Ferrexpo Navigates a Critical Cash Crunch

Iron ore producer Ferrexpo warns of severe consequences as frozen funds and a $80M VAT refund shortfall leave it with just $22M in available liquidity, forcing drastic cost cuts.

The iron ore pellet producer Ferrexpo finds itself in a precarious financial position, grappling with a severe liquidity squeeze on multiple fronts. Management has been forced to implement drastic cost-cutting measures as it seeks to secure the company's operational future beyond the coming summer months. Exploring various funding avenues, including a potential equity raise, has become a critical priority.

Frozen Funds and Tax Shortfalls

At the core of the crisis are two major cash blockages. Ukrainian authorities have withheld substantial value-added tax (VAT) refunds owed to the company. By the end of March, this shortfall had accumulated to approximately $80 million. Compounding the problem, additional company funds remain inaccessible at the Swiss-based MBaer Merchant Bank AG. The recent revocation of the bank's license has prevented the swift recovery of these deposits. Excluding these frozen amounts, Ferrexpo's freely available net liquidity stood at a mere $22 million as of March 31.

Austerity Measures and Operational Challenges

In response to the intense financial pressure, Ferrexpo has slashed expenditures across the board. The leadership has reduced employee working hours and halted all non-essential capital investments and procurement. Despite these severe constraints, partial production continues. One pelletizing line resumed operations in February following a stabilization of Ukraine's power supply and energy prices, which had been disrupted by earlier infrastructure attacks.

The company's formal financial reporting has also been impacted by the turmoil. Ferrexpo requires additional time to finalize its annual accounts and now aims to publish them by April 30 at the latest. The search for fresh capital is underway as management races against the clock. The company has issued a stark warning: a failure to secure new financing, coupled with the continued absence of VAT reimbursements, could lead to significant adverse consequences for the entire group.