3/2013: 2.2%)
- Profit for the period totalled EUR -0.7 (Q3/2013: -1.9) million
- Ferrochrome production decreased by 21.4% to 20,163 (Q3/2013: 25,574) tonnes
- Tonnage mined decreased by 59.2% to 50,005 (Q3/2013: 122,573) tonnes
- Cash flow from operations was EUR 1.2 (Q3/2013: -1.8) million and liquid funds at 30 September were
  EUR 21.4 (30 September 2013: 13.1) (30 June 2014:17) million
- The Group updates its outlook for 2014

KEY FIGURES (EUR million)	Q3/14	Q3/13	Change	Q1-Q3/14	Q1-Q3/13	Change	FY/13
Revenue	40.6	30.7	32.1%	131.1	93.8	39.8%	135.5
EBITDA	2.1	2.9	-28.3%	8.4	13.3	-36.3%	14.0
EBITDA margin	5.1%	9.4%		6.4%	14.1%		10.4%
EBIT	0.5	-3.1		2.9	-5.1		-8.0
EBIT margin	1.3%	-10.2%		2.2%	-5.5%		-5.9%
Earnings before taxes	-1.3	-2.8		1.7	-8.1		-11.2
Earnings margin	-3.3%	-9.1%		1.3%	-8.6%		-8.2%
Profit	-0.7	-1.9		0.8	-3.7		-4.4
Earnings per share, basic, EUR	-0.00	-0.01		0.00	-0.02		-0.02

Commenting on the third quarter results, Danko Koncar, CEO, said:

"The volumes of ferrochrome processed decreased by 21.4% when compared to the same period last year as both EWW and Mogale Alloys had scheduled maintenance during this quarter. The tonnage mined continued to be negatively affected by the temporary suspension of the Mecklenburg mine and the lockout at the Turkish mines.

The Group's revenue during this quarter remained strong with an increase of 32.1% when compared with the same period last year as a result of sales stockpiles. Ferrochrome prices remained weak during this quarter and remain below the high levels seen last year. The weak US dollar during the majority of this quarter has also continued to impact conversion of revenue and results from operations as has the increase in cost of production, due to higher raw material costs in the Speciality Alloys segment and higher energy cost in the Ferroalloys segment due to the South African winter energy tariffs.

The ferrochrome market remains difficult to predict with no signs of recovery in prices during this period. In the longer term we believe that ferrochrome prices, particularly the speciality and super alloys segment, have potential to recover to higher levels which we would expect to result in improved margins. We continue to evaluate initiatives with the objective of strengthening our position and providing new growth opportunities. Our focus remains on generating cash and increasing profits.

Finally, I'm pleased to announce that despite a lower EBITDA we managed to achieve positive EBIT for the third consecutive quarter."

2014 OUTLOOK

Afarak expects its financial performance to be better than 2013 but EBITDA is expected to be lower. The global economic outlook continues showing signs of recovery with western industrial nations issuing positive economic indicators. Demand for commodities is also showing recovery with increase in demand for speciality alloys in the United States. The ferroalloy market is expected to continue the positive trend of 2013 during which consumption reached record levels. To date, however, pricing has not responded to the increased demand. The Group continues to be prepared for significant price fluctuations and will continue to adapt its production levels accordingly. At Mogale Alloys, part of the FerroAlloys division, the Company expects to start production of medium carbon ferrochrome during the fourth quarter of 2014, which is expected to have a positive impact on our profit margins. In the Speciality Alloys division we are expecting to see an increase in our raw materials cost due to current market conditions. As a result the full year revenue and EBIT are expected to be higher but EBITDA lower as compared to 2013. 
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. 

The previous outlook, published in the second quarter interim results on 14 August 2014, was:

Afarak still expects its financial performance to be better than 2013 but EBITDA will be lower as Q3 2014 is expected to be weaker as compared to Q3 2013. The global economic outlook continues showing signs of recovery with western industrial nations issuing positive economic indicators. Demand for commodities is also showing recovery with increase in demand for speciality alloys in the United States. The ferroalloy market is expected to continue the positive trend of 2013 during which consumption reached record levels. To date, however, pricing has not responded to the increased demand. The Group continues to be prepared for significant price fluctuations and will continue to adapt its production levels accordingly. At Mogale Alloys, part of the FerroAlloys division, the Company expects to start production of medium carbon ferrochrome during the fourth quarter of 2014, which is expected to have a positive impact on our profit margins. In the Speciality Alloys division we are expecting to see an increase in our raw materials cost due to current market conditions. As a result the full year revenue and EBIT are expected to be higher but EBITDA lower as compared to 2013. 

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.

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 Q3/2014 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.

 

AFARAK GROUP PLC
Danko Koncar
CEO


For additional information, please contact:

Afarak Group Plc
Danko Koncar, CEO, [phone], [e-mail]



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 FerroAlloys 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

Q3-Report

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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

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