Last checked at 21 Aug 2020 08:42
AFARAK GROUP: INTERIM REPORT H1 202008:30 London, 10:30 Helsinki, 21 August 2020 - Afarak Group Plc ("Afarak" or "the Company") (LSE: AFRK, NASDAQ: AFAGR)
FINANCIAL INTERIM RELEASE H1 2020
| H1/20 | H1/19 | 2019 | ||
| Revenue | EUR million | 44.9 | 82.8 | 144.9 |
| EBITDA | EUR million | -2.8 | -12.9 | -23.8 |
| EBIT | EUR million | -9.6 | -37.7 | -63.2 |
| Earnings before taxes | EUR million | -15.6 | -31.8 | -60.6 |
| Profit | EUR million | -16.1 | -29.2 | -58.9 |
| Earnings per share | EUR | -0.07 | -0.11 | -0.23 |
| EBITDA margin | % | -6.3 | -15.6 | -16.4 |
| EBIT margin | % | -21.3 | -45.6 | -43.6 |
| Earnings margin | % | -34.7 | -38.5 | -41.8 |
| Personnel (end of period) | 770 | 1,035 | 905 |
FIRST HALF 2020 HIGHLIGHTS
Revenue decreased by 45.7% to EUR 44.9 (H1/2019: 82.8) million;Processed material sold decreased by 46.1% to 23,356 (H1/2019: 43,334) tonnes; Tonnage mined decreased by 46.4% to 102,659 (H1/2019: 191,497) tonnes due to lower mining activity at Stellite mine and no mining activity at Mecklenburg mine;The Group’s EBITDA increased to EUR -2.8 (H1/2019: -12.9) million and the EBITDA margin was -6.3% (H1/2019: -15.6%);An impairment write-down on other long term assets related to Mogale business of EUR 4.7 (H1/2019: 20.8) million;EBIT was EUR -9.6 (H1/2019: -37.7) million, with the EBIT margin at -21.3% (H1/2019: -45.6%);Profit for the period totalled EUR -16.1 (H1/2019: -29.2) million;Cash flow from operations stood at EUR -2.2 (H1/2019: -5.2) million; Net interest-bearing debt after deducting liquid funds amounted to EUR 54.7 (30.2) (31 December 2019: 55.1) million; Cash and cash equivalents at 30 June totalled EUR 6.1 (30 June 2019: 6.1) (31 December 2019: 5.4) million.OUTLOOK FOR THE SECOND HALF OF 2020
The global economy has experienced an unprecedented turmoil due to COVID-19. We will continue to face a turbulent future with uncertainties throughout the globe on future expectation making forecasting future prices or volumes very difficult to predict.
The second half of the year is expected to continue on a weak tone until a vaccine for COVID-19 is found. The lower demand will have an impact on the Group’s sales and production cycles. Our profitability and cash flow position are strained which is leading to going concern difficulties. The Group may need to raise further funds to meet its liquidity needs during this period.
CEO GUY KONSBRUCK
“In the beginning of the first half of 2020 we were on the right track of recovery where we have seen stronger performance in the Speciality Alloys segment and recovery in the FerroAlloys segment. Unfortunately the global economic downturn originated by COVID-19 halted this and showed to be the most challenging business environment that I have ever experienced in my professional career. Having said this, we have still managed to show good signs of recovery when compared to H1 2019. Our specialty segment remained profitable. We have reduced our overall EBITDA loss by 78.2%, we have reduced our working capital by 36.3%, we have further reduced our total inventory by 36.7% and our total cost by 26.1%. I express my sincere gratitude to all colleagues for their substantial personal contributions to make this happen.
The COVID-19 epidemy has caused a significant decrease in demand and market prices both in the FerroAlloys and Speciality Alloys segment. We have reduced our production in the Speciality Alloys segment to reflect that trend. We have also put the Mogale plant under care and maintenance, as the energy cost during the South African winter period is making profitable production impossible. We made good progress in the mining assets and hope to be producing PGM’s by end of the year. We are also continuing to prepare the Serbian mines and sintered magnesite plant for commercial production. We managed to maintain and preserve the group assets, by applying a strict and rigorous cash management. Nevertheless, the company is still in a critical situation, as can be seen in our cash flow statement. The company cannot count on any financial COVID-19 associated help from any government where we have production assets.
We have therefore been evaluating sources of incremental capital since some time. It has proven to be a difficult exercise as the company’s reputation was already severely damaged by the disputes that arose in 2015.
One year ago, a “special audit” was initiated by a group of minority shareholders. Even though the initiators eventually withdrew their demand, we had to go through this unnecessary and lengthy process. We have been ever since actively cooperating with the special auditors, but at this point, we cannot even get a commitment on when the process will be terminated. On 23/09/2019, a fine was issued against us by FIN-FSA, which we consider both unjustified and completely exaggerated. Our appeal is lying with the courts since months. It is also unfortunate that Afarak is still incorrectly associated to investigations against one of its stakeholders, although we have stated many times that the company is not a party to this at all.
All this “corporate noise” does not encourage banks and other financial institutions. The management continues to explore further options, including fund raising via shareholders. We will keep all shareholders appraised of further developments.
It is difficult to predict how the markets will evolve in the second half year 2020, but we are in a position to swiftly resume 100% production capacity, in case the global industrial activity recovers.”
Helsinki, August 21, 2020
Afarak Group Plc
Board of Directors
For additional information, please contact:Guy Konsbruck, CEO, +356 2122 1566, guy.konsbruck@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 mediawww.afarak.com
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Afarak_Quarterly_2020_H1_EN