Ferrexpo increases pellet production 11.6% in 2013
8 January 2014
Iron ore miner Ferrexpo’s (FXPO LN) total pellet production increased 11.6% yoy to 10.8 mmt, according to the company’s report published on Jan. 8. This growth occurred mainly due to 1.8 mmt in pellet output from ore mined at the Yeristovo Mine that was launched in end-2012, while ore extraction at its Poltava Mine declined 9.7% yoy, or 0.9 mmt. Pellet production fell 1.3% qoq in 4Q13 to 2.8 mmt on a 4.7% drop in output from FPM ore, as well as halved production from purchased ore.
Roman Topolyuk: The 2013 results are slightly below our expectation of 10.9 mmt of pellets. We reiterate our forecast of almost full pelletizing capacity load at 11.8 mmt in 2014, which is generally in line with the company’s guidance. So the key driver of Ferrexpo’s earnings this year will be the selling price of pellets, which we expect will decline 4% yoy to USD 123/t in 2014, but the reduced price of natural gas may bring positive surprises. Based on our estimates, the announced schedule of quarterly gas prices cuts for industrial users in Ukraine will yield average annual savings of USD 87/tcm, which will boost Ferrexpo’s EBITDA to USD 458 mln (-3% yoy), or 3.8% higher than our previous forecast.
