Ferrexpo proposes DPS of USc 13.2, plans to boost CapEx

Ukraine’s largest iron ore pellet exporter Ferrexpo
(FXPO LN) reported its full-year financial results on Apr. 23. Revenue
increased 6% yoy to USD 1,274 mln, while EBITDA slid 9% yoy to USD 503 mln.
Operating cash flow before working capital also decreased 6% to USD 496 mln,
and net cash from operating activities dropped 17% to USD 292 mln.

Ferrexpo invested a further USD 40 mln into
stockpiling lean ore it currently is unable to process (2017: USD 53 mln),
increasing its inventory of such ore to USD 218 mln at the end of 2018.
However, during an Apr. 23 conference call with analysts and investors,
Ferrexpo said that it does not plan to invest into long-term ore stockpiles in
2019.

Ferrexpo’s net debt amounted to USD 339 mln at the end
of 2018, a 14% yoy drop. The net debt-to-EBITDA ratio decreased to 0.67x at the
end of 2018, from 0.72x a year ago.

The company’s C1 cash production cost increased 34%
yoy to USD 43.3/t. Capital investments rose 31% yoy to USD 135 mln, and the
guidance for 2019 is a range of USD 220 to 300 mln.

A final special dividend of USc 6.6 per share will be
paid on May 14 to shareholders on the register on May 3 COB. Ferrexpo also
plans to ask its shareholders to approve, at their June 7 AGM, the final
ordinary dividend of USc 6.6 per share to be paid on July 1 (record date: June
14 COB).

Dmytro Khoroshun: We think that Ferrexpo is improving the use of the capital it earns.
Namely, we view as positive its 2019 plans to cease stockpiling lean ore and to
boost CapEx, as well as raise its 2018 dividend (the total dividend for 2018
will be 23.1 USc per share, or USD 135 mln).