As expected after its solid December half production and sales report late last month, Fortescue Metals Group rode the boom in iron ore prices very nicely to more than triple its half-year profit and in doing so, topped market forecasts.
Interim earnings surged 280% to $US2.4 billion ($A3.6 billion) for the six months to December 31 from $US644 million in the first half of 2018-19.
Revenue was up 83% to almost $US6.5 billion from $US3.5 billion in the previous corresponding period.
The WA iron ore miner boosted interim dividend to 76 cents per share, up from 30 cents per share last year.
That boost delivered a dividend of $698 million to the company’s founder and biggest shareholder, Andrew “Twiggy” Forrest.
Fortescue’s first-half shipments rose 7 percent from the same time the previous year to reach a record high of 88.6 million tonnes, the company said.
Iron ore prices in 2019 surged nearly 60 percent, with the benchmark price hitting about $US125 a tonne in early July on the back of strong demand and a global supply outage caused by a mine dam collapse in Brazil on January 25 last year.
Global prices have since returned to about $US90 in the past week after languishing around $US80 to $US85 for the past five months.
Fortescue has maintained its 2019-20 iron ore guidance of shipments at the upper end of the 170 million to 175 million tonne range despite supply disruptions in Western Australia after Cyclone Damien earlier this month forced Rio Tinto to downgrade its 2020 production forecast by around 6 million tonnes.
Contributing to the record revenue was an average realised iron ore price of $US80 per dry metric tonne, 73% higher than US$US47/dry metric tonne in the December half of 2018.
Boosting Fortescue’s improved margins even further was a 3% fall in C1 production costs, which came in at $US12.73/wet metric tonne for the December 2019 half, down from $US13.11 for the previous half.
Fortescue’s chief executive officer Elizabeth Gaines described the company’s 1H 2020 results as “excellent”.
“We are continuing to generate strong margins, driven by our industry-leading cost position and product strategy, resulting in a 281% increase in net profit after tax to ~US$2.5 billion, delivering outstanding shareholder returns.”
Fortescue shares rose 0.7% to $11.14 as investors had a good idea of the earning surge from the half-year production and sales report and pricing details.
Only the size of the dividend was unknown and greedy analysts reckoned it would be as high as 80 cents a share instead of the 76 cents.
