23rd Apr 2019 08:44
LONDON (Alliance News) - Ferrexpo PLC on Tuesday hiked its annual dividend after a year of robust global demand for its high-grade iron ore pellets.
The iron ore company, which has assets in Ukraine, delayed its 2018 results in March and then again in early April due to an ongoing review into funds paid to Ukraine's Blooming Land Charity, which provides diabetes prevention, eyesight care, and support to the elderly.
Ferrexpo has raised its dividend for the year by 40% to 23.1 US cents per share in 2018 from 16.5 cents per share in 2017.
"We continued to benefit from the strong global demand for our high-grade iron ore pellets, which helped deliver strong cash flow despite a rise in costs. This enabled us to increase investment, reduce debt further and pay a record dividend," said Ferrexpo Non-Executive Chair Steve Lucas.
Revenue rose 5.8% to USD1.27 billion from USD1.20 billion due to higher pellet premiums, which climbed to more than 30% above 2017 levels.
Pretax profit, however, declined 13% to USD392.0 million from USD449.8 million as operating expenses rose 18% to USD844.5 million from USD717.4 million. The company also swung to a USD5.3 million loss on foreign exchange from a USD6.7 million gain.
In 2018, Ferrexpo reported one work related fatality, equal to 2017.
Total pellet production was up at 10.6 million tonnes from 10.4 million and is set to stay at that same 10.6 million figure in 2019 as the company continues its programme of repairs and maintenance, including a 75-day pellet line shutdown in the second half of 2019.
Cost of production looks set to rise in 2019 due to higher commodity input prices and Ukrainian inflation. Capital expenditure for the year will be used for growth projects and is likely to be in the USD220 million to USD300 million range.
Lucas said: "Our balance sheet is now strong and this gives us a platform to deliver the next stage in our planned expansion.
"This year we plan to increase investment once more to be able to hit our medium-term production target of 12 million tonnes per annum by 2021 and lay the foundations for our longer-term intention to move to an annual output of 20 million tonnes per annum."
Returning to Ferrexpo's charity issue, an independent review committee is assessing donations made by Ferrexpo, USD9.5 million in 2018 and USD24.0 million in 2017, to explain inconsistencies in the bank statements of the charity and possible discrepancies in the charity's use of donated money.
Ferrexpo said Tuesday the IRC's interim conclusion is that the charity is not a related party of Ferrexpo or of Ferrexpo's executive management.
"At this stage, the IRC cannot yet conclude as to the ultimate use of the funds by the charity, however, there are indications some could have been misappropriated. Further work is required before any final conclusion can be drawn," said Ferrexpo.
Ferrexpo's board noted auditors had not been able to determine whether the company's chief executive officer has significant influence or control over Blooming Land. The board's view is that he does not.
Shares in Ferrexpo were marginally higher early Tuesday at a price of 286.50 pence each.
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