Ukraine suspends VAT refunds on two Ferrexpo subsidiaries

(Sharecast News) - Ferrexpo said on Friday that Ukrainian tax authorities have suspended VAT refunds for January totalling UAH 512.9m ($12.5m) for two of its subsidiaries, citing sanctions imposed on major shareholder Kostiantyn Zhevago. The FTSE 250 company said the decision affected Ferrexpo Poltava Mining and Ferrexpo Yeristovo Mining.

It emphasised that the sanctions were personal to Zhevago and had not been applied to Ferrexpo itself or any of its subsidiaries.

The company argued that using the sanctions as grounds to withhold VAT refunds would place undue financial pressure on the group, whose majority voting shareholders include international institutional investors.

Ferrexpo warned that the suspension of VAT refunds would add to existing financial strain, amid weak iron ore prices and elevated production costs.

The firm said it expected the move to negatively impact liquidity, leading to lower production and sales volumes.

It also cautioned that it would reduce domestic procurement and result in lower tax, royalty and social contributions to the Ukrainian economy.

"Ferrexpo is a significant contributor to the Ukrainian economy and society, especially during a time of war," said executive chair Lucio Genovese.

"The suspension of VAT refunds will place significant stress on our business, at a time when we are already managing many other challenges.

"Ferrexpo calls on the Ministry of Finance and the State Tax Service of Ukraine to take urgent and effective measures to reinstate the VAT refunds."

Reporting by Josh White for Sharecast.com.