2nd Aug 2018 10:18
LONDON (Alliance News) - Ferrexpo PLC on Thursday suffered double-digit drop in profit in the first six months of the year, resulting from increasing costs and declining iron ore prices.
Shares in Ferrexpo were down 16% at 170.00 pence Thursday morning, the second worst performer in the FTSE 250 index of large caps.
In first half of 2018, the iron ore company recorded a USD202.9 million profit, down 23% from USD262.2 million the year before.
The benchmark 62% iron ore fine price was 6% lower than in 2017, averaging USD69.7 per tonne with lower-quality iron ore prices "heavily discounted".
Commodity and local cost inflation had the most significant impact on costs. Per tonne, commodity costs were USD3.3 higher and inflation USD1.9 higher for the period versus the previous year.
Repair and maintenance costs widened by USD2.6 per tonne for the period due to increased maintenance activities.
Ferrexpo's mines are in Ukraine.
Overall, total operating expenses came to USD402.1 million, 23% higher than the USD328.0 million Ferrexpo recorded the year before.
Ferrexpo's revenue for the six months ended June 30 was USD616.7 million, increasing 4.3% from USD591.0 million in 2017.
Despite the negative results, Ferrexpo maintained its interim dividend at 3.3 US cents per share.
Steve Lucas, non-executive chairman of the company, said that "record price premiums" had helped offset costs. The premium on Platts Atlantic iron ore pellets increased 28% to USD58 per tonne from the year before.
"Our high-quality product is in strong demand reflected in the record price premiums realised during the first half. This has helped offset a lower underlying iron ore price and higher costs...Despite these costs, which are expected to show a further modest increase in the second half of the year, our cash generation has allowed us to increase capex, pay down debt and retain very low leverage," said Lucas.
"Our output which in the near term is on track to increase by 1.5 million tonnes to 12 million tonnes by 2020," he added.
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