Ferrexpo plc announces special dividend, expects production to rise in 2021

() said it expects to increase production levels from 2020 and proposed a further special dividend following a strong year.

Iron ore pellet production is likely to be higher in the second half of 2021 as pelletiser upgrade work is planned for the first half of the year, which will deliver between 500,000 and 1mln tonnes per annum of additional full year pelletiser capacity in the second half of 2021.

READ: Credit Suisse sets a bullish tone for iron ore companies, with US$150 price forecast for 2021 

The FTSE 250 group also expects to market additional concentrate for sale during 2021 following investments completed in expanding processing capacity in 2020.

Global demand for pellets continues to be robust, with steel producers globally looking to increase the productivity of blast furnaces and reduce carbon emissions, both of which are achieved through the increased usage of iron ore pellets over sinter fines.

The manufacturer added the outlook for pellet premiums in 2021 is positive but there will be continued supply disruption of Brazilian exports, as local producers face operational issues while prioritising the domestic steel sector.

The return of Brazilian pellet producer Samarco is not expected to materially impact the market in 2021, with this operation ramping up towards a reduced level of output compared to previous levels.

The firm proposed a special interim dividend of 39.6 US cents, bringing total dividends for 2020 to 72.6 US cents, following the strong performance in 2020 and the transition to a net cash position and healthy iron ore prices.  Ferrexpo had announced a special dividend of 13.2 US cents in January.

In the year to December 31, revenue jumped 13% to US$1.7bn, reflecting rising production volumes and destocking process in the first half, while underlying earnings (EBITDA) surged 46% to US$859mln.

Net cash at year-end was US$4mln from a net debt of US$281mln in December 2019.

“As cash builds and with limited capex programmes in the immediate future, excess cash would be returned to investors rather than stockpiled ahead of longer-term growth capex needs. This interim dividend alone offers an 8% yield on the share price, before considering the 33cts already paid out so far,” analysts at Peel Hunt noted.

Shares were flat at 355p early on Wednesday.

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