Fortescue Metals shares (ASX: FMG) moved 3.03% into the red year-to-date, as today’s update failed to live up to expectations. The FMG share price ended the day down 6.22% as $18.24, within the range where support was previously found earlier this month.
One of the key factors affecting the stock was the company’s reported financial performance for the half-year ending 31 December, where profits missed estimates. Fortescue faced declining revenues attributed to lower iron ore prices. Additionally, Fortescue experienced rising production costs, with hematite C1 costs hitting US$19.17 per wet metric tonne—a rise of 8% compared to the same period in the previous year.
Also contributing to the bearish sentiment were debt, and margins. The company saw it’s net debt rise quadruple from June’s $500 million, to the current level of $2 billion, whilst the EBITDA margin saw a decline from 62% to 48%.
Despite these challenges, Fortescue announced an interim dividend of 50 cents per share, which represents a 65% payout of net profit after tax (NPAT). This move might have been aimed at maintaining shareholder confidence.
An additional strategic focus for Fortescue is its commitment to sustainability, highlighted by a US$2.8 billion agreement with Liebherr aimed at decarbonizing its fleet through new battery power systems. While this demonstrates a forward-looking approach, it also presents potential costs that could affect short-term financial performance.
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Lastly, Fortescue’s CEO, Dino Otranto, emphasised the exceptional operational achievements and record half-year shipments in his comment, trying to reassure investors about the company’s operational strength.
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