Fortescue Metals is looking likely to enjoy a substantial surge in revenue for the six months to June that will boost earnings and dividends for shareholders for the full year.
While the country’s third ranked iron ore miner met guidance for third quarter with iron ore exports of 42.3 million tonnes, the revenue gains will be enormous thanks to the surge in iron ore prices of 20%-25% so far this year.
Exports in the three months to March were made an average price of $US143 a tonne – that’s nearly double the average price per tonne in the first quarter of 2020 of just over $US72 a tonne and means an extra $US3 billion or more in revenues for the third quarter.
That means total revenue for the three months to March alone was more than $US6 billion. Seeing Fortescue reported interim revenues of $US9.33 billion for 202-21, it is well on track to topping that and more in the June half year if demand and iron ore prices remain around current levels.
That could see Fortescue earn as much revenue in the six months to June as it did in all of 2019-20 when the figure was $12.82 billion.
Fortescue paid a full year dividend for 2019-20 of $1.76 a share and an interim for the six months to last December of $1.47. The final for 2019-10 was $1 a share which will be easily topped when the results are announced in August.
The surge in revenues means the total dividend for the year to June could quite easily rise to or top $3 a share.
So, if everything remains roughly the same (and Chinese and other Asian demand for steel remains strong, and there is still a slight shortfall in iron ore supplies) then Fortescue’s revenues could top $US20 billion for the June year and net profit could easily double to more than $US8 billion.
Fortescue left full year guidance for shipments in the June 30 year unchanged at 178 million tonnes to 182 million tonnes and C1 costs of $US13.5 to $US14/wet metric tonne) were also unchanged.
The only negative is the continuing crackdown on pollution breaches and capacity by Chinese regulators that will continue for a while yet. At some stage that will see Chinese crude steel capacity cut, with a knock-on impact on demand (possibly to be felt more by producers of lower grade ore in china and externally, but producers such as Fortescue).
“Against the backdrop of the record performance in our iron ore business and our clean energy focus, Fortescue is well-placed to finish the financial year strongly, as we continue to meet demand from our customers and deliver value for all stakeholders,” CEO Elizabeth Gaines said in the statement to the ASX.
2020-21 could very well be as good as it was for Fortescue and the rest of the world’s iron ore producers – then again Covid in Brazil, or bad weather could crimp supplies and keep prices higher for longer.
Fortescue shares eased 0.17% to $22.58.
