Ferrexpo pellet production falls 1.8% yoy in 7M16

Ferrexpo’s (FXPO LN, FXPOLN) pellet production fell 3.8% m/m and 2.9% yoy to 860 kt in July, Interfax-Ukraine reported on July 10. In 7M16, pellet output fell 1.8% yoy to 6.583 mmt.

Roman Topolyuk: Ferrexpo’s data for July, being somewhat weaker than we expected, implies the company might produce 11.5 mmt of pellets in 2016 (-1% yoy), assuming it increases its capacity load in the following months. Currently, Ferrexpo is enjoying firm iron ore prices, which would compensate for weaker production and enable the company to generate operating cash flow to cover debt amortization. However, seeing the risk of another dip in iron ore prices in 2H16, we are keeping a neutral view on Ferrexpo’s Eurobonds.