Ferrexpo boosts EBITDA 25% yoy, 10% higher than expectations
12 March 2014
Iron ore miner and pellet producer Ferrexpo (FXPO LN) reported its 2013 financials on March 12, posting 11% yoy revenue growth yoy to USD 1,581 mln (+1% higher than Bloomberg consensus), 25% EBITDA growth to USD 506 mln (10% vs. consensus), and EPS growth by 21% to 44.76 cents per share (+8% vs. consensus). The company increased its net debt to USD 639 mln as of end-2013 from USD 423 mln a year before.
Ferrexpo kept its C1 costs almost flat yoy in 2013 at USD 59.8/t. The weak C1 costs result of USD 63.9/t observed in 1Q13 was offset by a cost improvement to USD 57.6/t in 4Q13, along with growing production at the Yeristovo Mine. The company declared final 2H13 dividends of USD 0.033/share and special dividends of USD 0.066/share.
Roman Topolyuk: The primary drivers of 2013 earnings growth was boosted production (+12% yoy) due to the launch and ramp up of the Yeristovo Mine and reduced non-production costs, while the selling price of pellets on a FOB/DAF basis declined 5% yoy to USD 129/t, we estimate. Ferrexpo will benefit from hryvnia devaluation in 2014.
In addition to the geopolitical turmoil in Ukraine, the major risk for the company lies in volatile global iron ore prices, which plunged in early March to a one-year low of USD 104/t on the escalating concerns regarding the solvency of Chinese corporate borrowers and the tightening of credit conditions for Chinese steelmakers. Hence, our forecast of a drop in selling prices by 4% yoy to USD 124/t may prove too upbeat. We reiterate our bearish view on Ferrexpo.
