Ferrexpo keeps pellet production flat in 2M16
16 March 2016
Pellet production at Ukraine’s largest pellet exporter Ferrexpo (FXPOLN, FXPO LN) fell 2% yoy in February to 850 kt, Interfax-Ukraine reported on March 15. Pellet output was flat yoy at 1,870 kt in 2M16.
Roman Topolyuk: Ferrexpo operates at close to full capacity load of 12 mmt p.a. We project the company will produce 11.9 mmt in 2016 (+2% yoy). Near-maximum capacity utilization, combined with premium pricing for pellets and average production costs of USD 23-24/t, will enable the company to generate EBITDA of around USD 24/t in 2016, we estimate. Based on such numbers, we project the company’s free cash flow at USD 173 mln this year. Having cash of USD 36 mln, and an unsold pellet inventory worth around USD 38 mln as of end-February, Ferrexpo seems to be capable of smoothly repaying the portion of its banking debt due by the year end, which we estimate at USD 164 mln. The company doesn’t face any immediate need to reprofile its debt, we conclude. This allows us to be bullish on Ferrexpo’s Eurobonds.
