On 20th February 2019, Australia’s leading iron ore miner, Fortescue Metals Group Limited (ASX: FMG) has posted its Half year FY19 results. The Company reported a net profit after tax of US$644 million which has massively increased by 227% or US$447 million from 2H18 NPAT of US$387 million, although a slight drop of 5% is seen when compared to 1H18 net profit after tax of US$681 million.
On the revenue front, the company posted the evenue of US$ 3,540, up by 10% or US$532 million from 2H18 revenue of US$3,208, but a marginal drop of 4% is noticed while comparing to 1H18 revenue of US$3,679 million.
One of the contributing factors for increased revenue in 1HF19 is the average realised price of iron ore which increased from US$40/dmt in 2H18 to US$47/dmt in 1H19.
Underlying EBIDTA also rose from US$1,354 million in 2H18 to US$1,633 million in 1H19. Operating sales revenue also contributed to this increase by going up from US$3,208 million in 2H18 to US$3,540 in 1H19. The underlying EBIDTA margin stood at US$21/dmt in 1H19 from the 2H18 underlying EBIDTA of US$17/dmt. This increase has been contributed by improved price realisation compared to the average realised price and benchmark 62 Platts CFR index.
The board also announced the fully franked interim dividend of A$0.19 per share and a special dividend of A$0.11 per share, which combines to the total dividend of A$0.30 per share. Both dividends will be paid on 22nd March 2019 with ex-date and record date being 28th February 2019 and 1st March 2019 respectively. The current dividend payout ratio is 65% which is higher than the historical payout of approximately 40%. The distribution of franking credits to eligible shareholders is expected to accelerate with this increase in the dividend payout ratio.
FY19 guidance given by the company was also on the moderately positive side. The company expects the full year cost to remain on a higher side at around US$12/wmt – US$13/wmt range. But it also expects to lower down this cost by increase in the volume in the second half with 165mt – 173mt in shipments taking place which is higher than the first half inclusive of West Pilbara Fines production of 8-10 million tonnes.
Guidance for capital expenditure was also given which was stated to be US$1.2 billion, which will be strategically allocated to sustaining capital US$580 million, Eliwana US$340 million, exploration US$100 million, Development expenditure US$100 million, Ore carriers and towage US$80 million. Current capital expenditure stood at less than half of what the guidance is being given for FY19 US$530 million (including 1H18: US$413 million).
Given the higher numbers compared to the 2H18, board's confidence for the coming months and higher than historical average of dividend payout invited a positive reaction in the market and as a result the stock price surged more than 5% to give a higher closing at A$6.69 on 20th February. The stock has given an outstanding return of more than 50% in the last six months, with impressive YTD return of 61.20% as on 20 February 2019.
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