Swiss miner Ferrexpo's profits drop despite record sales volumes

Pre-tax profit was down 36% to $92m in the first half of the financial year, after revenue declined despite an increase in production and sales volumes.

For the six months ended 30 June, revenue fell 11% to $458m compared to the same period last year. Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 9% to $160m.

Production volumes from ore grew 4% to 5.7m tonnes while output of the company’s 65% iron pellets increased to 5.4m tonnes. Sales volumes rose 6% to 6,017 kilotonnes.

The Swiss company was affected in the first half of the year by China iron ore fines at an average of $52 per tonne compared to an average of $61 per tonne in 2015. The market was volatile with iron ore trading from an eight year low of $38 per tonne in mid-December 2015 to a 15 month high of $71 per tonne in April. The average iron ore price in July was $57 per tonne.

Ferrexpo said pellet premiums recovered from lows seen at the start of the year to finish the period strong.

Net cash flows from operating activities rose by 61% to $142m, which allowed the company to repay $120m of debt amortisation in the first half of 2016.

At period end net debt stood at $753m, a $115m fall in comparison with the $868m on record as of 31 December 2015.

Non-executive chairman Michael Abrahams, said: "We are pleased to report a good set of financial results given the challenging circumstances in the iron ore industry. We have improved the quality of our pellet output, increased sales volumes to record levels and significantly reduced our cost base.

“The group continues to control costs and to benefit from selling a premium product to the world's top steel mills. Pellet demand remains strong and Ferrexpo believes it is well placed to continue to generate positive net operating cash flows throughout the commodities cycle."

Shares in Ferrexpo were up 7.69% to 56p at 1220 BST.