Ferrexpo EBITDA drops 5% in 1H20, USc 6.6 DPS declared

Revenue slid 1.4% yoy to USD 776 mln at Ukraine’s
largest iron ore pellet exporter Ferrexpo (FXPO LN), the company said in its
1H20 financial report released on Aug. 5. Its 1H20 EBITDA dropped 5.3% yoy to
USD 352 mln and net income lost 7.6% yoy to USD 250 mln. Operating cash flow
before working capital decreased 17.5% yoy to USD 316 mln, while net cash from
operating activities inched up 1.0% yoy to USD 258 mln. CapEx slid 15.8% yoy to
USD 96 mln.

Ferrexpo’s net debt dropped 38.3% yoy to USD 174 mln
at end-June. The net debt-to-EBITDA ratio fell to 0.31x at end-June, down from
0.44x a year ago. Gross debt slid 8.2% yoy to USD 343 mln at the end of June.

Ferrexpo’s C1 cash production cost dropped 11.2%, or
USD 5.2/t yoy to USD 40.9/t. The company disclosed that its commodity input
cost decrease contributed USD 4.3/t to the C1 production cost decrease in 1H20,
and that the effect of inflation and the exchange rate on the C1 cost was a
decrease of USD 0.2/t.

Ferrexpo declared on Aug. 5 a further interim dividend
of USC 6.6 per share to be paid on Aug. 26, with the record date for the
payment of Aug. 14 and ex-dividend date of Aug. 13, according to the report.
This follows the first portion of interim dividend, also USc 6.6 per share, which Ferrexpo declared on June 15.

Ferrexpo also said in its release that an
investigation was ongoing into the football club (FC) Vorskla by the Committee
of Independent Directors (the “CID”) of the company’s board. Recall,
in March, Ferrexpo disclosed that FC Vorskla received sponsorship
payments from the company, and loaned about USD 17 mln to
Collaton Limited, a company controlled by Ferrexpo’s majority shareholder and
former CEO Kostyantin Zhevago. Ferrexpo mentioned in its report that the CID
has received confirmations from Zhevago and FC Vorskla that all of Ferrexpo’s
payments to FC Vorskla have been used in their entirety for legitimate
purposes.

Dmytro Khoroshun: Ferrexpo’s
performance remains strong because of China’s insatiable appetite for iron ore
and Brazil’s problems with delivering it. These factors have continued to play
out in the beginning of 2H20, suggesting another period of high profitability
for Ferrexpo.

Nevertheless, should the effects of these factors
weaken, which we consider possible later in 2H20, the iron ore prices at the
global markets might decline, dragging with them Ferrexpo’s prices and margins.