Fortescue Metals, the world’s fourth-largest iron ore producer and a common holding in client’s portfolios.
FMG released its full financial year 2023 earnings results that fell short of analysts’ expectations.
In a year-over-year comparison, net income plunged 23% to $4.80 billion, a significant miss against the anticipated $5.57 billion. Revenues contracted 3% to $16.87 billion, although, in a slightly redeeming factor, they did manage to surpass the estimate of $16.71 billion. Return on equity also slid from last year’s robust 35% to a less spectacular 27%. The updated financials add to a growing list of major miners who have struggled recently amid sluggish demand from China.
Notably, the final dividend of $1 per share, part of an overall annual dividend per share of $1.75, is down from $2.07 year-over-year and fell short of the forecasted $1.93. Underlying EBITDA (earnings before interest, taxes, depreciation, and amortization) also declined 5.7% year-over-year to $9.96 billion, while the EBITDA margin decreased from 61% to 59%.
For those concerned by the fall in FMG yesterday, the stock went ex its gigantic interim dividend of $1.47 fully franked (which is actually $2.10 including the franking credits). Fortescue Metals is the world’s fourth-largest iron ore producer and a common holding in client’s portfolios.
These results come amid a turbulent period for the company, with the recent resignation of Fiona Hick, the CEO of its iron ore division. She is set to be replaced by Dino Otranto, the company’s chief operating officer for iron ore. The sudden departure was described as “friendly and mutual,” adding another layer of uncertainty for investors. On the operational front, Fortescue maintained its iron ore shipment guidance for 2024 between 192.0 million and 197.0 million tons, with C1 costs per wet metric tonne expected to be between $18.00 and $19.00.
Despite the weaker-than-expected numbers, the outlook isn’t entirely bleak. Fortescue is making strides in its green energy initiatives, recently commencing the assembly of in-house designed proton exchange membrane electrolyzer stacks. This move is part of the company’s broader strategy to pivot towards clean-energy technologies, aspiring to become a major producer of green hydrogen. Management is also focusing on managing costs, which have been affected by rising diesel prices and labor rates.
While FMG shares are currently down by 3.68%, against a broader market uptick of 0.60%, the stock still offers long-term potential given the company’s strong operational efficiencies. As a high-quality producer in the volatile iron ore sector, FMG remains one to watch, particularly if the Chinese economy shows signs of rejuvenated growth. Despite the current missteps, FMG still stands as a solid holding for those with a long-term view, eyeing both demand resurgence and its noteworthy initiatives in the green energy sector.
