Ferrexpo proposes DPS of USc 13.2 to be approved at AGM

Ukraine’s largest iron ore pellet exporter Ferrexpo
(FXPO LN) proposed a final ordinary dividend of USc 13.2 per share for
financial year 2020, the company reported in an April 16 release to investors.
If approved by the company’s shareholders at a May 27 AGM, the final dividend
will be paid on July 1. The record date for the dividend payment will be June
18.

 

The total dividends declared to date with respect to
the 2020 financial year amount to USc 85.8 per share, compared with USc 19.8
per share for 2019, the release said.

 

After deducting special interim dividends announced in
1Q21, under the revised terms of Ferrexpo’s major bank debt facility, the
remaining total available distributable reserves in 2021 will amount to
approximately USc 29.9 per share, according to the release.

 

Recall, Ferrexpo declared a special interim dividend of USc 39.6 per share on March 17
and USc 13.2 per share on Jan. 5.

 

In its March 17 announcement of its FY20 results,
Ferrexpo said that at the time its ability to pay dividends in 2021 will be restrained
due to the exhaustion of its distributable reserves. To continue declaring and
paying dividends, the company had to obtain a waiver from its lenders or repay
in full its USD 257 mln PXF facility.

 

Dmytro Khoroshun: Ferrexpo’s
dividend payment for its 2021 financial year is likely to be substantial,
possibly approaching USc 85.8 per share declared so far for 2020.

 

Ferrexpo might also declare and pay a final special
dividend for its 2020 financial year, we think. The company paid USc 6.6 per
share in the final special dividends for the years 2017 and 2018, and USc 3.3
per share for its financial year 2019.

 

Ferrexpo’s reference in the April 16 release to a
revision of the terms of its bank debt facility likely indicates the company’s
intention and ability to continue paying substantial dividends in the near
future. The revision likely resulted in an increase in Ferrexpo’s distributable
reserves, allowing for the payment of the 2020 final ordinary dividend and
leaving further headroom.

 

Its distributable reserves might be topped up again
once the company reports its 1H21 results, we think, and these results should
be exceptionally strong due to high iron ore prices at the global markets.
However, we expect the iron ore prices and Ferrexpo’s profits to decrease later
in 2021.

 

Looking ahead, Ferrexpo is likely to continue
paying dividends above the yearly level of USc 13.2 per share foreseen in its
policy as long as the iron ore markets remain strong and Ferrexpo’s project of
pellet capacity expansion beyond the current 12 mmt per year remains on the
backburner.