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Fortescue Ltd's share price is drawing attention after the iron ore miner reported a significant profit increase for FY24.
Fortescue (ASX:FMG) FY24 Results
Key highlights from the fiscal year ending 30 June 2024 include:
- Revenue up 8% to USD 18.2 billion
- Underlying EBITDA increased by 7% to USD 10.7 billion
- Underlying Net Profit After Tax (NPAT) rose 3% to USD 5.7 billion
- NPAT surged 18% to USD 5.7 billion
- Final Dividend per Share down 11% to AUD 0.89
- Total Dividend per Share up 13% to AUD 1.97
Iron ore shipments for FY24 were nearly unchanged at 191.6 wet metric tonnes (wmt). The average revenue for hematite iron ore was USD 103.01 per dry metric tonne (dmt), a 9% increase year-over-year, while the C1 production cost rose to USD 18.24 per wmt, a 4% increase.
Cash Flow
The company's cash flow metrics demonstrated strength:
- Net Operating Cash Flow grew by 7% to USD 7.9 billion
- Free Cash Flow increased by 18% to USD 5.1 billion
Energy and Decarbonisation Update
Fortescue highlighted several advancements:
- Several electric excavators are now operational across its mine sites.
- The Cloudbreak aerodrome has become the first in Australia with a fully solar-powered airfield lighting system.
- New developments include a solar farm and prototypes for battery electric and hydrogen fuel cell haul trucks.
- The establishment of ‘Fortescue Zero’ has seen significant progress, including contracts for electrolysers and a multi-year agreement for battery intelligence software.
The Arizona Hydrogen and Gladstone PEM50 projects received final investment decisions in FY24, while the Holmaneset and Pecem green energy projects advanced to the feasibility phase.
Balance Sheet and Dividend
As of 30 June 2024, Fortescue's financial position was:
- Cash Balance: USD 4.9 billion
- Gross Debt: USD 5.4 billion
- Net Debt: USD 0.5 billion
The full-year dividend of AUD 1.97 per share results in a total shareholder payment of AUD 6.1 billion, with a dividend payout ratio of 70% of net profit.
Outlook for Fortescue's Share Price
For FY25, the company has forecasted iron ore shipments of 190 to 200 million tonnes, including 5 to 9 million tonnes from Iron Bridge. The C1 cost is anticipated to rise to between USD 18.50 and USD 19.75 per tonne.
Fortescue’s performance in FY25 will heavily depend on the iron ore price, which is currently below USD 100 per tonne. While the company can still achieve a satisfactory profit, it may not be as substantial. This lower price could present an opportunity for potential investment while market confidence remains subdued, though a recovery in iron ore prices is not assured.
Exploring Investment Opportunities
With interest rates on the rise, this could be an opportune moment to explore ways to generate income from a diversified portfolio. Achieving returns of 4%, 5%, or more from top shares, LICs, or ETFs can be highly beneficial.
Chief Investment Officer Owen Rask has released a new report detailing 10 top ETFs and shares to monitor, outlining rules for income generation, and explaining his preference for ETFs over LICs.
