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Annual Results

Ferrexpo reinstates dividends as earnings rise

22 March 2017 07:25

Ferrexpo has reinstated dividends after a strong performance in the year to the end of December in 'very challenging conditions'.

EBITDA rose 20% to US$375m (2015: US$313m) on higher revenues and lower costs.

Operating profit, excluding foreign exchange gains, increased buy 36% to US$307m and profit before tax rose by US$206m to US$231m.

Net cash flows from operating activities increased by 159%, or US$204m, to US$332m and net debt was reduced by 32% to US$589m at 31 December.

Other highlights:

- Cash balance increased by US$110m to US$145m as of 31 December 2016 (31 December 2015: US$35m) - Dividend reinstated - final ordinary dividend of 3.3 US cents per share proposed (2015: nil) and special dividend of 3.3 US cents per share (2015: nil) payable on the 11 April 2017

Non-executive chairman Steve Lucas said: "In 2016, Ferrexpo demonstrated the strength of its business model and management team.

"In very challenging market conditions, where the iron ore price traded at eight year lows, the Group increased its net cash flows from operations by over 1.5 times to US$332 million compared to 2015.

"This allowed it to significantly reduce its financial leverage and strengthen its balance sheet. Net debt to EBITDA for the last 12 months was 1.57x compared to 2.78x as of 31 December 2015.

"Due to the Group's strong financial performance together with a positive outlook for 2017, I am pleased to announce a return to dividends.

"The iron ore pellet industry continues to have high barriers to entry given the capital intensity of new investment while demand for high grade ore, including pellet, remains strong.

"Ferrexpo is one of the largest iron ore pellet exporters in the world by volume and benefits from a well-invested asset base, a competitive cost position and a diversified high quality customer portfolio.

"The average 62% Fe iron ore fines price in 1Q 2017 (as of 20 March 2017) was approximately US$86 per tonne compared to the average of US$58 per tonne in 2016, while Ferrexpo's average pellet premium for 2017 is expected to be in line with the PLATTS Atlantic long-term contract pellet premium less adjustments for quality.

"The pellet premium has steadily recovered from lows seen in 1Q 2016 and now reflects tight market conditions. Costs remain subject to commodity prices, the Hryvnia exchange rate and inflation levels in Ukraine.

"Cash generation to date in 2017, has been strong and we expect the Group's net debt to EBITDA to improve further during the year.

"On the whole, these factors underpin a positive outlook for 2017."

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Related Company: FXPO

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