Ferrexpo operations unaffected by Ukraine turmoil, 2013 profits beat forecast

12th Mar 2014 07:00

- Operations unaffected by Ukraine turmoil- EBITDA up 25 per cent, ahead of expectations- Production to grow to 12mt in 2014, from 10.8mt- Hryvnia devaluation to lower operating costsUkraine-focused iron ore producer Ferrexpo said it is monitoring the geopolitical situation in the country very closely but has assured investors that operations have been unaffected by the unfolding events of recent weeks.The comments came alongside the group's annual results which revealed that operating profits rose by a better-than-expected 25% in 2013 on the back of strong growth in sales volumes and higher market pricing.Chairman Michael Abrahams expressed his "profound sadness for the loss of life" due to the political turmoil in Ukraine, but said he is "hopeful of a satisfactory political outcome reflecting democratic principles".Ferrexpo's facilities are located in central Ukraine in the Poltava region, some 200 miles south of the capital Kiev. "At the time of writing, there have been no disruptions to Ferrexpo's operations in Ukraine," Abrahams said.In 2013, Ferrexpo said it was the fastest growing supplier by volume of pellets to the global steel industry and a top five seaborne producer. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by a quarter to $506m last year, well ahead of the consensus EBITDA forecast of $477m. Pre-tax profit improved 15% to $305m, on revenues that rose 11% to $1,581m.As previously announced, total pellet output rose 12% to a record 10.8m tonnes, compared with a 5% decline for the average producer in the industry. The quality of Ferrexpo's output also improved, with a 20% increase of higher grade 65% Fe pellets."Ferrexpo achieved an average increase in its realised price of 4% and progressively reduced its cost of production quarter on quarter following the ramp up of mining operations at Ferrexpo Yeristovo Mining (FYM), and thus stabilised production costs year on year."Net debt increased by 51% but was slightly lower than analysts expected at $639m. The company said it would pay a final dividend of 3.3 cents and a special dividend of 6.6 cents, in line with 2012.Looking ahead, Abrahams said that the 16% devaluation of the Ukranian hryvnia since the start of 2014 should reduce operating costs this year, but it will also lower the carrying value of assets and liabilities which are also denominated in local currency. Meanwhile, production is forecast to increase to 12m tonnes in 2014, as expected by analysts.BC