Ferrexpo CEO might lose parliament bid

The CEO and majority owner of Ukraine’s largest iron
ore pellet exporter Ferrexpo (FXPO LN), Kostyantyn Zhevago, is losing his bid
for Ukraine’s parliament in the July 21 elections, according to preliminary
reporting by Ukraine’s Central Election Commission.

Specifically, with 63.3% of district protocols
counted, Zhevago, an independent, holds second place with 26.9% of the votes
against 39.4% for the leader, Oleksiy Movchan, a member of the national leader
The People’s Servant party.

Zhevago has been a Ukrainian MP since 1998. In 2014,
Zhevago was elected with 43.8% of the votes, vs. 61.2% in 2012. In both 2012
and 2014, Zhevago was elected as an independent.

Dmytro Khoroshun: We think
that if Zhevago loses his MP seat in the 2019 elections, then eventually it
will be long-term positive for Ferrexpo, provided the company’s ownership of
its Ukrainian assets is not successfully challenged. We expect the positive
effects to come from the elimination of uncertainties related to Zhevago’s
connections other than purely business ones.

However, in the short-term, we do not exclude
turbulence because it will not be certain immediately whether Ferrexpo will
experience any problems due to the downgrade in Zhevago’s political status in
case he is not elected.

Nevertheless, Ferrexpo’s fundamentals remain
strong. We expect Ferrexpo’s 1H19 EBITDA, which will be reported on Aug. 2, to
have reached USD 350-375 mln, or a 50-60% yoy jump.