8th Apr 2022 10:44
(Alliance News) - Ferrexpo PLC is a robust, cash-generating company which has performed admirably in the face of logistical challenges posed by Russia's invasion of Ukraine, according to Liberum.
The stock was up 10% at 184.60 pence on Friday, the best performer in the FTSE 250.
Ferrexpo shares rose on Friday after the Ukraine-focused iron ore pellet producer said its operations are outside the main conflict zones, allowing it to continue deliveries to key customers in Europe.
The Baar, Switzerland-headquartered firm reported total iron ore pellet production of 2.7 million tonnes in the first quarter of 2022, in line with the same period in 2021.
However, iron ore pellet production fell 11% versus the fourth quarter, due to operational and logistical constraints following Russia's invasion of Ukraine.
Ferrexpo said production continued to comprise entirely of high-grade forms of iron ore, which are those with an iron ore grade of 65% or above.
It also generated first-quarter sales of 2.6 million tonnes, scaling production activities to meet the accessible pellet demand.
Ferrexpo noted that logistics pathways to Europe through rail and barge remain open, while activities at the Black Sea port of Pivdennyi continue to be suspended. Sales to customers in Europe represented roughly 50% of sales in the past.
Liberum analyst Ben Davies said Ferrexpo has "done well" this year, not only in maintaining operations during a war, but also driving an humanitarian effort in the area of its facilities and providing opportunities for displaced workforces.
Ferrexpo shares are down 38% so far this year amid fears Russia's invasion of Ukraine would derail its operations. However, Davies said the company's operations "admirably" continue and the situation "is not as dire as first feared".
"When this war began, there was much speculation on what portion of the territory east of Dnipro River would be taken by the Russians, an area that includes the assets of Ferrexpo. This risk is declining now, with the withdrawal and re-positioning of Russian further to the east," Davies said.
In addition, Davies expects Ferrexpo to build rapidly, as non-essential capital expenditure is likely to be stripped out, and as high-grade pellet prices lift back to "very attractive" levels.
"We all hope for a swift resolution, this war appears set to continue indefinitely. No doubt as the market learns that Ferrexpo is still a robust, cash-generating company, capable of paying dividends - it will likely become an attractive yield play. However, we would not expect Ferrexpo to materially re-rate until the war ends," added Davies.
By Arvind Bhunjun; [email protected]
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