Fortescue Metals- FY16 Results coverage

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Fortescue Metals Group (ASX: FMG), the global leader in the iron ore mining and production, announced outstanding results for the financial year ending June 30th 2016.

Net profit after tax (NPAT) rose almost three fold during the year to USD 985 million compared to USD 316 million in 2015, due to the positive impact of declines in operating costs, which more than offset the global decline in iron ore prices.

Underlying EBITDA surged to USD 3.2 billion in 2016 from USD 2.5 billion, a solid 27 percent increase year on year, while revenue declined 17 percent to USD 7.1 billion, led by a 29 percent fall in iron- ore prices. The FY16 earnings per share (EPS) stood at 31.6 cents, higher than the 10.2 cents delivered a year earlier.

 

According to the CEO, Nev Power, the results represent significant improvements in the business resilience and competitive position and the successful delivery of a critical strategic target. The cost savings of USD 1.9 billion achieved during FY16, added to the cumulative cost savings of USD 3.5 billion, since the company reached full operating capacity.

 

Key highlights-

  • Operating sales revenue declined to USD 7 billion from USD 8.3 billion in 2015
  • C1 costs were sharply lower at 43 percent and averaged USD 15.43/wmt from USD 27.15, a year earlier.
  • US$ 2 billion in debt repaid during the year, reducing the net outstanding debt to USD 5.2 billion
  • Capital expenditure was below estimates at US$ 1.33/wmt
  • Declared a dividend of 12c per share, taking the total dividends to 15c, sharply higher from the 5c paid in FY15

 

Outlook-

The company has issued a positive outlook for FY17 as it continues to grow its markets in Japan, South Korea and other emerging economies and expects C1 costs to reduce further to US$ 12- 13/ wmt. The industrialization in China, which represents 18 percent of the company’s exports is likely to reinforce ongoing domestic steel demand. Through innovation, ongoing productivity and focus on efficiency, the company is positioned at the lower end of the global cost curve with additional improvements to look forward to in FY17.

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