Ukraine looks like a good place to do business – for the time being. Local iron-ore producer Ferrexpo (FXPO) revealed a 40 per cent hike in operating profits to $273m (£162m) as costs tumbled, thanks both to operating efficiency and the devaluation of the Ukrainian currency. The bottom line was also bolstered by a one-off revaluation gain of $47.4m on dollar-denominated trade receivables in Ukraine, following the drop in the value of the hryvnia.
These results were all the more remarkable because they were achieved against a backdrop of falling iron-ore prices. However, this problem was largely mitigated by economies of scale: Ferrexpo's cost of sales fell 14 per cent as it boosted sales volumes of iron ore pellets. Production is also moving in the right direction: total pellet production increased 2 per cent to 5.4m tonnes, while production of premium 65 per cent iron pellets increased 13 per cent to 2.6m tonnes. Ferrexpo confirmed that it is on track to increase pellet production to 12m tonnes and to upgrade the iron content of all of its pellet production to the higher-margin 65 per cent grade.
Net debt is up by 23 per cent from 12 months ago to $694m, partly due to Ferrexpo completing a major refurbishment of one of the pellet lines at its Poltava operations. However, Ferrexpo’s net debt to cash profits ratio of 1.2 remains well within debt covenants.
Deutsche Bank expects full-year EPS of 32¢.
| FERREXPO (FXPO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 133p | MARKET VALUE: | £785m | |
| TOUCH: | 132-133p | 12-MONTH HIGH: | 203p | LOW: 121p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 4 | |
| NET ASSET VALUE: | 196¢ | NET DEBT: | 59% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) † |
|---|---|---|---|---|
| 2013 | 775 | 150 | 21.5 | 3.3 |
| 2014 | 759 | 248 | 34.7 | 3.3 |
| % change | -2 | +65 | +62 | - |
Ex-div:13 Aug Payment:19 Sep £1 = $1.69. † Excludes a 6.6¢ special dividend paid on 28 March 2014. | ||||
