Fortescue Metals Group has tripled its interim dividend payout to 30 cents a share for the six months to December after earnings comfortably topped market forecasts.
And with global iron ore prices up around $US89 a tonne and likely to stay in the vicinity for much of this year, there’s every chance the second half will see a much higher earnings figure and possibly another dividend payout like that for the first six months or better.
Fortescue said that second half iron ore shipments will be higher than the 82.7 million tonnes shipped in the first half and that plus lower costs from higher throughput and price gains (for its increasing shipments of higher grade ore and its standard 58% iron content product) there’s every chance the company will see a significant jump in earnings.
Fortescue reported a statutory net profit of $US644 million that was comfortably ahead of analyst expectations (around $US540 million), 5% down on a year ago thanks to a fall in tonnage and high costs because of the lower throughput and weaker prices than expected for its 58% iron ore products for much of the six months.
Revenue fell 4% in the half – because of the earlier weakness in 58% ore prices – to total $US3.54 billion.
But prices spreads for 58% ore products have narrowed sharply compared to 62% and 65% prices, especially since the Vale January 25 iron ore mine dam disaster in Brazil that has helped boost prices.
Fortescue rewarded shareholders with a 19 Australian cents a share interim dividend, up from 11 cents a share last year, as well as a special dividend of 11 cents a share.
Net profit for the six months to December 31 came in at $US644 million, down from $US681 million a year ago, but handily beat the $US544 million average of two estimates by UBS and Goldman Sachs.
“The half-year results demonstrate Fortescue’s continued ability to generate strong cash flows from its highly efficient Pilbara operations,” the company said in a statement.
Shares in FMG jumped as much as 7% to $6.83 on the ASX, the highest since March 2017. They eased in afternoon trading to finish the day up 5% at $6.69.
Fortescue said the combined interim dividend, which was 30 percent higher than the total paid in 2017-18, reflected its confidence in its outlook.
The miner said it realised $US47 a tonne for its iron ore in the December half, up from $US40 a tonne in the previous half.
CEO Elizabeth Gaines said in a statement in yesterday’s results release: “the Fortescue team have successfully delivered on our integrated operations and marketing strategy, resulting in an average realised price of US$47/dmt for the half year.
“This reflects strengthening iron ore markets, demand for our products and the introduction of West Pilbara Fines. Together with the ongoing contribution of our low-cost operations, we generated strong margins and achieved a 66 percent increase in underlying net profit after tax compared to the half year ended 30 June 2018 (2H18).”
