FINANCIAL STATEMENTS RELEASE 2018

12:00 London, 14:00 Helsinki, February 22, 2019 - Afarak Group Plc ("Afarak" or "the Company")

FINANCIAL STATEMENTS RELEASE 2018

QUARTER FOUR 2018 HIGHLIGHTS

• Pressed by a lower ferrochrome benchmark price and weaker chrome ore export prices, Afarak’s FerroAlloys segment performed poorly in the fourth quarter when compared to a year earlier. The Specialty Alloys segment continued its good performance;
• Profit impacted by an impairment write-down related to Mogale business of EUR 6.5 million in the fourth quarter;
• Revenue for the fourth quarter of 2018 decreased by 7.1% to EUR 47.0 (Q4/2017: 50.6) million compared to the equivalent period in 2017 on account of lower average prices than those a year earlier;
• Processed material sold increased by 1.8%, to 25,833 (Q4/2017: 25,371) tonnes;
• Tonnage mined decreased by 33.7%, to 102,562 (Q4/2017: 154,646) tonnes due to the weak geological formations in some of our South African mines;
• The Group’s EBITDA stood at EUR 1.0 (Q4/2017: 2.6) million and the EBITDA margin was 2.1% (Q4/2017: 5.2%);
• EBIT was EUR -7.0 (Q4/2017: 1.2) million, with the EBIT margin at -14.9% (Q4/2017: 2.3%);
• Profit for the period from continuing operations totalled EUR -11.1 (Q4/2017: 3.5) million;
• Cash flow from operations stood at EUR 4.3 (Q4/2017: 0.7) million. Net interest-bearing debt increased to EUR 12.3 (31 December 2017: 1.2) (30 September 2018: 9.9) million;
• Cash and cash equivalents at 31 December totalled EUR 12.1 (31 December 2017: 10.7) (30 September 2018: 5.8) million.

FULL YEAR 2018 HIGHLIGHTS

• The interplay of lower sales volumes, higher production costs due to the challenging environment and the weakening of the US Dollar caused EBITDA to swing into deficit from the record performance in 2017 to EUR -1.0 (FY/2017: 18.0) million;
• The lower average market prices and the adverse industry conditions faced by the FerroAlloys segment, impacted the Group negatively when compared to the record performance in 2017;
• Lower ferrochrome prices and a contraction in sales volumes accounted for an 8.5% decline in the revenue of the FerroAlloys segment to EUR 97.0 (FY/2017: EUR 106.1) million;
• Revenue in the Speciality Alloys segment increased by 7.5% to EUR 96.1 (FY/2017: EUR 89.4) million driven by stronger sales volumes;
• The share of joint venture result for the period amounted to EUR -2.7 (FY/2017: 3.1) million;
• Profit from continuing operations for the full year 2018 stood at EUR -18.6 (FY/2017: 5.2) million.

MARKET SENTIMENT FOR THE FIRST QUARTER 2019

The downward trend in the benchmark price for ferrochrome in 2018 has continued in the first quarter of 2019. The benchmark for Q1 2019 is reported as USD 112 c/lb.

CEO GUY KONSBRUCK

“2018 marked a particularly disruptive and difficult year for Afarak. The unforeseen challenges in the South African assets were exacerbated by the lower average ferrochrome benchmark prices. These factors led to the Group posting poor results when compared to the record performance for 2017.

Several operational issues including technical faults in processing equipment in our South African mining operations, weak geological formations and lower quality of ore caused reduced production outputs, ultimately affecting raw material supply to Mogale. In addition, increasing production costs, a strengthening of the Rand and the forced closure of the P3 furnace in Mogale all had a bearing on the results.

The Speciality segment continued to improve its operations. Revenues increased on account of higher sales volumes and stable prices for material produced until the end of Q3. Our new investment in a fine tailing plant in Turkey supported the improved performance of the segment. However, the weakening of the US Dollar against the Euro and the softening market prices starting in Q4 2018 impinged on the results.

The Group is responding to these challenges. The Executive Management Team is highly focused on optimising the performance of the South African assets. The Mogale plant is today under a new management team which is tasked with improving operations and cutting costs. The team has already started to implement a turnaround strategy and production is shifting from charge chrome to high carbon ferrochrome which currently commands higher margins. Mining operations are also being re-focused with a resulting reduction in fixed costs and capital expenditure. In our German plant we have managed to reduce the production costs in order to cope with lower market prices. The year has been tough; I would like to thank all members of staff who have supported the Company in this phase.

Afarak remains committed to sustainable operations and continues to focus its efforts both on the health and safety of its employees as well as on its corporate social responsibility. This year has seen Mogale commission a 2.8 MW waste gas heat recovery unit now producing electric power, which saves electricity costs and reduces CO2 emissions. In addition, we continued to lend our support to our host communities through a number of social and infrastructure projects.

A number of initiatives are currently underway across our units to further strengthen our operations. The Mecklenburg underground mining investment has been delayed and open-pit mining is set to continue in first quarter 2019. The PGM Plant in Stellite is operating and further improvements are expected to come on stream in the coming quarters. At Zeerust, mine beneficiation equipment is currently being repaired, and processing of tailings is expected to start in Q2 2019. Vlakpoort restarted operations during the year and plans are underway to increase the highwalls. In Serbia, the Company continues to upgrade the beneficiation plant and the rotary kiln at the Magnohrom site for operation later this year.

Looking ahead, the market continues to remain volatile and challenging. The Ferrochrome benchmark for Q1 2019 fell to USD 112 c/lb on account of a softening demand for stainless steel in China. This is the lowest since the benchmark settled in Q3 2017.

As instructed by the Extraordinary General Meeting held in November 2018, management is currently working on the repurchase of Afarak’s own shares and plans are underway to present the proposals and documentation to the shareholders by end of March 2019.

Despite the difficult environment, the Company is focused on further consolidating and streamlining its operations and is committed to increasing its resilience.”

The Board of Directors
Afarak Group

For additional information, please contact:

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

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• Afarak_Q4_FINAL