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Fortescue Metals posts 195% increase in profit to US$3.2 billion

The Fortescue Metals Group Limited (ASX: FMG) share price has dropped lower despite announcing a record profit result in FY 2019.

At the time of writing the iron ore producer’s shares are down 3% to $7.34.

How did Fortescue perform in FY 2019?

For the 12 months to June 30, Fortescue reported record underlying EBITDA of US$6 billion and record underlying NPAT of US$3.2 billion. This was an impressive 90% and 195% increase, respectively, on the prior corresponding period.

This strong result was driven by a 48% increase in the average price received to US$65 per dry metric tonne (dmt), which resulted in revenue increasing to US$10 billion.

And although C1 cash costs came in 6% higher at US$13.11 per wet metric tonne (wmt), a significant reduction in its debts and refinancing offset this. Interest expense on borrowings and finance lease liabilities was US$218 million, a decrease of 36% compared to FY 2018.

In light of this, a fully franked final dividend of 24 cents per share was declared. This brought its total FY 2019 dividends to $1.14 per share, which equates to a 78% payout ratio and is 396% higher than FY 2018 dividends.

Fortescue Chief Executive Officer, Elizabeth Gaines, said: “FY19 was a year of record achievements, most importantly in safety performance which resulted in our lowest annual TRIFR of 2.8, with the entire Fortescue team delivering excellent results across all of our operations.”

Our integrated operations and marketing strategy, record processing, together with our continued disciplined approach to cost management delivered shipments of 167.7mt and a full year Underlying EBITDA margin of US$39/dmt. Cash on hand increased to US$1.9 billion at 30 June, while net debt reduced to US$2.1 billion, the lowest level since achieving current production capacity in FY14,” she added.

FY 2020 guidance.

In FY 2020 the company expects iron ore shipments of 170-175mt, inclusive of 17-20mt of West Pilbara Fines product. This compares to 167.7mt shipments in FY 2019.

C1 costs are expected to be in the range of US$13.25-13.75/wmt, which is slightly higher year on year. Whereas, total capital expenditure is estimated to more than double from US$1.04 billion in FY 2019 to US$2.4 billion this year. The majority of this is going towards its Eliwana and Iron Bridge projects.

Elsewhere on the market today, the Japara Healthcare Ltd (ASX: JHC) share price and the IOOF Holdings Limited (ASX:IFL) share price have both sunk lower following the release of their respective results.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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