The mining of iron ore has not been an easy business line so far in 2016, but Ukrainian miner Ferrexpo (FXPO) has put in a solid performance in the six months to June, thanks to a record sales volumes and an exceptionally low cost profile. In fact, local currency devaluation, lower oil prices and operational efficiencies brought reported cash costs down by 23 per cent to $25.7 (£19.3) per tonne, putting Ferrexpo among the most competitive producers of iron ore pellets in the world.
Record first-half sales also helped, with operating cash flows of $142m already 11 per cent up on the whole of 2015. Nonetheless, this improvement in operational fortunes has not been sufficient to remove a key obstacle: the company's ability to pay the $159m of debt that matures this financial year. Given operating profit before adjustments in the year to June was a mere $133m, and with the cash position hamstrung by the collapse of the company's transactional bank last year, management will be relying on a further uptick in prices and volumes.
Broker JPMorgan has upgraded its EPS forecasts to 27.9¢ for the year to December, against 24¢ in 2015.
FERREXPO (FXPO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 55p | MARKET VALUE: | £321m | |
| TOUCH: | 54-55p | 12-MONTH HIGH: | 71p | LOW: 13p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 50¢ | NET DEBT: | $753m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 512 | 143 | 19.6 | 3.3 |
| 2016 | 458 | 92.0 | 13.2 | nil |
| % change | -11 | -36 | -33 | -100 |
£1=$1.33 | ||||
