Ferrexpo, a prominent Ukrainian iron ore producer, has announced potentially devastating consequences stemming from the tax authorities' decision to suspend VAT refunds, which could dramatically reduce the company's operational capacity and create significant economic challenges for the Poltava region.
The suspension of VAT refunds totaling approximately US$12.5 million will force Ferrexpo to reduce its production to merely 25% of full capacity, triggering a cascade of economic repercussions. The company warns that this decision will directly impact thousands of jobs, substantially decrease tax revenues, halt future investments, and potentially destabilize local and national economic ecosystems.
Executive Chairman Lucio Genovese emphasized the critical nature of monthly VAT refunds, highlighting their significance for the company's cash flow and broader stakeholder interests. The suspension comes despite Ferrexpo's substantial contributions to Ukraine's economy, particularly during wartime conditions.
The tax authorities' decision appears linked to personal sanctions against Kostiantyn Zhevago, though Ferrexpo argues that these sanctions should not compromise the company's financial operations, especially given that international investors predominantly own the company's voting shares.
Ferrexpo's potential operational contraction would have far-reaching implications. The company, which has contributed over US$2 billion to Ukraine's economy since the Russian invasion, supports more than 8,000 employees and has been a significant purchaser of local goods and services. The reduction could potentially destabilize Horishni Plavni, a city of 50,000 residents that fundamentally depends on Ferrexpo's operations.
The company has already experienced financial challenges, reporting a US$50 million loss in 2024 and a US$72 million asset write-down. The VAT refund suspension threatens to exacerbate these financial pressures, potentially forcing further operational constraints.
Ferrexpo is calling on Ukrainian financial authorities to reconsider the VAT refund suspension, arguing that supporting industrial enterprises like themselves is crucial for maintaining economic resilience during challenging national circumstances.
