The Fortescue Metals Group Limited (ASX: FMG) share price has jumped 5% after the miner’s big FY21 dividend and result.
Fortescue’s FY21 result
The iron ore mining giant said that it shipped 2% more wet metric tonnes (wmt) of iron ore in FY21 – a total of 182.2 mt. Fortescue saw a 72% increase of the average revenue per dry metric tonne (dmt), being US$135.32.
However, the C1 cost per wmt increased by 8% to US$13.93.
Now let’s look at the actual financials.
Fortescue revenue increased by 74% to US$22.28 billion. This drove underlying EBITDA (EBITDA explained) higher by 96% to US$16.38 billion. The underlying EBITDA margin improved by a further 12 percentage points to 73%.
The net profit after tax (NPAT) surged 117% to US$10.3 billion and profit/earnings per share (EPS) went up 117% to US$3.35. In Australian dollar terms, EPS jumped 95% to $4.48.
Operating cashflow rose 96% to US$12.6 billion. Free cashflow doubled to US$9.86 billion.
Fortescue FY21 dividend
The iron ore miner decided to declare a final dividend of A$2.11 per share. That was an increase of 111%.
Added to the interim dividend, that brings the full year dividend to A$3.58 per share – an increase of 103%. At the current Fortescue share price, that represents a FY21 fully franked dividend yield of 16.7%.
Balance sheet
Fortescue finished the financial year with a cash balance of US$6.9 billion, with net cash of US$2.7 billion. That was an improvement from a net debt position of US$258 million at 30 June 2020.
The miner’s balance sheet is structured on low cost, investment grade terms while maintaining flexibility to support ongoing operations and the capacity to fund future growth.
Fortescue Future Industries
FFI is the segment that’s enabling Fortescue’s decarbonisation and in FY21 it has achieved significant progress on heavy industry decarbonisation initiatives and advanced its global portfolio of renewable energy and green hydrogen projects.
FFI was allocated 10% of the net profit, with the FY21 allocation being US$1 billion. Expenditure was US$122 million.
FY22 expenditure is expected to be between US$400 million to US$600 million. Key areas of activity include green fleet development and decarbonisation technologies, as well as studies and asset identification in Australia and internationally.
FY22 guidance
In this current financial year, the miner is expecting iron ore shipments of between 180 mt to 185 mt. The middle of the guidance is roughly what it shipped in FY21.
The C1 cost is expected to be between US$15 to US$15.50. That means it’s expecting an increase of costs.
Capital expenditure is expected to be between US$2.8 billion to US$3.2 billion, including US$1.1 billion to US$1.4 billion on major projects (Iron Bridge and PEC).
Summary thoughts on the Fortescue share price and outlook
Fortescue’s iron ore division is making tons of profit and FFI has a compelling future. However, I’m not sure if today’s price is good because of the volatility of iron ore prices. If the iron ore price keeps falling then the share price could keep falling. But FFI’s progress is looking good so far.
