IFL.L Regulatory News (IFL)

3 Mar 2008 07:02

International Ferro Metals Limited03 March 2008 3 March 2008 International Ferro Metals Limited ("IFL" or the "Company") Reviewed Interim Results - 31 December 2007 International Ferro Metals Limited (LSE: IFL), the integrated ferrochrome producer, presents its interim results for the half year ended 31 December 2007. Highlights • Through this six month period of ramp-up to full production, Ferrochrome costs per pound have reduced by 30%. • The average market ferrochrome price was approximately US$1.00/lb over the period. • Ferrochrome production for the six months ended 31 December 2007 amounted to 93,317 tonnes. • Revenue of ZAR367 million. • EBITDA of ZAR14.52 million. • Loss of ZAR23.9 million. Post period highlights • First quarter Ferrochrome price has increased 21% to US$1.21/lb • ZAR has depreciated 15% from 1US$:R6.85 at 31 December 2007 to the current exchange rate of 1US$:R7.89. • Eskom restricted Ferrochrome producers to operate utilising no more than 90% of their maximum electricity demand. Eskom's electricity constraints support higher Ferrochrome prices. • Feasibility study underway to increase capacity to 665,000 tonnes per year. • Outlook for ferrochrome market remains strong. • David Kovarsky joined the Board as Managing Director from 1 February 2008. 31 Dec 2007 31 Dec 2006 ZAR'000 ZAR'000 Sales revenue 367,525 4,441Cost of goods sold (349,595) (3,600)Gross profit 17,930 841Net loss after tax (23,858) (71,628)Loss per share (ZAR cents) (4.54) (17.29) Stephen Turner, Chief Executive Officer of IFL commented: "These results are in line with our expectations given the production problemswe experienced which, with the exception of the industry-wide electricity supplyproblems, have since been rectified. We continue to achieve increasingferrochrome prices and the outlook for demand remains very positive. This isdriven largely by the strong growth in developing countries like China, whosepopulation continues to urbanise. Ferrochrome supply has been affected mostrecently by well-publicised electricity supply constraints in South Africa. Wedo not expect significant new electricity capacity to come on stream in the nearfuture, thus supporting further price increases. IFL's position as anestablished ferrochrome producer, with substantial expansion plans supported byelectricity supply commitments, positions the Company well to benefit from theconsistent growth in stainless steel demand." For further information please contact: International Ferro Metals LimitedStephen Turner, Chief Executive OfficerMob: +61 418 440 844ORDavid Kovarsky, Managing DirectorMob: +27 82 650 1192www.ifml.com Brunswick GroupPatrick Handley / Carole CableTel: +44 (0) 20 7404 5959 Numis Securities LimitedJohn Harrison / Stuart SkinnerTel: +44 (0) 20 7260 1000 Notes to editors:IFL produces ferrochrome, the essential ingredient in stainless steel, from itsintegrated chromite mine and ferrochrome processing operations in South Africa. Financial Review The six months to 31 December 2007 were dominated by the ramp-up of the integrated ferrochrome production facility. As was announced in September 2007,production from our two furnaces was temporarily disrupted as a result of an operational failure of the pressure rings within the furnaces as well as electricity supply interruptions. The replacement programme for the electrode pressure rings was completed successfully, one month ahead of schedule, resulting in full operating capacity being restored by December 2007. The consequent impact on the ramp-up programme resulted in 93,317 tonnes of ferrochrome being produced in the six month period to 31 December 2007 generating revenue of ZAR367 million. This production was comparable to a designed capacity of 133,700 tonnes; less a shortfall of approximately 40,000 tonnes. The shortfall comprised approximately 30,000 tonnes as a result of the redesign and replacement of the 48 electrode pressure rings and approximately 10,000 tonnes from a combination of crusher failures at the metal recovery plant, scrubber failures, disruption to the supply of reductants and most significantly, interruptions to electricity supply. Plant engineers are confident that, with the exception of the electricity supply issues, all these ramp-up issues have been resolved. We report a loss of ZAR23.9 million for the period (£1.6m). Electricity Supply In December 2007, January and February 2008 production was significantly reducedby a shortage of electricity. Following two months of disrupted power supplyEskom, the sole supplier of electricity in South Africa, in January 2008restricted Ferrochrome producers to operate utilising no more than 90% of theirmaximum electricity demand. A 10% reduction in electricity supply reduces IFL'sferrochrome production by approximately 12% assuming that IFL's mining,beneficiation, pelletising and sintering plants continue to operate at fullcapacity. IFL anticipates operating at this restricted level of electricitysupply through the balance of this financial year. The Ferrochrome market Demand for IFL's ferrochrome is strong and our two offtake agents, JISCO and CoMetals, have increased their guaranteed offtake commitment to 400,000 tpa to take effect following the proposed facilities expansion. In the reported period the Company has sold product to China, Germany, Italy, Brazil, USA, Thailand, Japan and Belgium. European stainless steel producers are reported to have ferrochrome stockpiles of less than two weeks consumption and the forecast outlook for ferrochrome prices has continued to strengthen. At the end of this reporting period, the price of ferrochrome increased by 21% from US$1.00 /lb to US$1.21. Since that time, ferrochrome has traded at increasingly higher prices and there is anticipation, within the industry, of further substantial upward movements in price in the immediate future. Expansion timing The Company is finalising its feasibility study to increase annual production capacity to 665,000 tonnes of ferrochrome. A delay was experienced in developing the mine plan for the SkyChrome chromite deposit, principally as a result of additional time taken to gain access to the site. SRK has committed to producing a feasibility study by the end of April 2008 and the Company will make the formal decision to commence construction shortly thereafter. The first of the new furnaces is expected to commence production following an eighteen month construction period, with two further furnaces coming on-stream shortly thereafter. Balance Sheet In this accounting period the Company issued an additional £85.2 million in equity bringing its total issued capital to 504,010,792 ordinary shares. This funding is expected to provide the full equity component required for construction of the proposed additional three furnaces and the Company is in the process of negotiating debt finance for the balance. At 31 December 2007 IFL hada cash balance of ZAR341 million. Stock levels of ferrochrome as at 31 December 2007 were 42,442 tonnes, representing eight weeks of capacity production. While the stock was committed for sale, unexpected logistical issues surrounding transporting the material to port prevented the stock from being shipped.IFL has an unredeemed capital expenditure balance of approximately ZAR1.39 billion at 31 December 2007, which should be utilised along with its tax losses of ZAR292 million before tax is payable by the Company. Our environment IFL is the only South African ferrochrome producer that operates totally closed furnaces and therefore does not have significant exposure to the environmental liabilities arising from the operation of open furnaces. Other ferrochrome producers in South Africa are moving to close or enclose their open ferrochrome furnaces. This action is being enforced by the South African government and should reduce ferrochrome supply through the change over period. IFL has continued to work with its host communities through its social responsibility program. The Company has a lost time injury frequency rate of 2.75 against an industry average of 8.66. Outlook Following the admission of its shares to trading on the Main List of the London Stock Exchange on 31 August 2007, IFL is well positioned to take advantage of opportunities for expansion and consolidation in the ferrochrome industry. IFL was included in the FTSE 250 index from 24 December 2007. The abridged financial statements follow and the full set is available on the Company web site www.ifml.com Abridged Financial Statements Consolidated Income StatementFor the half year ended 31 December 2007 31 Dec 2007 31 Dec 2006 ZAR'000 ZAR'000Sales revenue 367,525 4,441Cost of goods sold (349,595) (3,600) --------- -------Gross profit 17,930 841 --------- -------Other income /expensesAdministrative and other expenses (38,658) (30,865)Gains/(Losses) on mark-to-market of derivatives 6,615 (27,495) --------- -------Net loss before interest and tax (14,113) (57,519) --------- -------Finance income 30,334 17,709Finance costs (40,079) (31,818) --------- -------Net loss before tax (23,858) (71,628)Income tax expense - - --------- -------Net loss for the period (23,858) (71,628) --------- -------Attributable to:Minority interest (1,117) (701)Members of the parent (22,741) (70,927) --------- ------- (23,858) (71,628) --------- -------Loss per share (cents per share)- basic loss per share (4.54) (17.29)- diluted loss per share (4.54) (17.29) Consolidated Balance SheetAt 31 December 2007 31 Dec 2007 0 June 2007 ZAR'000 ZAR'000Current assetsCash and cash equivalents 341,721 43,929Trade and other receivables 99,144 33,073Prepayments 767 4,044Inventories 251,052 140,821Other current assets - 141,916 --------- ---------Total current assets 692,684 363,783 --------- ---------Non-current assetsProperty, plant & equipment 1,632,301 1,632,388Other non-current assets 126,427 124,371 --------- ---------Total non-current assets 1,758,728 1,756,759 --------- ---------Total Assets 2,451,412 2,120,542 --------- --------- Current liabilitiesInterest bearing loans and 50,000 -borrowingsTrade and other payables 105,304 134,406Derivative liability - 20,994Provisions 9,440 23,118 --------- ---------Total current liabilities 164,744 178,518 --------- ---------Non-current liabilitiesInterest bearing loans and 115,622 898,631borrowingsDerivative liability 39,855 42,432Provisions 29,215 33,971 --------- ---------Total non-current liabilities 184,692 975,034 --------- ---------Total liabilities 349,436 1,153,552 --------- ---------Net assets 2,101,976 966,990 --------- --------- Shareholders' equityContributed equity 2,767,935 1,607,075Share based payment reserve 5,464 7,480Accumulated losses (673,956) (651,215) --------- ---------Parent entity interests 2,099,443 963,340 --------- ---------Minority interests 2,533 3,650 --------- ---------Total shareholders' equity 2,101,976 966,990 --------- --------- This information is provided by RNS The company news service from the London Stock Exchange