Ferrexpo appoints auditor

The board of Ukraine’s largest iron ore pellet
exporter Ferrexpo (FXPO LN) has approved the appointment of MHA MacIntyre Hudson,
the U.K. member of Baker Tilly International, as its auditor, the company said
in a July 3 release. Baker Tilly International has been operating in Ukraine
since 1999 and has a significant local capability, Ferrexpo noted, adding that
the appointment is for the current financial year and will be subject to
subsequent shareholders’ approval at each AGM.

Ferrexpo’s 1H19 results, to be released on Aug. 2,
will not be reviewed by the new auditor due to the timing of the appointment,
the company said.

Recall, Ferrexpo’s previous auditor, Deloitte, resigned on Apr. 26
because of the unfolding situation with the use of Ferrexpo’s donations and the
company’s potential undeclared links to Blooming Land,
an entity that managed Ferrexpo’s corporate social responsibility program.

Dmytro Khoroshun: This is a
welcome step toward the normalization of the corporate governance situation at
Ferrexpo.

However, much about how the Blooming Land affair
affects Ferrexpo depends on the outcome of an independent review of the
Blooming Land situation, which is being conducted by an independent committee
established by Ferrexpo’s board.

The worst outcome would be if some previously
undeclared ties between Blooming Land and Ferrexpo’s CEO, Kostyantyn Zhevago,
are established. Such findings might attract regulators’ scrutiny and will
question the credibility of Ferrexpo’s board, which previously stated it was confident Zhevago and
Blooming Land were not related.

Conversely, if the review convincingly demonstrates
there were no ties between Ferrexpo and Blooming Land, then we think this
affair will be over without significant damage to the company.

Ferrexpo board’s chairman mentioned in an Apr. 29 interview
that the review could be over in one or two months, but apparently it is still
ongoing after two months. That is, unless Ferrexpo promptly follows up on
today’s auditor appointment news with another update regarding its Blooming
Land review.