Seymour Pierce has reiterated its 'buy' rating for iron ore producer Ferrexpo despite the company revealing a sharp drop in earnings.

Shares in Ferrexpo dropped on Wednesday morning after the firm reported that earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 46% year-on-year to $328.8m in the nine months to September 30th. Meanwhile, revenue fell 18% to $1,082.6m due to lower prices.

The average implied realised price for the period was $156/tonne, in line with expectations, but Seymour reckons that lower prices will continue into the fourth quarter (forecast: $136/tonne).

"Although we will be re-examining our estimates in light of this release this morning we reiterate our positive stance on Ferrexpo. Indeed, we believe there are a number of catalysts around the corner that will have a positive effect on the share price over the next few quarters," said analyst Matthew McDonald.

"Not only do we expect the company's Yeristovskoye mine to begin first commercial production in 1H2013 and the start of the development of its new 10Mtpa concentrator at that mine, but also that cash costs will benefit from a 10% devaluation in the hryvnia during the year."

The stock was down 3.68% at 261.9p by 10:44 on Wednesday, but the broker continues to see upside, highlighting that the shares trade at a 27% discount to its target price of 373p.

BC

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