Ferrexpo revenue and earnings up as pellet production falls

Ferrexpo saw its revenue rise 29% to $591m in its first half, it said on Thursday, while its C1 cash cost was 23.7% ahead at $31.70 per tonne.

The FTSE 250 company’s underlying EBITDA improved 79% year-on-year in the six months to 30 June at $287m, with its underlying EBITDA margin up to 48.5% from 34.9%.

Its profit for the period, after special items, was 177% higher at $216m, with diluted earnings per share up 179% at 36.6 cents.

The board declared an interim dividend per share of 3.3 cents, having not paid a dividend in the first half of 2016.

Ferrexpo’s net cash flow from operating activities was up 37% at $194m, and made 88% more capital investment at $45m.

The company’s net debt reduced 36% at $481m, and its liquidity including undrawn assets was 225% higher at $143m.

Its board said its net debt-to-last 12 months’ EBITDA was 0.96x, compared to 2.54x at the same time last year.

“We are pleased to report another excellent set of results, which demonstrate that demand for Ferrexpo's high quality iron ore pellets from the world's leading steel manufacturers remains strong,” said non-executive chairman Steve Lucas.

“The premium we achieved in sales of pellets was significantly higher than in 2016.”

On the operational front, Ferrexpo posted total pellet production of 5,160 kt, which was 10% lower than the first half of 2016, while its pallet sales volumes were off 16% at 5,065 kt.

Average PLATTS CFR 62% iron ore fines price during the half was 44% higher year-on-year at $74.40 per tonne.

The board said it “regretted to report” a work related fatality during the period, which was no improvement on the same period last year, when one person also died.

Group lost-time injury frequency rate was 0.9 per million man hours, broadly in line with 0.89 in the first half of 2016 but a marked improvement on 1.44 during the second half last year.

Looking at the market as a whole, Ferrexpo’s board said there remained a “strong” market environment for high-grade iron ore products including pellets, while its increase in pellet premiums reflected market conditions.

The average FOB price was ahead compared to the first half of last year, and the firm said it saw “strong” customer demand from its long-term target customers.

“The group continues to manage costs, which has benefitted both operating margins and cash flow, while we have increased our levels of capital investment,” Steve Lucas added.

“We continue to lay the groundwork to grow output incrementally towards our target of 20 million tonnes a year.”

At the same time, Lucas noted the company had “substantially strengthened” its balance sheet and reduced net debt to less than one times last 12 months' EBITDA.

“While the outlook for the iron ore price remains uncertain, pellet premiums remain supported and we are confident of achieving a good result for the year.”