Ferrexpo warns of discrepancies, guides FY18 EBITDA at USD 500 mln

Ukraine’s largest iron ore pellet exporter Ferrexpo (FXPO
LN, FXPOLN) reported in a Feb. 4 release that its board decided to conduct an
independent review of Blooming Land, a charity whose primary function is to
co-ordinate Ferrexpo’s corporate and social responsibility programme. The
reason for the review are discrepancies that Ferrexpo found in the charity’s
bank statements, Ferrexpo said, adding that it had donated USD 9.5 mln to
Blooming Land in 1H18.

Ferrexpo warned that it is continuing to plan to
release its FY18 statements on Mar. 20; however, the company’s board cannot
guarantee a completion of the charity’s review by that date. If the charity
review is not completed by the FY18 results release, Ferrexpo’s auditors might
qualify or otherwise modify their audit opinion, Ferrexpo said.

In the same release, Ferrexpo reported it expects FY18
EBITDA of about USD 500 mln.

Dmytro Khoroshun: It is a bit
unnerving that Ferrexpo might be forced to release financial statements with a
qualified opinion before the Apr. 7 redemption of its USD 173 mln Eurobond.
This redemption depends on the company being able to draw down USD 205 mln of
the PXF loan it has available. We think that Ferrexpo will be able to draw down
the PXF loan and to redeem its Eurobond, even if it releases financial
statements with a qualified auditor’s opinion.

We retain our neutral view on FXPOLN Eurobonds.