Ferrexpo PLC (LON:FXPO) has declared a second interim dividend as cash flow was strong amid continued strength in iron ore pellet prices.
Pellet production was up 5% and sales volumes rose 22% in the six months to June 30, but revenue slipped more than 1% to US$775.8mln due to 13% lower average realised free-on-board (FOB) prices.
FOB prices were primarily hit by lower pellet premiums, though realised prices were 7% above the level seen during the second half of last year, with the average iron ore price remaining above US$100 per tonne.
The global pellet market faced reduced demand in the first half of 2020 due to lower steel production outside of China, though this was partly mitigated by significantly lower pellet supply from Brazil.
Profit after tax of US$250mln was down 7% as while cash costs of production fell to US$40.9 per tonne from US$46/t a year earlier, reflecting lower energy prices and continued cost control measures, total costs were higher.
But because US$258mln of net cash flow was generated from operating activities, total cash rose to US$169.2mln from US$131mln at the end of December, while net debt fell to US$174mln from US$282mln.
As a result, Ferrexpo has declared a second interim dividend of 6.6 US cents per share, on top of the same amount declared earlier in the year.
“Whilst the ongoing global COVID-19 pandemic has affected demand in most markets, Ferrexpo's operations continue to operate with minimal disruption,” said chairman Steve Lucas.
“The group has adapted to a changing market environment, and has sold increased volumes to China where demand remains robust. As the market returns to more normal conditions in 2H 2020, we expect to see a recovery in steel demand outside China, which should be constructive for pellet premiums.”
The shares jumped 10% to 199.7p on Wednesday morning.