Ukrainian iron ore miner Ferrexpo (FXPO) produced a creditable set of numbers at the half-year mark, including a 3 per cent rise in sales volumes and record pellet production. Predictably, however, revenues were down by a third from a year ago, while cash profits fell by 45 per cent to $176m (£113m), reflecting the steep fall-away in iron ore prices.
Average realisations fell from $111 per tonne during the first six months of 2014 to just $61 in the period under review. However, Ferrexpo has been able to mitigate the effects of the price slump through operational improvements. For a start, the proportion of high-grade, higher-margin pellets within Ferrexpo's production mix has increased massively following completion of a four-year investment programme. Efficiencies are also being generated by the combination of the mining plans at the group's Yeristovo and Poltava pits. Factor in continued depreciation of the local currency and it’s unsurprising that production and distribution costs both fell by just under a third.
Ferrexpo's investment programme didn't come cheap, pushing net debt to 1.9 times cash profits. This is well within its covenants, but the group has agreed to restrict future dividend payments within certain parameters in order to meet obligations under its recently extended 2019 'Eurobond' issue.
JPMorgan Cazenove expects adjusted full-year EPS of 12¢, against 43¢ in 2014.
| FERREXPO (FXPO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 55.75p | MARKET VALUE: | £328m | |
| TOUCH: | 55.5-56.5p | 12-MONTH HIGH: | 130p | LOW: 43.9p |
| DIVIDEND YIELD: | 7.6% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 78¢ | NET DEBT: | 141% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | 759 | 248 | 34.7 | 3.3 |
| 2015 | 512 | 143 | 19.6 | 3.3 |
| % change | -33 | -42 | -44 | - |
Ex-div: 13 Aug Payment: 18 Sep £1 = $1.56 NB: Ferrexpo has paid annual special dividends of 6.6¢ in 2012-14. | ||||
