The Fortescue Ltd (ASX: FMG) share price normally goes through plenty of volatility over the months and years as it generally follows the direction of the iron ore price.
When the iron ore price increases, it allows the company to significantly increase its earnings because of operating leverage. The company's costs per tonne of production don't change much month to month, so extra revenue can largely flow to the bottom line – good news for both net profit generation and the dividend.
We're going to take a look at what's predicted in terms of earnings generation.
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FY26
UBS wrote a note after seeing the ASX mining share's half-year result in February.
It noted that Fortescue delivered an operating profit (EBITDA) of $4.5 billion, which was around 5% ahead of what the market was expecting, as the margin strengthened towards 53%. However, the net profit after tax (NPAT) of US$1.9 billion was around 6% lower than the market expected due to higher depreciation and amortisation, reflecting the growing asset base.
The broker also noted that Fortescue is rolling out batteries, solar, and wind farms. The cost of the installations is improving as they're rolled out, with strong relationships with manufacturers. It's accelerating the installation, which will take out diesel and gas costs of production to the tune of between US$2 to US$4 per tonne by 2030.
UBS is projecting that the iron ore price will be US$96 per tonne in 2026, which could enable the business to make US$3.8 billion in net profit.
FY27
The business isn't expected to be as profitable in the 2027 financial year. As the huge new African iron ore project called Simandou – partly owned by Rio Tinto Ltd (ASX: RIO) – ramps up, UBS is expecting the iron ore price to decline to US$90 per tonne in 2027.
The iron ore price may be different to those projections, but it will play an important role in how much profit Fortescue makes in FY27 (and every other year). One factor that could change that dynamic is whether Fortescue's copper exposure continues growing.
UBS commented regarding copper:
Alta Copper acquisition close and acceleration of studies toward FID at its Cañariaco project in Peru (2024 PEA: 158ktpa Cu annual average first 10yrs, 27yr LOM [life of mine]). Copper tenements in Kazakhstan and Canada are advancing toward drilling this year. Exploration strategy is to acquire tenements in world class terrain and aggressively drill out.
The business is expected by UBS to generate a net profit of US$2.94 billion in FY27.
FY28
The company's net profit is expected to improve in the subsequent years after the earnings hit in the 2028 financial year, which could be good for the Fortescue share price.
Fortescue's net profit is forecast to increase to US$3.3 billion in the 2028 financial year.
FY29
Fortescue's net profit could continue improving in the 2029 financial year.
The ASX mining share could see earnings climb to US$3.5 billion in FY29.
FY30
The last year of this series of projections is the 2030 financial year. Its profit could climb close to the FY26 profit figure.
Fortescue's net profit could climb year over year to US$3.75 billion.
