5th Aug 2015 07:11
LONDON (Alliance News) - Iron ore pellets producer Ferrexpo PLC on Wednesday said its pretax profit slumped in the first half of 2015 as the collapse in world iron ore prices offset a rise in production volumes.
Ferrexpo said its pretax profit for the half was USD143.0 million, sharply lower than the USD248.0 million it made a year earlier as its revenue fell by 33% to USD512 million from USD759 million thanks to the 46% fall in iron ore prices since the first half of 2014. The group will pay a flat 3.3 cents interim dividend.
The struggling iron ore market offset an 8% rise in total pellet production in the half to 5.8 million tonnes of pellets, up from 5.4 million a year earlier, and a 3% rise in sales volumes to 5.7 million tonnes from 5.5 million. It said its production of 65% Fe pellets rose 93% to 5.1 million tonnes.
Ferrexpo said it expects this price weakness in the iron ore market to continue into the second half, amid analyst forecasts of a surplus of iron ore fines due to the completion of major supply projects in Brazil and Australia, while growth in steel output, particularly in China, is set to remain weak.
The company added its options remain unaffected thus far from the geopolitical turmoil in Ukraine, but it noted the local economy in the country remains fragile. Ferrexpo's mining operations are based in Ukraine's Poltava region.
"We are pleased to report a good set of results and an excellent operational and marketing performance given the challenging circumstances in both the iron ore industry and in Ukraine. We have increased production and sales volumes, improved the quality of our pellet output and benefited from a significantly reduced cost base. Furthermore, we have reduced net debt and extended our debt maturities," said Chairman Michael Abrahams.
"We remain cautious in the short to medium term, due to the potential for further iron ore price weakness and the fragile state of the Ukrainian economy," Abrahams added.
Ferrexpo said its cash cost of production declined by 30% to USD33.4 per tonne of pellets due to the devaluation of the Ukrainian currency, lower oil prices and production efficiencies.
By Sam Unsted; [email protected]; @SamUAtAlliance
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