UPDATE 1-Ferrexpo hikes dividend, sees better demand this year

Wed, 21st Mar 2018 10:18

LONDON, March 21 (Reuters) - Iron ore pellet producerFerrexpo announced a record dividend on Wednesday asearnings jumped on stronger demand from the steel industry.

The London-listed firm, the third largest exporter ofpellets, said 2017 underlying earnings before interest, tax,depreciation and amortisation (EBITDA) rose 47 percent to $551million.

The dividend for 2017 totalled 16.5 cents a share, up from6.6 cents a year earlier, including a final and specialdividend.

"This year we paid 16.5 cents, partly as compensation whenwe had the lower dividend over the last two years because ofvery low iron ore prices," chief executive Chris Mawe toldReuters.

He said the company was targeting a shareholder payout of13.2 cents or $80 million in 2018.

Ferrexpo, based in Switzerland with assets in Ukraine, sellshighly processed iron ore in the form of pellets. These sawstronger demand in 2017 from steel makers aiming to reducepollution.

The company said it expected this trend to continue in 2018.

Ferrexpo benefited from a 22 percent rise in the price ofhigh quality iron ore in 2017, while the lower quality iron orecategory inched up just 3 percent.

Production of pellets in 2017 fell 7 percent to 10.4 milliontonnes due to planned higher maintenance, the company said inJanuary.

Net debt was cut by 32 percent to $403 million. The companyexpects it to fall to $250 million by the end of the year, Mawesaid.

Ferrexpo will focus growth plans on expanding its existingmines, or "brownfields" development rather than acquisitions,Mawe said.

"There are further opportunities for brownfields expansionand that is where we will be focusing our capital expenditure,"he said.

In 2017, Ferrexpo resumed a project to expand output at itsconcentrator that is expected to be completed by 2020 and willincrease the production of pellet concentrate by 1.5 milliontonnes.

The project will cost about $65 million to complete, itsaid.

But Liberum and Investec analysts kept their "sell" ratingson Ferrexpo shares, citing risks from a slow down in steelmarkets, a resumption in output at Brazil's huge Samarco ironore mine and potentially limited production growth at Ferrexpodue to maintenance.

Ferrexpo's shares in London, which have nearly doubled invalue in the last year, were down 3 percent to 292 pence at 1012GMT.(Reporting by Zandi Shabalala; Editing by Jason Neely and MarkPotter)