REPORTING SEASON: Fortescue Metals Group (FMG)

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Figure 1: Fortescue Metals Group 12 month chart

 

Australia’s third biggest iron ore miner, Fortescue Metals (FMG) reported a 260% surge in half year profit to US$1,723m.

The result was driven by higher ore production, a focus on cutting costs and a steady rise in the iron ore price from June 2013.

FMG shipped almost twice as much ore over the half than in the previous corresponding period and operating costs have been slashed by 34%.

Despite the market’s expectations in recent years for a fall in iron ore demand, prices have surged by 14.7% between July and December 2013.

Sales to China accounted for 97.7% of FMG’s total revenue.

A high debt level has consistently been a concern for FMG.

Last month the WA focused miner said it would repay another US$1.6bn in debt in mid-March.

FMG’s net debt position improved by US$1.9bn over the half to US$8.6bn; helped by strong operational cashflows and fewer projects.

Looking ahead, FMG has maintained guidance and expects the delivery of full production capacity (155 million tonnes per annum) by the end of March 2014.

The miner forecasts FY14 capital expenditure to be US$2.1bn, almost three times less than in FY13.

A better than expected A$0.10 interim dividend was declared, payable to eligible investors on 2nd April.

FMG shares initially reacted positively to the result.

 

You can see all of CommSec’s reporting season analysis by clicking here.

Steven Daghlian, Market Analyst,