Fortescue Metals, the world’s fourth-largest iron ore producer and a common holding in client’s portfolios.
Fortescue Metals Group Limited (FMG) is a current holding within the ASX Blue Chip portfolio and announced its latest earnings report for the first half-year, with the market reacting positively with the shares up +2.20%
For the first half-year, Fortescue reported a revenue of $9.51 billion, up 21% on the previous year and above estimates of $9.83 billion, with profit rising 41% to $3.34 billion, above expectations of $3.05 billion. The company announced capital expenditure for the half-year period was $US1.5 billion, including $US104 million on decarbonisation and $US165 million by Fortescue Energy. FMG have announced that they will pay a fully franked interim dividend of $1.08, with metals chief executive Dino Otranto adding “Fortescue’s performance in the first half of FY24 has been excellent, with the team achieving our second highest first-half shipments while maintaining our strong focus on safety and keeping our costs low.”
FMG announced total iron ore revenue came in at $8.71 billion, rising +24% over the year, exceeding analyst forecasts of $8.58 billion, with C1 costs, direct costs associated with mining and processing, at $17.77/wet metric tonne, with a strong focus on productivity and efficiency.
The company’s Iron Bridge project is currently underway, with installation scheduled to be completed by mid-2025. The capital estimate is around $100 million, with most of the investment to be incurred in FY25. The bridge will look to de-risk and improve the performance of the company. Fortescue’s recent investment decision on $750 million worth of green hydrogen projects over the next three years and $500 million in raised capital expenditure guidance to $500 million across its Fortescue Energy arm for this year, further supports energy division’s chief executive Mark Hutchinson comments that the company’s decarbonisation plan is continuing to gain momentum.
Fortescue’s guidance for full-year shipments, cost and capital expenditure was unchanged. The company sees iron ore shipments at 192 million to 197 million tons, with metals capital expenditure around $2.8 billion to $3.2 billion. Energy net operating expenditure is forecasted to be $800 million, with energy capital expenditure and investments about $500 million.
Recent volatility in iron ore prices has seen the commodity reach a three-month low this week, as investor concern grows over steel demand in China, after the country’s underwhelming post-pandemic recovery. Fortescue’s results come after key competitors in the mining industry have announced disappointing results as weaker commodities prices and rising costs, saw profits. As a reminder, FMG’s inclusion in the Blue Chip portfolio is based on its dividend yield, which currently sits at 9.01% and its inclusion will depend on how the stock trades between now and the next rebalance date of March 1st, 2024.
