19th Jan 2015 11:26
(An item published at 0820 GMT misstated revenue figures. The correct version follows)
LONDON (Alliance News) - Iron ore producer Ferrexpo PLC Monday said production rose and costs decreased during the first nine months of 2014, but pretax profit declined after the company made a significant impairment charge on one of its investments and saw revenue constrained by lower iron ore prices.
For the nine months ended September 30, 2014, the company reported revenue of USD1.07 billion, a 3% fall from USD1.10 billion reported in 2013, producing a pretax profit of USD199 million, a 6% reduction from USD211 million in the comparable period in 2013.
Despite the increase in revenue, pretax profit fell due to an USD83 million impairment charge on Ferrous Resources to reflect the current iron ore market environment. Ferrexpo has a 15.5% interest in Ferrous Resources.
"The iron ore prices in the global market declined significantly and no recovery is expected in the near future based on available market outlooks.... The investment in Ferrous Resources was fully impaired due to surrounding uncertainties in respect of the current operational activity and the future development of the mining operation," said Ferrexpo.
At the end of the period, Ferrexpo reported a cash balance of USD608 million with net debt of USD712 million, which increased 5% over the nine month period.
Total pellet production increased by 3% to 8.3 million tonnes from 8.0 million tonnes a year earlier, resulting in sales of 8.3 million tonnes, a 9% increase from the 7.6 million tonnes sold in the first nine months of 2013. Ferrexpo said 65% graded iron pellet production increased by 10% in the nine month period to 4.1 million tonnes from 3.7 million tonnes.
Average prices for 62% graded iron ore fell to USD104 per tonne in the period from USD136 a year earlier. The company's average price for delivered free on board product fell by 15% from the nine month period in 2013, whilst the benchmark iron ore price fell 23% during the nine months to September 30.
Delivered free on board means that the seller's obligation to deliver has been fulfilled when the goods have passed over the ship's rail at the named port of shipment.
The company's total average C1 cash cost fell to USD47.1 per tonne from USD60.1 per tonne a year earlier driven by the depreciation of the Hryvnia, increased volume, improved efficiency, lower cost ore and reduced commodity prices, said the company.
During the period, Ferrexpo spent USD191 million on capital investment, with growth projects due to increase output to 12 million tonnes per year, consisting of more higher grade iron ore pellets, said the company in a statement.
Ferrexpo shares were up 1.8% to 56.50 pence per share on Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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