Global iron ore prices fell 20 per cent in the year, slipping to $118 (£75) a tonne by end-July - partly driven by a recent cooling in China's formerly insatiable appetite for steel. Add that to a rise in production costs at Ukraine-based iron ore miner Ferrexpo, and the group's half-year cash profit dropped 40 per cent year on year to $240m. That leaves the shares - despite the undemanding rating - looking up with events.
Rising costs were a particular problem as fuel, taxes and inflation in the Ukraine combined to push group cash costs to $60.4 a tonne - 25 per cent higher than a year earlier. That was compounded by high inventory levels, which meant that recent price falls for key inputs - particularly oil - won't make much difference until the second half. The miner is also spending heavily on ramping up production at the Yeristovo mine, which will come fully on-stream by 2014 and, consequently, capital spending nearly doubled in the period to $222m. Still, cost rises were partly offset by having been able to keep freight overheads under control. And, while the average selling price for its iron ore pellets fell 12 per cent in the period, that's still less than the overall market's price slide.
FERREXPO (FXPO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 194p | MARKET VALUE: | £1.14bn | |
| TOUCH: | 193-194p | 12-MONTH HIGH: | 392p | LOW: 168p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 4 | |
| NET ASSET VALUE: | 254¢* | NET DEBT: | 17% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 855 | 352 | 49.8 | 3.30 |
| 2012 | 731 | 169 | 24.8 | 3.30 |
| % change | -15 | -52 | -50 | - |
Ex-div: 29 Aug Payment: 21 Sep *Includes intangible assets of $104m, or 18¢ a share £1=$1.57 | ||||
