Ferrexpo plc (LSE: FXPO), a premium iron ore pellet producer and exporter to the global steel industry, is pleased to report interim results for the six months ended 30 June 2024 (“the period” or “first half” or “first six months” or “1H 2024”).
Commenting on the announcement, Lucio Genovese, Executive Chair said:
“Ferrexpo continues to demonstrate resilience, retaining the entire workforce during a time of war, whilst increasing production and ensuring exports to our customers around the world. The significance of our operations has never been greater to our people, local communities and Ukraine.
From a corporate perspective, we are adapting to the complexities of a prolonged war. We have learnt how to operate a large-scale business more nimbly, embedding flexibility into our operations and working practices. This means that we are able to adapt to the constant challenges that confront us. With access to Ukrainian Black Sea ports returning during the period, we were able to respond quickly, bringing idled production capacity back on line and exporting to our customers via seaborne routes, thereby achieving our best production result since the start of Russia’s full-scale invasion.
Revenues and EBITDA also improved in the first six months and underscore the extraordinary effort and commitment of our workforce. 8,000 people, across every business function, co-ordinating their skills and expertise, time and resources, to realise these tremendous results. The fact that we can achieve so much in such challenging conditions is testament to our resilience and perseverance today, and in the future.
During the period, we deployed cash to increase production and preserve the integrity of our assets. Nevertheless, despite adding volume and lowering our controllable unit costs, we must accept that we are operating in an environment where lower iron ore prices and significantly higher electricity prices put pressure on our margins. It is therefore pleasing to note that we were able to end the period with a modest increase in our net cash position.
For the remainder of the year, we will focus on optimising current production levels. We remain hopeful that domestic electricity supply will improve during the third quarter when power plants that were shut for maintenance come back on-line.
Since the start of the full-scale invasion, we have demonstrated our ability to operate flexibly and adapt to ever changing circumstances. I am confident that should we see an opportunity to benefit from changes in iron ore pellet prices, we will adjust our production accordingly.”
Production and Financial Highlights
- Total commercial production for the first six months of 2024 increased by 75% to 3.7 million tonnes, comprising 3.3 million tonnes of pellets and 0.4 million tonnes of commercial concentrate.
- Total sales for the first six months of 2024 increased by 85% to 3.8 million tonnes, of which 1.8 million tonnes were exported through Ukrainian Black Sea ports.
- Revenues increased by 64% to US$549 million due to increased sales volume, although prices were lower than in 1H 2023.
- Profit after tax increased by 104% to US$55 million.
- C1 Cash Cost of ProductionA (C1 costs) increased to US$79 per tonne in the half year, due to higher energy costs, expanded mining activities, maintenance and repairs, partially offset by positive effects from a currency devaluation and cost saving initiatives.
- Interim Underlying EBITDA increased by 24% to US$79 million, reflecting the net effects from higher sales volume and lower realised prices and higher production costs, principally driven by rising energy prices in Ukraine.
- The Group ended the period with a US$112 million Net CashA position, comprising US$115 million of cash and cash equivalents, and minimal financial debt of US$4 million as of 30 June 2024 (Net Cash positionA as at 31 December 2023: US$108 million).
- US$55 million of continued capital investment in sustaining and development capital expenditure projects in Ukraine.
Commenting on the financial results, Nikolay Kladiev, CFO, said:
“For the first six months of the year, our business demonstrated its resilience from a financial perspective. The strong rebound in production resulted in revenues increasing 64%. We achieved excellent progress managing our controllable costs on a unit basis, however costs did increase overall due to additional mining and maintenance activities, higher energy costs and towards the end of the period a big jump in electricity prices. In the context of a weakening iron ore price environment, we achieved a 24% increase in EBITDA to US$79 million for the period. After continued investment in our operations of US$55 million, our closing net cash position was maintained at US$112 million, four million higher than at the end of 2023.
Towards the end of the period, the authorities in Ukraine mandated that large enterprises including Ferrexpo to import 80% of their electricity needs from neighbouring European countries. This policy was established in response to Russian attacks on Ukrainian power generation and transmission infrastructure, estimated to have reduced domestic electricity supply capacity by 50%. It is noticeable that the reduction in available domestic energy has also been affected due to maintenance at several domestic nuclear power plants during this time of year. At the current time, we are sourcing electricity from our European neighbours, however, the costs are higher and indeed quite volatile. For the month of June, this added approximately US$11 a tonne to our C1 costs compared to the previous month, meaning, we expect this to have a greater impact for the remainder of the summer due to continued high prices, until domestic nuclear power comes back on line in the autumn.”
Link to full PDF version of this release: click here.
For further information, please contact:
Ferrexpo:
Nick Bias
[email protected]
+44 207 389 8305/+44 (0)7733 177 831
Tavistock:
Jos Simson / Gareth Tredway
[email protected]
+44 207 920 3150 / +44 (0)7785 974 264
About Ferrexpo:
About Ferrexpo: Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine and a listing in the equity shares commercial companies category on the London Stock Exchange (ticker FXPO) and a constituent of the FTSE All-Share index. The Group produces high grade iron ore pellets, which are a premium product for the global steel industry and enable reduced carbon emissions and increased productivity for steelmakers when converted into steel, compared to more commonly traded forms of iron ore. Ferrexpo’s operations have been supplying the global steel industry for over 50 years. Before Russia’s full-scale invasion of Ukraine in February 2022, the Group was the world’s third largest exporter of pellets. The Group has a global customer base comprising of premium steel mills around the world. For further information, please visit www.ferrexpo.com.
Notes:
Please note that numbers may not add up due to rounding. Items including C1 cash cost of production, underlying EBITDA, net cash/(debt), capital investment and total liquidity are Alternative Performance Measures (“APM”) that are not defined or specified under International Financial Reporting Standards (“IFRSs”). These are marked with “A” and more information on these is detailed below in this report.