The long-expected flow of riches from Fortescue Metals Group arrived in the 2018-19 financial year thanks to that surge in iron ore prices which have already produced record dividends for shareholders in BHP and Rio Tinto.
Fortescue on Monday announced a fully franked 24 cents a share final dividend, which followed a 90 cent a share dividend already paid to investors in the first 11 months of the 2019 financial year.
That’s a total payout for the year to June of $1.14 a share and given the slump in iron ore prices since their six-year highs around $US125 a tonne in early July to around $US89 a tonne last week, Fortescue shareholders will not get such a cornucopia of cash for some time to come.
The impact of the Trump trade war, falling Chinese steel output and demand and rising output from Brazil in the wake of the January 25 mine wall disaster (which triggered a surge in iron ore prices from around $US72 a tonne to over $US125 a tonne) will not be repeated this financial year.
Even if the Chinese government boosts its stimulus spending it is hard to see a surge in prices (even with BHP and Rio Tinto having quality and volume problems with their mines in the Pilbara).
Trump’s trade war is not only impacting the Chinese economy but other economies around the world and global growth are going to continue to slow, probably until 2021 and after the November 2020 US elections.
So Fortescue’s five-year high net profit of $US3.2 billion ($A4.7 billion) is going to be a peak that the company will struggle to regain for a while.
The company shipped of 167.7 million tonnes (of iron ore in 2018-19,1% lower than FY18. The company reported record Underlying EBITDA of $US6.0 billion, 90% higher than FY18. Revenue jumped to $US9.965 billion.
Fortescue shares fell more than 5% to $7.17 yesterday in a market off 1.3% at the close or down 83 points. During the session, it was down more than 1.6%.
