At the time of writing, the iron ore producer’s shares are up 2% to $24.93.
How did Fortescue perform in the first half?
For the six months ended 31 December, Fortescue delivered a 44% increase in revenue to US$9,335 million and a 66% lift in net profit after tax to US$4,084 million.
This strong result was of course driven by the sky high iron ore price. During the half, the company commanded an average realised price of US$114 per dry metric tonne for its iron ore. This was a 42.5% increase on the prior corresponding period.
This is actually a larger increase that the 62% Fe CFR Platts index over the same period. Management advised that the outperformance of the index reflects the enhanced contribution of higher value products meeting the demands of its customers, as well as iron ore market supply constraints from South America.
Also supporting its growth was a 2.4% increase in shipments to a total of 90.7 wet metric tonnes.
Fortescue increases its dividend
In light of its strong first half and its positive outlook, the Fortescue board has declared a fully franked A$1.47 per share interim dividend. This is an increase of 93.4% on the prior corresponding period.
Based on the current Fortescue share price, this interim dividend alone equates to a fully franked 5.9% yield.
Fortescue’s interim dividend also represents a payout ratio of 80% of net profit after tax. This is in line with its guidance of maintaining a payout ratio at the top end of the Board approved range of 50% to 80% of net profit after tax.
Management advised that the interim dividend declared reflects the strong operating cash flow environment, confidence in the outlook for the second half of FY 2021, and the strength of the balance sheet.
Possibly holding back the Fortescue share price slightly today has been a change to its guidance due to the stronger Australian dollar.
While Fortescue continues to target iron ore shipments of 178mt to 182mt, it has revised its C1 costs and capital expenditure guidance.
C1 costs are now expected to be US$13.50 to US$14.00 per wet metric tonne. This compares to previous guidance for US$13.00 to US$13.50 per wet metric tonne. Whereas capital expenditure is now expected to be at the upper end of its previous guidance range of US$3 billion to US$3.4 billion.
This is based on a revision to the assumed FY 2021 average exchange rate from 0.70 to 0.75 USD/AUD.