FMG records 212pc profit jump

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 25 Aug 2016   Posted by admin

FMG’s cost reduction measures have realised a turnaround in annual finance results.

By Cameron Drummond

IRON ore producer Fortescue Metals Group (Fortescue) announced a 12c per share dividend on the release of its full year financial results on 22 August.

The company posted an after tax profit of $US985 million for FY16, a 212 per cent rise from $US316m in FY15.

Fortescue’s underlying earnings before interest, tax depreciation and amortisation (EBITDA) increased 48 per cent from $US2 billion the year before to $US3.2bn.

A 29 per cent year-on-year drop in revenue of $US7.1bn was countered by improved C1 operating costs averaging $US15.43 per wet metric tonne (wmt); a 43 per cent reduction from FY15.

The company said the numbers reflected its continued focus of efficiency and productivity measures to offset the impact of lower iron ore prices.

Fortescue chief executive Nev Power said the entire team had delivered on safety, production and cost targets resulting in outstanding FY16 results.

“Successful cost improvement measures and lower capital expenditure have more than offset the impact of falling iron ore prices to generate strong free cash flow,” Mr Power said.

“We have repaid US$2.9bn of debt in FY16, reducing net debt to US$5.2bn and will continue to repay debt from operating cash flows.

“Our continued focus on safety, innovation, efficiency and productivity has ensured a solid foundation for [the] achievement of FY17 goals and ongoing balance sheet strength.”

Fortescue achieved C1 costs of $US14.31 in the June 2016 quarter and finished the month of June at US$13.10/wmt.

Fortescue was hoping to drive down C1 costs even further in its bid to becoming Australia’s lowest cost iron ore producer.

The company posted a shipping guidance of between 165mt and 170mt at a $US12-13/wmt average C1 cost for FY17, based on an exchange rate of 0.75 and a West Texas Intermediate oil price of $US50 per barrel.