Fortescue Metals Group Limited (ASX: FMG) has been one of the worst-performing stocks on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today after it reported its earnings for the six-months ended 31 December 2014.
Not even a heavy reduction in costs or an increase in production could counteract the effects of the crashing iron ore price. With iron ore down more than 50% over the last 14 months, Fortescue announced an 81% decline in net profit which resulted in a 70% decrease to its interim dividend. Investors will receive just 3 cents per share, fully franked, compared to 10 cents per share last year.
While Fortescue's earnings were destined to fall, investors are likely focusing on the company's weak cash flow during the period. Fortescue Metals Group's cash flow stooped to US$905 million and could fall further with more pain tipped for the iron ore price. This could put pressure on the miner's ability to repay its debts which is clearly a concern.
The stock tumbled 4.85% or 13 cents to be trading at just $2.55. BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) fell 0.2% apiece, while the ASX 200 is down 0.8% late in the session.
