Just when the sell-off in Ferrexpo (FXPO) shares looked to have turned, our IC Tip of The Year has sunk once again on a discomforting set of half-year results. In the first half of 2018, the Ukrainian miner saw cash costs climb by a massive 31 per cent to $41.60 (£32) per tonne of iron ore pellets, thanks to industry inflation, local inflation, currency inflation and higher rail tariffs and energy prices.
A note on a “further modest increase” in second-half inflation was enough to send investors tumbling out of a stock which has paid out $132m in dividends in the 15 months to June. One could be forgiven for thinking Ferrexpo has had its moment, and now faces only pain. Worse, these numbers landed amid the latest frightening broadside in a trade war which bodes ill for iron ore pellet sales.
Yet sales remain strong, as do premiums. Ferrexpo sees a divergence in both low and high grade iron ore prices – where buyers seeking low-alumina and low-phosphorous product have recent been paying an average of $24 extra per tonne – and pellets, where the Platts Atlantic premium increased by 28 per cent to $58 per tonne in the first half of 2018. Nearly all of Ferrexpo’s output falls into the higher-grade category.
Analysts expect full-year adjusted pre-tax profits of $429m and EPS of 58.2¢, declining to $290m and 39.3¢ in 2019.
| FERREXPO (FXPO) | ||||
| ORD PRICE: | 171p | MARKET VALUE: | £1.01bn | |
| TOUCH: | 170.7-171.2p | 12-MONTH HIGH: | 317p | LOW: 156p |
| DIVIDEND YIELD: | 7.4%^ | PE RATIO: | 4 | |
| NET ASSET VALUE: | 129¢ | NET DEBT: | 48% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 | 591 | 241 | 36.7 | 3.3 |
| 2018 | 617 | 179 | 25.9 | 3.3 |
| % change | +4 | -26 | -30 | - |
| Ex-div: | 23 Aug | |||
| Payment: | 26 Sep | |||
| £1=$1.30. ^Includes 9.9¢ of special dividends paid for 2017 (and a 6.6¢ special paid in June 2018). | ||||
