Metals and Mining
March 27, 2014
While the 25% YtD devaluation in Ukraine’s hryvnia in 2014 bodes well for exportoriented Ferrexpo, this will not be sufficient to offset a projected 13% drop in the group’s achieved iron ore pricing along with a likely jump in the state extraction tax rate from the current 2.7% to 10%. As a result, we model Ferrexpo’s 2014 EBITDA as declining by 12% to USD 447mn. Expected sluggish iron ore prices in the medium term on rising global supply will prevent the group’s EBITDA margin from exceeding 25% vs. 45% recorded in 2011. We downgrade the FXPO stock to SELL with target price of GBP 1.25.
