7th Oct 2024 14:30
(Alliance News) - Ferrexpo PLC on Monday announced a lower production amid rising input costs and lower iron ore prices, amid challenges of operating in Ukraine.
The Baar, Switzerland-headquarterer iron ore pellets producer reported weaker output in the third-quarter, as it wrestles with "a very challenging operating and macroeconomic environment".
Total commercial production weakened 16% on-quarter to 1.4 million tonnes, while pellet output alone fell 14% to 1.3 million tonnes.
Interim Executive Chair Lucio Genovese said: "For Ferrexpo's operations, the third quarter presented a very challenging operating and macroeconomic environment. As we highlighted in the interim results, the requirement to import 80% of our electricity from our western neighbours remains in place, and the resulting high tariffs continue to have a negative impact on our costs. This has been exacerbated by elevated shipping freight rates and additional war risk insurance premiums.
"To mitigate the pressure on margins, our strategy has been to focus on sales of higher quality iron ore products to customers in close geographical proximity."
Further, he noted that five more colleagues were killed while serving in the Armed Forces of Ukraine. They worked as electricians, welders, locomotive drivers and repairmen.
Genovese has been interim executive chair since July 2023, after Jim North stepped down from the role of chief executive officer at the end of June 2023.
Chief Financial Officer Nikolay Kladiev said: "The combined effects of much lower iron ore prices and higher input costs, put significant pressure on our margins during the third quarter. High electricity tariffs, which I highlighted at our interims, continue to increase and add to our C1 costs compared to the start of the year. We also continued to see elevated freight rates and additional war risk insurance premiums.
"In response, we have sought to contain costs where possible and to manage our cash position, which at the end of the third quarter remained around USD100 million.
"It is encouraging to note that in the final days of September, the Chinese stimulus measures, notably the removal of home purchase restrictions provided welcome support for iron ore prices. The pessimism surrounding iron ore prices appears to have lifted for now, however, the recent volatility of the third quarter does not provide any certainty that prices will remain at these levels or improve further.
"We will continue to keep a vigilant approach to our financial and operating performance for the remainder of the year."
Ferrexpo shares fell 2.6% to 44.14 pence each on Monday afternoon in London.
By Tom Budszus, Alliance News slot editor
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