Fortescue share price sinks amid 13% dividend cut

On the positive side for the Fortescue share price, the miner achieved record half year iron ore shipments of 96.9 million tonnes.

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Key points

  • The Fortescue share price is trading lower amid the release of the company's half-year results
  • The ASX 200 miner saw revenues decline 3.6% in H1 FY23 from the pcp
  • The 75 cent per share interim dividend also declined by 12.8%

The Fortescue Metals Group Ltd (ASX: FMG) share price is down 1.67% in morning trade on Wednesday.

Shares in the S&P/ASX 200 Index (ASX: XJO) iron ore miner closed yesterday at $22.18 and are currently trading for $21.81 apiece.

This follows the release of the company's half-year results for the six months ending 31 December (H1 FY23).

Here are the highlights:

Fortescue share price slides alongside profits and dividends

What else happened during the half year?

Also putting the Fortescue share price under pressure is the lower average realised price the miner received for its iron ore shipments. Over the reported half, that came to US$87 per dry metric tonne (dmt), down from US$96.dmt in the first half of the 2022 financial year.

Earnings per share (EPS), meanwhile, declined to AU$1.14 per share, down from AU$123.70 per share a year ago.

The ASX 200 miner's dividend payout ratio declined from 70% in H1 FY22 to 65% in the current reported half-year.

On the positive side for the Fortescue share price, the miner achieved record half-year iron ore shipments of 96.9 million tonnes (Mt), beating the prior record first half set in H1 FY22 by 3.8Mt.

Ore processed was also a first-half record, coming in at 98.0Mt.

Ore mined, on the other hand, decreased to 114.8Mt, down from 118.0Mt in H1 FY22.

What did the miner report on the sustainability front?

The Fortescue share price could be getting some support from ESG investors, as the iron ore giant continues its strong focus on slashing emissions. Fortescue intends to achieve real zero emissions (Scope 1 and 2) across its iron ore operations by 2030.

The company stated:

Fortescue is making significant progress on our decarbonisation initiatives, enabled through our 100% renewable green energy and green technology company FFI [Fortescue Future Industries] and battery design and energy management system company WAE Technologies (WAE) in the United Kingdom.

Fortescue allocates 10% of NPAT to fund FFI.

Now what?

Looking at what could impact the Fortescue share price down the road, the miner provided the following FY23 guidance:

  • Iron ore shipments in the range of 187 to 192Mt
  • C1 costs for hematite of US$18.00 to US$18.75 per wet metric tonne (wmt)
  • Capital expenditure (excluding FFI) of US$2.7 to US$3.1 billion
  • FFI's FY23 anticipated expenditure comprises US$500 to US$600 million of operating expenditure and US$230 million of capital expenditure

Fortescue assumed an average FY23 exchange rate of 70 Aussie cents to the US dollar.

Fortescue share price snapshot

As you can see in the chart below, the Fortescue share price has had a strong run in 2023, up 7% since the closing bell on 30 December despite this morning's dip.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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