Performance Review of Two FTSE-250 Listed Stocks: Victrex & Ferrexpo

Summary

• Victrex PLC reported revenue of £266 million, which fell by 10% year on year in FY2020.
• The total sales volume declined by 7% year on year to 3,492 tonnes in FY2020.
• Ferrexpo PLC produced 2.5 million tonnes of pellets in Q3 2020 that was down by 12% quarter on quarter.
• The production was impacted due to the scheduled maintenance of the pelletizer.

Victrex PLC (LON:VCT) and Ferrexpo PLC (LON:FXPO) are two FTSE-250 listed companies. Shares of VCT were up by around 1.85%, and shares of FXPO were down by close to 0.54% from their last closing price (as on 8 October 2020, before the market close at 12:40 PM GMT+1).

Victrex PLC (LON:VCT) - FY21 performance to remain subdued

Victrex PLC is a UK based company that provides polymer solutions. It is focused on PEEK and PAEK polymer space and develops new polymer grades and products. The end markets of the Company include Aerospace, Energy, Automotive, Medical and Electronics sector. Victrex is listed on the FTSE-250 index.

Victrex at a Glance

(Source: Company website)

FY2020 trading update (ended 30 September 2020) as reported on 6 October 2020

In FY20, the overall business activity remained subdued; however, some end markets improved slightly. The total sales stood at £266 million, which fell by 10% year on year from £294 million in FY19. The total sales volume declined by 7% year on year to 3,492 tonnes in FY20 from 3,751 tonnes in FY19. The full-year revenue was better than expected, but the lower production volume has impacted the fixed cost, and thus it has impacted the margins. To bring down the cost and improve margins in the event of lower production, the Company took a voluntary severance programme that has removed the requirement of 100 roles from UK polymer manufacturing facility. The Company would incur a onetime cost of £9.5 million in FY20 related to severance programme. As on 30 September 2020, Victrex had net cash of £67.4 million. It has a revolving borrowing facility and an accordion facility of £20 million each. The Company expects that capital requirement for China manufacturing subsidiary and the ongoing maintenance expenditure would be close to £50 million. The cash flow generation would cover these expenses, and Victrex intends to reinstate the dividend for FY20.

Q4 FY2020 performance

In Q4 FY20, the performance in the Aerospace and Energy sector remained suppressed the same as that in Q3 FY20. Although, there was some uptick witnessed in monthly run rates in the Automotive and Medical sector. The total revenue in Q4 FY20 was down by 27% year on year to £55.7 million from £76.2 million a year ago. The total sales volume fell by 26% year on year to 695 tonnes in Q4 FY20 from 940 tonnes in Q4 FY19.

Polymer & parts

(Source: Company website)

Share Price Performance Analysis

1-Year Chart as on October-8-2020, before the market close (Source: EODHD/Others, Thomson Reuters)

Victrex PLC's shares were trading at GBX 1,984.00 and were up by close to 1.85% against the previous closing price (as on 8 October 2020, before the market close at 12:40 PM GMT+1). VCT's 52-week High and Low were GBX 2,574.00 and GBX 1,645.00, respectively. Victrex had a market capitalization of around £1.69 billion.

Business Outlook

The trading performance remained weak at the start of FY21, even though some end markets have improved from their lowest point. The covid-19 headwinds continue to impact the business, and the Company expects the demand from the end market to be similar to that seen in Q4 FY20. The lower production would weigh down on the margins, and the inventories would be unrolling through FY21. The performance in H1 FY21 could be lower when compared to H1 FY20 that had a strong performance. The Company is well prepared for the Brexit outcome with plans for more warehousing and additional inventories. It stated that it is well poised for medium term to long term growth opportunities.

Ferrexpo PLC (LON:FXPO) - Announced the special interim dividend of 6.6 USD cents

Ferrexpo PLC is a UK based company that produces iron pellets. The Company has mines in Ukraine where it has two open-pit mines with a processing facility, and it uses rail, barge or ships to transport its products to steel plants globally. Ferrexpo is the third-largest pellets exporter to the steel industry, and it produced 10.5 million tonnes of steel in 2019. Ferrexpo is listed on the FTSE-250 index.

Q3 2020 production update as reported on 6 October 2020

The Company highlighted that its production was not much impacted due to the covid-19 in Q3 2020. It produced 2.5 million tonnes of pellets in Q3 2020 that was down by 12% quarter on quarter from 2.8 million tonnes produced in Q2 2020. The production in Q3 20 was impacted due to the planned maintenance of the pelletizer in early September 2020. High-grade iron ore pellets constituted the total production in Q3 20. For the nine months (9M 20), the total output stood at 8.1 million tonnes, and it increased by close to 3% year on year. Ferrexpo has completed the additional concentrator section in Q3 20 and plans to ramp up the production capacity in Q4 20.

Performance in H1 2020

(Source: Company website)

Recent events

• As on 6 October 2020, Ferrexpo announced that the restrictions covering 50.3% shares of Ferrexpo Poltava Mining (FPM) owned by Ferrexpo AG Switzerland remain effective. The regulations were imposed by the district court in Kyiv that does not affect the ownership but restricts the transfer of the share.
• On 11 September 2020, the Company announced the special interim dividend of 6.6 USD cents for FY20 this was in addition to a special interim dividend of 6.6 USD cents announced in June 2020 and the interim dividend of 6.6 USD cents. The total dividend distribution would be 19.8 USD cents for the current year that would be paid in October 2020. The decision for an extra dividend was taken given the strong cash flow generation. The Company is putting effort to maintain a balance between growth opportunities and shareholder's return.

(Source: Company website)

Share Price Performance Analysis

1-Year Chart as on October-8-2020, before the market close (Source: EODHD/Others, Thomson Reuters)

Ferrexpo PLC's shares were trading at GBX 174.76 and were down by close to 0.54% against the previous closing price (as on 8 October 2020, before the market close at 12:40 PM GMT+1). FXPO's 52-week High and Low were GBX 206.54 and GBX 90.02, respectively. Ferrexpo had a market capitalization of around £1.03 billion.