Ferrexpo's profit surged on high production and low costs in 2016, allowing the miner to reinstate its dividend

 
Courtney Goldsmith
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This photo taken on March 5, 2010 shows
Ferrexpo's share price has been volatile in morning trading (Source: Getty)

Ukraine-focused miner Ferrexpo reported a huge uptick in profit driven by high production and lower costs and said it will reinstate dividend for the year to the end of December 2016.

The figures

Ferrexpo strengthened its balance sheet over 2016 as profit before tax jumped to $231.4m (£185.8m) from $25.4m the previous year.

The FTSE 250 firm sold a record 11.7m tonnes (mt) of iron ore pellets, up three per cent from the previous year, and revenue increased from $961m to $986.3m.

Production costs were cut by 13 per cent to the lowest point in a decade, $27.7 per tonne.

The miner reinstated its dividend with a final ordinary proposed dividend of 3.3 cents per share and a special dividend of 3.3 cents per share. It's targeting a payout of 13.2 cents per share in 2017, according to Reuters.

Why it's interesting

Iron ore prices almost doubled to $80 a tonne last year, led by a burst in demand from Chinese steel mills.

Ferrexpo said its average iron ore price in the second half was $64.64 per tonne, up from $50.66 per tonne in the same period in 2015. Taking a weak first half into account, prices were in line with 2015.

However, China iron ore prices came under pressure this morning after a clampdown on housing loans sent the metal futures down six per cent.

What Ferrexpo said

Steve Lucas, non-executive chairman, said:

"Due to the group’s strong financial performance together with a positive outlook for 2017, I am pleased to announce a return to dividends.

"Cash generation to date in 2017, has been strong and we expect the group’s net debt to earnings before interest, tax, depreciation and amortisation to improve further during the year. On the whole, these factors underpin a positive outlook for 2017."

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