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5 years ago
CORRECTED-UPDATE 1-Ferrexpo profit hit by rising costs, lower prices
August 21, 2012 / 9:18 AM / 5 years ago

CORRECTED-UPDATE 1-Ferrexpo profit hit by rising costs, lower prices

(Corrects par 8 to show Chris Mawe is CFO, not CEO)

* H1 core profit down 40 pct as costs jump, iron costs fall

* Shares up 1.85 pct

LONDON, Aug 21 (Reuters) - Ukrainian iron ore producer Ferrexpo said core profit fell 40 percent in the first half, hurt by a rise in the cost of extracting the metal and lower global iron ore prices.

Miners have had a torrid earnings period, reporting their first profit falls since 2009, as margins become squeezed by stubbornly high costs and weaker prices for key commodities.

Ferrexpo said on Tuesday higher energy costs and domestic inflation in Ukraine pushed up the cost of extracting each tonne by 25 percent in the first half of this year compared to the same period in 2011.

Limited buying interest from top consumer China has also driven spot iron ore prices .IO62-CNI=SI to their lowest levels for over two and a half years amid sluggish Chinese steel demand, but Ferrexpo said it partially offset the price drop.

It said the selling price for its iron ore pellets in the six months to June 30 was 12 percent lower compared to last year, outperforming a 20 percent fall in the market price, as it managed to lower freight costs.

The company posted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $240 million for the six months to June 30, broadly in line with a consensus forecast of $243 million from a company-supplied poll.

"Overall the shipping cost was lower, which meant that the reduction in price was offset by lower freight (costs)," Chief Financial Officer Chris Mawe said in a telephone interview.

Ferrexpo, majority owned by billionaire and Ukrainian opposition parliamentarian Kostyantin Zhevago, also said its four main growth projects were progressing well and it was on track to ramp up annual production to 12 million tonnes by 2014.

"We expect Ferrexpo to remain on track for another around 10 million tonnes production this year. All-in-all, a good set of numbers," Numis analysts said.

Shares in Ferrexpo, which earlier in July posted total first half production of 4.725 million tonnes of iron ore pellets, slightly lower than the 4.785 million tonnes it mined in the equivalent period in 2011, rose 0.77 percent to 196.2 pence at 0908 GMT. (Reporting by Sarah Young; editing by Rhys Jones)

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