The Fortescue Metals Group Ltd (ASX: FMG) share price had a very strong FY23, rising by 26%. It beat the S&P/ASX 200 Index (ASX: XJO) return of around 10%.
Here's how the ASX mining share's performance looks on the graph.
It has been another volatile year for the ASX iron ore share, with plenty of changes in the iron ore price.
Almost all of Fortescue's earnings come from iron ore. So what happens with the commodity can have a big impact on the Fortescue share price.
Several months ago, the iron ore price drooped well below US$100 per tonne. We also saw the iron ore price go above US$130 per tonne earlier this year.
The company's FY23 result hasn't been reported yet, so we'll see what it reports in reporting season next month. But, we can remind ourselves what happened in the FY23 first-half result.
Earnings recap
For the first six months of FY23, revenue was down 4% to US$7.8 billion, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 9% to US$4.35 billion and net profit after tax (NPAT) dropped 15% to US$2.37 billion.
This came after the average revenue declined by 9% to US$87.18 per tonne, while the C1 cost per wet metric tonne rose by 14% to US$17.43. It shipped 4% more iron ore in the first half of FY22, with a total of 96.9 wet metric tonnes.
Fortescue shares paid a fully franked interim dividend of 75 cents per share for the first half, which was 65% of first-half NPAT.
At the time of the update, it said it was expecting to ship between 187mt to 192mt of iron ore for FY23.
In the third quarter of FY23, it shipped another 46.3mt of iron ore, while achieving average revenue of US$109 per dry metric tonne (dmt), realising 87% of the average Platts 62% CFR Index for the quarter, which was another three months of good revenue.
Subsequent quarters will be helped by the fact that Fortescue's Iron Bridge project has started producing.
What's keeping the iron ore price strong?
The iron ore price is currently sitting at around US$115 per tonne, which may be stronger than some analysts were expecting. This is a key factor for the Fortescue share price.
China's economy may not be firing on all cylinders at this stage, but the steel mills are still using a lot of iron. While there may be less construction going on within China, steel exports are growing strongly.
According to reporting by Reuters, steel exports in the first five months were up 41% year over year, thanks to increased buying from Asia and Africa. Steel exports in 2022 amounted to a reported 67 million tonnes, while exports in 2023 could reach 77 million tonnes according to three analysts referenced by Reuters.
Fortescue share price valuation
Market expectations may also have had an important influence on where the ASX mining share finished the financial year.
According to estimates on Commsec, the expectation for FY23 profit was $2.75 of earnings per share (EPS), which put the Fortescue share price at around 8 times the projected earnings.
