Ferrexpo Rises Most in Four Months After Beating Estimates

Ferrexpo Plc, a producer of iron-ore pellets in Ukraine, jumped the most in almost four months in London trading after first-half profit beat analyst estimates.

Ferrexpo advanced 13 percent, the biggest gain since April 9, to 185 pence by the close, valuing the company at 1.1 billion pounds ($1.7 billion.)

Net income dropped 14 percent to $125.6 million, exceeding the $117.8 million average estimate of six analysts surveyed by Bloomberg. Ferrexpo reduced freight expenses by more than a third by using more capesize vessels, it said in a statement.

“Operational performance is solid,” Liberum Capital Ltd. said in a note to investors. “In particular the 33 percent drop in freight costs will result in an upgrade to our numbers.”

Cost cutting has helped Baar, Switzerland-based Ferrexpo to soften the effect of lower prices. Iron ore with 62 percent iron content delivered to China’s Tianjin port, the benchmark price, fell 2.6 percent to average $136.97 a metric ton in the first half, according to The Steel Index. Ferrexpo sold pellets at prices 6 percent lower than a year earlier.

The company, controlled by Chief Executive Officer Kostyantin Zhevago, plans to invest as much as $1.5 billion to double iron-ore output to 20 million tons a year by 2016. It increased total pellet production in the first half by 11 percent to 5.2 million tons after starting the Yeristovo mine. It’s targeting output of 12 million tons this year.

“Whilst the iron ore price is likely to remain volatile, the group is in a good position to continue its investment program,” Chairman Michael Abrahams said in the statement.

Earnings before interest, taxes, depreciation and amortization rose 1 percent to $244 million, while production costs increased to $61.80 a ton from $60.40, the company said, keeping the dividend unchanged at 3.3 cents a share.

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