Ferrexpo Warns of Severe Economic Impact from VAT Refund Suspension in Ukraine

Ferrexpo, a prominent iron ore producer headquartered in Switzerland, has highlighted significant economic risks stemming from the Ukrainian tax authorities' decision to suspend monthly VAT refunds of approximately US$12.5 million, potentially forcing the company to reduce its operational capacity to just 25%.

The VAT refund suspension threatens to create a cascading series of economic challenges for both the company and the broader Ukrainian economy. According to company leadership, the immediate consequences could include massive job losses, substantial decreases in tax revenues, halted investments, and disrupted supply chains across multiple sectors.

Lucio Genovese, Executive Chairman, emphasized the critical nature of the VAT refunds, stating that they represent a significant cash flow contribution essential for the company's operations. The decision appears to be linked to personal sanctions against company stakeholder Kostiantyn Zhevago, which Ferrexpo argues should not impact the company's broader financial operations.

The potential economic impact extends far beyond the company itself. Ferrexpo operates in Horishni Plavni, a city of over 50,000 residents, including 8,000 internally displaced people. Viktor Lotous, Chief Operating Officer, noted that nearly every household in the region depends directly or indirectly on Ferrexpo's operations.

Since Russia's full-scale invasion of Ukraine, Ferrexpo has been a critical economic contributor, paying over US$150 million in salaries, supporting local suppliers with more than US$1.8 billion in purchases, and contributing over US$300 million in taxes and royalties. The company has also invested significantly in modernizing its mining and processing operations.

By potentially forcing Ferrexpo to reduce its business dramatically, the tax authorities risk undermining not just the company's operations, but the broader economic stability of the Poltava region and Ukraine during a particularly challenging period. The company is urgently calling on the Ministry of Finance and State Tax Service to restore VAT refunds and support continued economic activity.