The Fortescue Metals Group Limited (ASX: FMG) share price will be on watch this morning after it reported its FY19 result (and also the latest from the ongoing trade war).
Fortescue Metals Group or FMG is a global leader in the iron ore industry, known for its leading development of world class infrastructure and mining assets in the Pilbara region of Western Australia. Fortescue was founded in 2003 by Andrew Forrest, who is now one of Australia’s wealthiest people. The vast majority of Fortescue’s iron ore, a steel-making ingredient, is shipped and sold to Chinese customers.
Fortescue’s Impressive FY19 Result
The large miner reported that its mined ore tonnes increased by 12% to 206.7 million wet metric tonnes (wmt), processed tonnes rose by 7% to 176.9 million wmt but shipped tonnes dropped 1% to 167.7 million wmt.
Due to solid demand and a fall in supply because of Vale’s problems in Brazil, the ore price achieved by Fortescue jumped 48% to US$65 per dry metrics tonne (dmt). This was a large cause of revenue rising by 45% to US$9.97 billion.
Underlying EBITDA (click here to learn what EBITDA means) shot up 90% to US$6.05 billion and underlying net profit rocketed 195% to US$3.19 billion.
The reported profit also came in at US$3.19 billion, but it was a 263% increase from last year’s reported profit. Market consensus figures were for a net profit of US$2.6 billion, so it was a stronger result than investors were expecting.
Fortescue Dividend
The iron ore miner’s Board decided to declared a final fully franked dividend of AUD $0.24 per share. This brings the total year dividend to $1.14 per share, an increase of 396% compared to FY18 (with a 78% payout ratio of net profit).
Is Fortescue A Buy?
The company has guided for 170mt to 175mt of shipments, C1 costs to be in the range of US$13.25 per wmt tot US$13.75 per wmt.
It will also be spending US$2.4 billion on capital expenditure split between various elements with developments and exploration.
I think it depends on what the iron ore price does over the next year. It’s generally best not to buy resource shares at the top of the cycle, which is where we might be right now. So I think it could be better to buy shares of the reliable winners in the free report below instead.
[ls_content_block id=”14945″ para=”paragraphs”]
[ls_content_block id=”18380″ para=”paragraphs”]
