Ferrexpo reports bumper interims but laments 'lack of pricing clarity'

Ferrexpo (LON:FXPO), the Swiss-based Ukrainian miner, said demand for iron pellets outstripped supply as weighed in with a bumper set of interim figures.

However the group complained of a "lack of pricing clarity" following a change by the industry’s super-majors to quarterly iron ore pricing rounds from annual contracts.

The effect of this change can be witnessed in a record set of first-half results from Rio Tinto (LON:RIO, NYSE:RTP, ASX:RIO) today.

However, Ferrexpo does not appear to have been a beneficiary of this change, though it has benefited from the rampant demand from China a re-stocking phase in Europe. "In spite of the change to shorter term pricing horizons there is a lack of clarity with respect to the frequency with which price settlements will occur going forward," the company said.

"Ferrexpo expects that it could take some time for a generally accepted methodology to evolve and for the pricing transparency that existed under annual benchmark price arrangements to return.

"Robust demand and provisional price settlements in the first six months of 2010 allowed the group to achieve significant price increases of 90 per cent to 120 per cent in the second quarter of the year. Ferrexpo will continue to set provisional prices with customers at current market levels going forward."


Revenues rose 74 per cent in the first half to US$526 million, which led to a 257 per cent rise in EBITDA to $US215 million. Pre-tax profit advanced 393 per cent to US$183 million.

"These results reflect the considerable progress the company has made during the first six months of the year," said chairman Michael Abrahams.

"We reacted quickly to capitalise on improved demand in our traditional markets. Production was at full capacity throughout the period achieving record levels of pellet volumes while cost increases were contained. 

"The group is confident that it can continue to produce at full capacity and place all of its output through its established market presence thus underpinning our expectations for a strong financial performance for the rest of the year," he added.

The group is paying a dividend of 3.3 cents a share.

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