Ferrexpo releases its production report for 9m2015

Total pellets production in 3rdQ 2015 decreased vs. corresponding period of previous year by 2.4% (following growth during previous two quarters, so that 9m production volumes of current year (8.677MT) are still higher vs. production volumes for 9m2014 by 5.1%). Pellets production from own ore grew by 0.7% in 3rdQ 2015 and made 98% of total output. 65% Fe pellets (regarded as premium production) made 87% of total.

Also recently management of Ferrexpo provided update on its transaction bank in Ukraine F&C. According to this update following the close of business on the 17th of September 2015, the National Bank of Ukraine made an announcement on its website stating that it had adopted a decision to declare Bank F&C insolvent. As of the 16th of September 2015, Ferrexpo Groups total cash balance was approximately US$280 million after the payment of the interim dividend. Of this cash balance, approximately US$174 million was held at Bank F&C with the remainder held offshore. Such situation has significant negative impact on liquidity position of the company. Also negatively impacts financial ratios of the company, for example Net Debt/EBITDA as of 30.06.15 is to be revised from 1.9x to 2.3x.

Along with it, despite huge slump in iron ore prices since the beginning of Y2014 under current price of 62% pellets at USD 55 per 1MT, the company is still expected to remain fairly profitable (reported C1 cash cost for 1H2015 has been close to USD 33 per 1 ton, average pellets price USD 61 per 1 ton, reported EBITDA margin 34%), On positive side is also the fact that Ferrexpo finished its large-scale investment program in 1Q 2015, so the company can use operating cash inflows for repairing of its balance sheet, quality of which suffered because of UAH devaluation and mentioned issue with F&C bank.

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