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Ferrexpo invests for growth

RESULTS: Iron ore producer Ferrexpo is investing heavily to build output, while strong pricing boosts profits - leaving the shares looking attractive
March 14, 2012

Ukraine-based iron ore pellets producer Ferrexpo continues to invest heavily to build output from 10 million tonnes per year (mtpa) currently to 12mtpa - as strong pricing drives profits higher. The current mine, Poltava, operated at full capacity throughout the year and produced 9.063m tonnes of pellets, up form 9.033m tonnes.

IC TIP: Buy at 333p

Ferrexpo has improved the quality of its pellet output, too, and delivered its largest ever production of higher value 65 per cent iron pellets - up 4.8 per cent to 4.256m tonnes. All production was sold, which drove cash profits 37 per cent higher to a record $801m (£510m). Capital investment more than doubled in the year to $378m as well and includes $121m for improving efficiency, reliability and output from existing operations and $49m to extend the life of the Poltava mine. Moreover, $129m was invested to develop the Yeristovo deposit, which remains on track to deliver first ore by the end of 2012.

Managements says that 90 per cent of output is sold through indexed contracts and 10 per cent into the spot market. Ferrexpo is also developing its presence in the Asian market, which chief executive Kostyantin Zhevago describes as "crisis-resistant".

FERREXPO (FXPO)
ORD PRICE:333pMARKET VALUE:£1.96bn
TOUCH:333-334p12-MONTH HIGH:523pLOW: 237p
DIVIDEND YIELD:1.3%PE RATIO:5
NET ASSET VALUE:233¢NET DEBT:6%

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
200769816120.43.2
2008111737648.66.5
20096498112.16.6
2010129549872.36.6
2011178869197.16.6
% change+38+39+34-

Ex-div: 2 May

Payment: 1 Jun

£1=$1.57