The UK-based company Ferrexpo, whose main interests are in Ukrainian iron ore assets, has announced that in the first half of 2009 it remained profitable, despite an 81 percent decrease year on year in its profit to $28.7 million, caused by lower iron ore prices, higher freight costs and lower overall sales.
Accordingly, in the final four months of H1 2009, Ferrexpo maintained its production at 100 percent of capacity, selling at 100 percent of output both at prices determined by long-term contracts, as well as at spot prices. In addition, in H1 2009, Ferrexpo was able to compensate the weak European demand by increased sales to Asia, which accounted for 57 percent of the company's 4.2 million mt total sales. Meanwhile, in the first six months of 2009, its cash costs decreased by 15.4 percent to $34.5/mt, registering a further decline to $33.5/mt since June. Ferrexpo's revenue for the period in question amounted to $301.8 million - down 42 percent year on year. The declaration of its interim dividend will be deferred until October.
"We are encouraged by Ferrexpo's results for the first half of 2009, which show that we can withstand the most extreme of economic downturns. Despite the iron ore market experiencing severe contraction, Ferrexpo was able to continue to produce almost at last year's levels and remain profitable by increasing sales to China and India, while maintaining sales to our traditional European markets to the extent possible," Ferrexpo's CEO Kostyantin Zhevago commented.
According to the company's statement, in the beginning of H2 2009, there are signs of "normalization" in the iron ore trade, and strengthening in regional consumption, while Chinese demand remains "robust". In H1 2009, 54 percent of its total spot and long-term sales volume were directed to China, compared to 16 percent in the same period last year. Ferrexpo stated that its spot prices for iron ore show uptrend, underpinning potential contract price settlements. Meanwhile, its average achieved prices in H1 2009 stay approximately ten percent below the recent Vale settlements.
As a regard to the future, Ferrexpo stated that it aims to take advantage of current climate, in order to increase its market share, to continue 100 percent production, and to expand its higher quality pellet production.