Brokers remain keen on iron ore pellet producer Ferrexpo (LON:FXPO) despite the headwinds battering the global economy.
Ferrexpo posted record 2011 underlying earnings of US$801 million, up 37 per cent from US$585 million and ahead of broker forecasts.
Broker Citi said Ferrexpo had done well to carry the level of first half earnings through to the end of the year despite a tougher second half environment.
Underlying earnings came in 5 per cent ahead of Citi’s projections as higher iron ore prices outstripped a 28 per cent increase in cash costs which the company attributed to commodity-related price inflation.
Iron ore pellets are used primarily in the production of steel. China is the world’s largest steel consumer and producer and Ferrexpo is increasingly targeting its output towards Chinese steel mills.
Citi says Ferrexpo benefitted from its long-term relationships with customers and also this push towards Asian markets.
Ferrexpo sales to Asia in 2011 rose to 40 per cent of its total compared to 27 per cent in 2010.
The company said it was on track with its investment programme, having more than doubled its capital expenditure last year in an attempt to boost output and quality.
Ferrexpo is targeting a premium pellet grade of 65% Fe for all output in 2012.
Citi believes Ferrexpo will struggle to match last year’s production, and because of that has trimmed its 2012, and 2013 earnings per share estimates but still keeps a 'buy' rating on the shares.
Cailey Barker an analyst at Numis also rates Ferrexpo as a low risk iron ore play and also maintained a 'buy’ stance.
The shares today are 337.8 pence.