Ferrexpo produces 11.2 mmt pellets in 2016
10 January 2017
Pellet production at Ukraine’s largest iron ore pellet exporter Ferrexpo (FXPOLN, FXPO LN) increased 10.3% qoq in 4Q16, according to a trade update published on Jan. 9. Pellet output from own ore grew 6.3% qoq. Also, the company restarted production of pellets from third party iron ore in 4Q16.
In 2016, Ferrexpo’s pellet production decreased 4% yoy to 11.2 mmt, driven by a 68% plunge in pellet output from purchased ore to 0.13 mmt. Pellet output from own ore fell 1.7% yoy to 11.07 mmt due to reduced output of low-grade (62% Fe) pellets (-48.4% yoy to 0.665 mmt).
Pellet sales volumes increased 3.5% yoy in 2016 owing to sales of inventory. The full-year average production cost decreased 9.1% yoy to USD 29/t while the average pellet price increased 5.4% yoy to USD 58.5/t. The company’s cash balance as of Dec. 31 almost tripled yoy to about USD 145 mln.
Andriy Perederiy: Ferrexpo demonstrated stable operating performance in 2016. The company’s pellet production was 2.6% lower than our projections of 11.5 mmt in 2016, while its pellet sales were in line with our projection of 11.7 mmt. Currently, Ferrexpo is enjoying a surge in iron ore prices and benefiting from reduced production costs.
Based on Ferrexpo’s operating performance, we are estimating that its 2016 EBITDA increased 22% to USD 384 mln (from USD 313 mln in 2015). However, seeing the risk of another dip in iron ore prices in mid-2017, we are keeping our neutral view on Ferrexpo’s Eurobonds.
