Here's a profitable iron-ore producer whose shares trade at just three times earnings, while offering an effective dividend yield of 15 per cent. The only trouble is that its operations are located in Ukraine.
Ferrexpo's (FXPO) sovereign risk rating has been downgraded by all credit agencies, but these latest full-year figures show it is coping better with the slump in iron-ore prices than many peers. Comparative earnings were down by a third, but this was largely down to an $82m (£55.4m) impairment charge on Ferrexpo's investment in Ferrous Resources. The group still turned in cash profits of $496m - a relatively modest 2 per cent decline year on year.
How did Ferrexpo manage this, given the glut in iron-ore markets? It was helped by a marked devaluation in the Ukrainian currency, which along with operating efficiencies drove down production costs by a quarter. More importantly, however, the successful commissioning of two new grinding machines meant that over half of Ferrexpo's record 11m tonne output in 2014 took the form of higher-quality 65 per cent grade pellets. These pellets attract higher prices from smelters, not least because the market is not oversupplied to the same degree as the mainstream iron-ore market.
| FERREXPO (FXPO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 58p | MARKET VALUE: | £338m | |
| TOUCH: | 57-58p | 12M HIGH / LOW: | 163p | 48p |
| DIVIDEND YIELD: | 7.8% | PE RATIO: | 3 | |
| NET ASSET VALUE: | 121¢ | NET DEBT: | 94% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 1.3 | 498 | 72.3 | 6.6 |
| 2011 | 1.8 | 691 | 97.1 | 6.6 |
| 2012 | 1.4 | 266 | 37.1 | 6.6* |
| 2013 | 1.6 | 305 | 44.8 | 6.6* |
| 2014 | 1.4 | 254 | 30.5 | 6.6* |
| % change | -12 | -17 | -32 | - |
Ex-div: 30 Apr Payment: 29 May £1 = $1.48. *Excludes 6.6¢ special dividend payments. | ||||
