The Fortescue Ltd (ASX: FMG) share price is down 7% after the miner reported a painful HY25 result.
Fortescue is one of the largest iron ore miners in the world. It also has a portfolio of potential green energy projects.
Fortescue HY25 result
Here are some of the main highlights from the disappointing result for the six months to 31 December 2024:
- Revenue fell 20% to US$7.6 billion
- Underlying EBITDA declined 38% to US$3.6 billion
- Attributable net profit declined 53% to US$1.55 billion
- Free cashflow sank 75% to US$661 million
- Dividend cut by 54% to A$0.50 per share
The company reported its average revenue for hematite (the main iron ore Fortescue produces) declined 21% to US$85.24 per tonne. Sadly, the C1 cost (mining costs) increased 8% to US$19.17 per tonne because of inflationary pressures and mine plan-led cost escalation, according to Fortescue.
The combination of lower revenue and higher costs led to the significant decline of profit, which is a pain point for the Fortescue share price.
Fortescue noted that its credit metrics remain strong, with gross debt to the last 12 months of EBTDA of 0.6 times and gross gearing of 22% at 31 December 2024. Net debt worsened by around US$1.5 billion to US$2 billion over the six months.
Green energy projects
Fortescue Energy said it remains committed to producing green energy, so it’s progressing and refining its green energy project pipeline in a “disciplined manner”, with timelines adjusted to reflect global market conditions and policy settings.
It noted the Trump Administration has instructed federal agencies to pause grant payments under the Inflation Reduction Act (a Biden era initiative).
The development timeframes for the Arizona project and Gladstone PEM50 project are being reconsidered. It expects to have greater clarity on the impact of external events by the end of FY25, which seemingly refers to the upcoming Australian federal election.
Feasibility studies and planning approvals continue to progress for the Holmaneset project in Norway and the Pecem project in Brazil.
Outlook for the Fortescue share price
Fortescue’s FY25 guidance is for iron ore shipments of between 190mt to 200mt, including between 5mt to 9mt for Iron Bridge.
The outlook for the energy division has significantly worsened, and the iron ore price is lower than it was a year ago. Will the iron ore price rebound? It’s difficult to predict, so I’m not looking to invest in new Fortescue shares, despite the lower price. It’s interesting that it’s currently in the process of trying to buy a small iron ore business right now.
I’d look at other ASX dividend shares for income or returns.
