3rd Jul 2015 08:25
LONDON (Alliance News) - Ferrexpo looks "comfortably placed" halfway through its financial year to meet its full year production guidance and the restructuring of its bonds should give the company "some fresh momentum", says Cantor Fitzgerald.
Asa Bridle, an analyst at Cantor, says Ferrexpo looks set to hit its full-year production guidance of around 11.6 million tonnes of cathode copper after it produced 5.8 million tonnes in the first half of the year.
Yuen Low, an analyst at Shore Capital, calls Ferrexpo's first-half results a "flying production start" and says although no costs were revealed with the production results, it has previously stated that its cost base continues to benefit from higher production volumes and devaluation of the Ukrainian currency, the hryvnia.
In addition to the production results on Friday, Thursday saw the holders of Ferrexpo's USD285.7 million of 7.875% notes due in 2016 approve the exchange of those notes for USD100.0 million of cash and USD185.7m of new notes. That was originally announced back in June and the exchange was confirmed Thursday.
Low says the restructuring will see the cash balance fall by around USD100 million but highlights the company still has cash on its balance sheet totalling USD493.3 million.
"While this was down from December 2014?s USD626.5 million (balance) mainly due to debt repayments, the balance sheet remained very strong in our opinion, as current liabilities amounted to a 'mere' USD315.2 million. The company has made no secret of the fact that it is maintaining a large cash [balance] to cater for potential contingencies in relation to country risk," says Shore's Low.
"Today?s note restructuring reduces the cash-pile by another USD100.0 million, but on the other hand, saves the company having to fork out a much more significant USD285.7 million next year," he adds.
Cantor's Bridle says: "Today?s production update, following the strong first quarter performance and successful bond restructuring, should give the stock some fresh momentum after slipping back from its recent highs around 80.0 pence."
Shore's Low says although he would normally expect the news to be positive for the shares, the "waters remain a bit muddied at the moment by the continued turmoil in iron ore prices".
Ferrexpo shares were 1.1% to 66.75p per share on Friday morning.
Cantor reiterates its Buy recommendation with a price target of 120.0 pence.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
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