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Tough slog persists for Fortescue

As expected after January’s half year production and sales update, Fortescue Metals Group (ASX:FMG) has again cut its dividends as earnings fell 15% to $US2.36 billion. That was just above market estimates of $US2.34 billion.

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The cut came ahead of an expected upturn in spending by Fortescue to broaden its interests, especially in renewables like hydrogen amid forecasts of weaker iron ore prices, especially in the all-important Chinese market.

Fortescue shareholders will receive a 75-cent interim dividend down 12.8% from 86 cents per share for the December, 2021 half.

Revenue eased 3.6% to $US7.84 billion – the profit fall was due to the sharp rise in costs in the half year.

Despite that reduction in the dividend executive chairman Andrew Forrest will still receive $849 million.

The weaker than expected result was apparent from the December quarter and half year report last month which revealed a slightly lower than expected average iron ore prices (despite record shipments of iron ore) and rising production costs at its Pilbara mines and port operations in WA.

Fortescue received $US87 per dry metric tonne (dmt) in the first-half e1 for its iron ore, down from $US96 per dmt a year earlier, taking the edge off record shipments of 96.9 million tonnes, up 4% from a year ago.

The company said in a statement to the ASX that it “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.”

The miner also warned that inflationary pressures will continue to be a risk for the remainder of the fiscal 2023 but Fortescue left its full year guidance unchanged at iron ore shipments in the range of 187 to 192 million tonnes, C1 costs for hematite of $US18.00 to $US18.75 per wet metric tonne (wmt) (it was $US17.43 a tonne in the December half year; capital expenditure (excluding FFI) of $US2.7 to $US3.1 billion.

FFI’s FY23 anticipated expenditure comprises $US500 to $US600 million of operating expenditure and $US230 million of capital expenditure

“We are one of the highest returning companies on the ASX over 20 years,” Fortescue executive chairman Andrew Forrest said in Wednesday’s ASX statement.

“We have consistently delivered returns to our shareholders and building on the more than $US22 billion paid, today we have announced a fully franked interim dividend of $0.75 per share.”

The Belinga project in Gabon will also be advanced as the company is implementing a production plan. In the plan, iron ore should be shipped in 2023.

“This is possible because we are using an existing road and rail infrastructure which limits the possibility of environmental delays,” Forrest said.

“This necessary equipment, which normally has very long lead times, is available to Fortescue now, utilising residual crushing and screening plant, haul trucks, rail cars and our own locomotives.

“We have also switched on the world’s first green iron facility through an electrolyser and expanded our major automation centre and Green Fleet Tech Hub in WA, which has been responsible for the breakthroughs our company has made in zero-pollution trucks and mobile equipment, train and ship engines.

“Remarkably, over this period of growth we have reduced our debt and improved on what was already a very strong balance sheet, while continuing to create value for all our stakeholders, including our shareholders,” Mr Forrest said.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

Image & Story Credit: finnewsnetwork.com.au

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