Ferrexpo approves shareholder returns policy

Ukraine’s largest iron ore pellet exporter Ferrexpo
(FXPO LN) will target a payout of 30% of free cash flow, which will form the
basis of its dividend in respect of a given year, the company announced in a
release to investors on Nov. 16.

Ferrexpo’s board will continue to evaluate additional
shareholder returns in the form of special dividends, the release said, adding
that the board will retain discretion over the actual declaration and payment
of dividends.

Ferrexpo defines free cash flow (FCF) as net cash
flows from operating activities less net cash flows from investing and
financing activities.

Total dividend payout as a share of FCF (with
financing activities cash flow taken before dividends) amounted to 119% for the
period from the beginning of 2017 until June 2021, including 51% for 2019, 151%
for 2020, and 84% for 6M21, Concorde Capital calculations show.

Dmytro Khoroshun: Ferrexpo
will likely continue to pay much more than 30% (close to 100%) of its FCF on a
cumulative basis over a long time, we expect.

The approval of the 30% payout basis will allow
Ferrexpo both to remain somewhat predictable with its dividends and to use up
to 70% of its FCF surplus for a given year to finance FCF deficits that might
occur due to significant investments or debt payouts in subsequent years, we
think.