AGM Statement
27 Mai 2010 - 8:00AM
UK Regulatory
TIDMFXPO
RNS Number : 6119M
Ferrexpo PLC
27 May 2010
27 May 2010
Ferrexpo plc
AGM Statement
Ahead of its Annual General Meeting later today Ferrexpo plc ("Ferrexpo" or "the
Company") is pleased to update the market on its current trading.
Summary
· Sales demand, year to date, has been very strong
· Over 90 per cent of sales have been based on long term volume framework
agreements
· Significant provisional average DAF/FOB pellet price increases
· 3.2 million tonnes of pellets produced to 30 April 2010
· Average C1 cash cost to 30 April 2010 US$38.84/tonne
Operating Environment and Financial Performance
Iron ore demand has recovered from its 2009 lows, suggesting that iron ore
pellet prices should remain well above 2009 levels for the remainder of 2010.
For the April to June 2010 quarter, Ferrexpo has already or expects to secure
significant average DAF/FOB price increases inline with international pricing
for all of its production.
The industry is in a period of transition with regard to establishing a new
pricing methodology. While it is impossible at this time to predict whether
more frequent re-pricing would have any effect on the overall average annual
pellet prices we achieve, it would likely give rise to a greater degree of short
term period-to-period variability in our results than has previously been the
case.
Quarterly pricing has been introduced in some cases but there is, at the moment,
no clarity with respect to the frequency with which price settlements will occur
going forward. We currently expect that it will be some time before a generally
accepted methodology emerges and the transparency that existed under annual
benchmark price arrangements returns. In the meantime we are achieving increased
pricing with our customer base.
Ferrexpo has maintained own ore production at full capacity. Pellet production,
including third party concentrate, to 30 April 2010 was 3.2 million tonnes, a
20.3 per cent increase over prior year levels. Of this amount 2.9 million tonnes
was produced from own ore, a 10.4 per cent increase over the previous period.
The split of production between 62 per cent Fe and 65 per cent Fe was 51.5 per
cent and 48.5 per cent respectively, for this period.
The average C1 cash cost to 30 April 2010 was US$38.84 per tonne, in-line with
our expectations. The Group has been experiencing local inflationary pressures
and increases related to cyclical price inputs such as oil and steel.
Operational efficiencies and productivity initiatives as well as a small
depreciation of the hryvnia versus the US dollar, however, have partly mitigated
these pressures.
The Group's working capital has increased over the period due to delayed VAT
repayments. The late repayment of VAT is a widespread issue in Ukraine affecting
all exporters. To resolve this problem, it has been announced as part of the
recent budget that the Ukrainian government may convert all or part of these
balances into a tradable financial instrument designed to allow industry to
collect these overdue balances
Projects and Capital Expenditure
The Group placed all significant capital expenditure on hold in October 2008 in
response to the global financial crisis. It did, however, maintain a moderate
level of investment in key projects so as to progress critical path items and
maintain value. With the material improvement in iron ore markets and current
pricing levels the Group is in a position to increase its level of expenditure
and is actively engaged in a process of re-evaluating project budgets and
schedules.
Current Trading and Outlook
Prices in April were significantly ahead of the first quarter and the Board
expects the Group to realise a strong financial performance as a result of a
positive outlook for prices in the remainder of the year compared to 2009
levels. The Board also anticipates ongoing improvements in operating efficiency,
notwithstanding higher cost pressures.
Michael Abrahams, Chairman of Ferrexpo, said:
"We are very pleased to report consistently strong production levels. Costs are
under control and the Group is well positioned to capitalise on current
conditions in the iron ore market. Ferrexpo is re-assessing development of its
growth projects with the intention to realise full value for our shareholders,
while our prudent financial management and careful adoption of any new industry
pricing methodology should ensure that we deliver sustainable shareholder value
over the long term no matter what stage of the economic cycle. "
For further information, please contact:
+-------------------------------------+-------------------------------------+
| Ferrexpo: | |
+-------------------------------------+-------------------------------------+
| Ingrid Boon | +44 207 389 8304 |
+-------------------------------------+-------------------------------------+
| | |
+-------------------------------------+-------------------------------------+
| Pelham Bell Pottinger | |
+-------------------------------------+-------------------------------------+
| Charles Vivian | +44 207 861 3126 |
+-------------------------------------+-------------------------------------+
| Evgeniy Chuikov | +44 207 861 3148 |
+-------------------------------------+-------------------------------------+
Notes to Editors:
Ferrexpo is a Swiss headquartered resources company with assets in Ukraine,
principally involved in the production and export of iron ore pellets, used in
producing steel. Current output is approximately 9 million tonnes, most of which
is exported to steelmakers around the world. The Group is listed on the main
market of the London Stock Exchange under the ticker FXPO. For further
information please visit www.ferrexpo.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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