5 October 2016
The company decreased its general production figures in latest reporting quarter (total pellets production declined by 9% vs. Q3 2015), but important is that 65% Fe pellets production is stable, while due to favorable market conditions, good financial performance is estimated for Q3.
In Q3 total pellets production made 2.604M tons, by 8.2% lower than in previous quarter and by 9% lower than in Q3 2015. Along with it production of premium 65% Fe pellets (2.456M tons) remained on the level of corresponding period of previous year (moreover production of 65% Fe pellets from own ore grew by 1.5%). Last fact is seen as most important for the company, as in Q3 65% pellets premium increased up to USD 30 per 1 ton (with general benchmark index value in USD 55-65 range), so that it seems Ferrexpo fully concentrated on premium production (the share of other production, which is much less profitable, decreased from 15% in Q3 2015 to 6%).
General Ferrexpo production in 9m2016 made 8.327M tons, by 4% lower than in corresponding period of previous year. Here as well one should note that 65% Fe pellets production grew by 3.7% and made 7.815M tons.
With stable C1 cash cost at about USD 25-27 per 1 ton and C3 freight cost at about USD 7-8 per 1 ton, we expect that because of stable iron ore price index in range USD 55-65 per 1 ton and growth of 65% pellets premium from average of about USD 20 per 1 ton in H1 2016 up to USD 30 in the end of Q3 (average pellets realization price in Q3 is estimated by at least USD 10 per 1 ton higher than in H1, which means EBITDA per 1 ton is up to USD 40), estimated total EBITDA for Q3 is close to USD 100M (vs. USD 160M in H1). Annual EBITDA in Y2016 can reach USD 330-350M.
After full repayment of PXF facility in January-July (total repayment made USD 127M), significantly less debt repayment are scheduled for remaining part of current year (about USD 60M in total to be repaid), so with current performance Ferrexpo is expected to significantly improve its liquidity position in H2 2016.
Ferrexpo reports its financials on semi-annual basis, no separate financial report will be published for Q3 2016.