Ferrexpo (FXPO) has been one of the best shares to own at almost any point in the last year. Half-year results for the Ukrainian miner show why. In the first half of 2017, global steel production jumped by 4.5 per cent, leading to higher mill utilisation rates and strengthened demand for better iron ore grades. As a producer of high-grade iron ore pellets, Ferrexpo was perfectly placed to benefit from the $43 (£33) premium its wares commanded over the $65 average sales price for a tonne of standard, 58 per cent-grade purity iron ore.
Consequently, the underlying cash profit margin surged 10.5 percentage points above the 2016 average, leading to a near doubling in half-year operating profit to $259m. Greater operating cash flows motored the virtuous cycle of loan repayments, with a further $163m chalked off the borrowing slate, and net debt now below the last 12 month’s trailing cash profit and at its lowest level since 2012.
This was despite several obstacles. Plant maintenance, including a two-month shutdown of one of the pellet production lines, resulted in a 10 per cent drop in output and a $2.5 increase in C1 cash costs per tonne, while fuel, electricity tariffs and wages all saw signs of inflation. On average, City analysts are asking for pre-tax profit of $391m and adjusted EPS of 53.3¢ this year, up from $242m and 33.5¢ in 2016.
| FERREXPO (FXPO) | ||||
| ORD PRICE: | 234p | MARKET VALUE: | £1.38bn | |
| TOUCH: | 233-234p | 12-MONTH HIGH: | 248p | LOW: 48p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 91¢ | NET DEBT: | 90% | |
| Half-year | Turnover | Pre-tax | Earnings per | Dividend |
| to 30 Jun | ($m) | profit ($m) | share (¢) | per share (¢) |
| 2016 | 458 | 92.0 | 13.2 | 0.0 |
| 2017 | 591 | 241 | 36.7 | 3.3 |
| % change | +29 | +162 | +179 | - |
| Ex-div: | 10 Aug | |||
| Payment: | 08 Sep | |||
| £1=$1.32 | ||||
