Ferrexpo, the iron ore company with operations in Ukraine and listed on the London Stock Exchange, has reported a significant surge in its net profit for the first half of 2024. The company's net profit doubled year-on-year to £55 million, highlighting its resilience in the face of ongoing war.
"Ferrexpo continues to demonstrate resilience, preserving jobs in a time of war, with production and export growth," said Lucio Genovese, Ferrexpo's CEO. "From a corporate perspective, we are adapting to the complexities of a long war. With access to Ukrainian seaports restored, we were able to quickly bring suspended production capacity back on line and achieved our best results since the start of the full-scale invasion."
The company's revenue for the six months reached £549 million, a substantial 64% increase compared to the same period in 2023. This growth was driven by higher sales volumes, despite lower average prices compared to the first half of 2023. Notably, product sales increased by 85% year-on-year, reaching 3.8 million tonnes, with 1.8 million tonnes exported through Ukrainian seaports. The average realised price, however, slipped slightly to £117.3 per tonne compared to £118.3 per tonne in the previous year.
Ferrexpo's interim Underlying EBITDA for the period rose by 24% year-on-year to £79 million. The increase in production costs to £79 million (+11% year-on-year) was mainly attributed to higher power prices, increased mining operations, and maintenance and repair expenses. These were partially offset by currency devaluation and cost-saving initiatives.
"Over the 6 months, our company has demonstrated its resilience from a financial perspective," said Mykola Kladiev, Ferrexpo's Chief Financial Officer. "Significant production resumption led to a 64% increase in revenues. However, production costs increased against the backdrop of scaling up mining and maintenance, as well as a significant jump in electricity prices at the end of the half-year."
A key factor driving the increase in production costs was the revised Ukrainian electricity import regulations. In June 2024, the CMU Resolution No. 661 amended the "Regulation on the peculiarities of electricity imports under the legal regime of martial law in Ukraine," obliging Ukrainian producers to purchase at least 80% of their electricity from the EU at European prices to avoid forced restrictions on electricity supply. Previously, this mandatory share stood at 30%.
"At the moment, we are getting electricity from our European neighbours, but the cost is higher and quite volatile," Kladiev explained. "In June, it added about $11 per tonne to our production costs compared to May, and we expect this figure to increase until the end of summer, until the domestic nuclear power industry returns to work after repairs in the fall."
Despite the challenges posed by the war and increased electricity costs, Ferrexpo demonstrated significant operational success in the first half of 2024. The company increased its pellet production by 76% compared to the second half of 2023, reaching 3.297 million tonnes. This included 2.836 million tonnes of premium pellets produced from its own concentrate, a 55% increase compared to July-December 2023. Ferrexpo also produced 298.46 thousand tonnes of pellets from third-party concentrate and 162.64 thousand tonnes of DR pellets.
Ferrexpo remains committed to its operations in Ukraine, demonstrating its resilience and adaptability in a challenging environment. The company continues to focus on optimising its production levels and ensuring a stable supply of high-quality iron ore pellets for its global customers.
