Fortescue Metals Group Ltd (ASX: FMG) shares have jumped after it released its half-year results to 31 December 2018, with its net profit after tax (NPAT) down 5.4% to USD $644 million.
Despite this, the market seemed to like it (probably due to the dividends) with Fortescue shares up as much as 7.5% in early trading to $6.83.
Fortescue is an iron ore production and exploration company with assets located in Western Australia.
Key Results
Fortescue reported:
- Revenue down 3.77% to US$3.54 billion
- NPAT down 5.4% to US$644 million
- Total dividend of 30 cents per share fully franked, comprised of:
- Interim dividend up 73% to 19 cents fully franked (previously 11 cents)
- Special dividend of 11 cents fully franked.
- US$948 million cash from operating activities.
Operational Performance
From its mining activities, Fortescue reported:
- Mined ore tonnes up 9% from prior half to 101.1 wmt (wet metric tonnes)
- Processed tonnes up 3% from prior half to 85.3 wmt
- Shipped tonnes down 2% from prior half to 82.7 wmt
- Realised price unchanged from prior half at USD $47/wmt
- C1 costs of up 8% from prior half at USD $13.11
Fortescue stated that 10% of its sales this half were now outside China. Put another way, 90% of its sales were to China making it completely reliant on China for economic prosperity and survival.
Debt
Fortescue’s net debt is US$3.036 billion, with a net gearing ratio of 23%. This is a far cry from when it had as much as US$13 billion of debt in 2013 with a net gearing of 199%.
Management Commentary
CEO, Elizabeth Gaines, said, “the Fortescue team have successfully delivered on our integrated operations and marketing strategy, resulting in an average realised price of US$47/dmt for the half year. This reflects strengthening iron ore markets, demand for our products…”
Rask Perspective
Fortescue’s underdog story of breaking up the Rio Tinto (ASX: RIO) and BHP Group (ASX: BHP) oligopoly on the iron ore market in Australia is incredible and a testament to Andrew Forrest. As much as I love the story, however, I don’t like the company at all from an investment perspective because it is a price taker selling commodities.
[ls_content_block id=”14945″ para=”paragraphs”]
