AUSTRALIA’S Fortescue reported a rise in annual profit on Wednesday (Aug 28), boosted by higher iron ore shipments from its Iron Bridge project, and announced a larger-than-expected final dividend, sending its shares higher.
The world’s fourth-largest iron ore miner has been building out a green energy business funded largely from its profits in iron ore, raising analyst concerns that it could trim its dividend payout to funnel more cash into the business.
Fortescue achieved its third-highest earnings in company history, with total iron ore shipments reaching 191.6 million tonnes in fiscal 2024 as operations at its Iron Bridge magnetite project have ramped up.
Shares in the miner rose as much as 1.72 per cent to A$18.95, hitting their highest since Aug 1, while the mining sub-index slipped up to 0.8 per cent.
Underlying net profit after tax was US$5.7 billion for the year ended Jun 30, compared with US$5.5 billion reported a year earlier. The figure missed a Visible Alpha consensus estimate of US$6.1 billion.
The earnings were slightly below expectations, primarily due to higher-than-expected depreciation and amortisation charges of US$2.1 billion, while other aspects of the results appeared to be in line with expectations at first glance, analysts at Jarden said in a client note.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Fortescue declared a final dividend of A$0.89 per share, down from last year’s A$1.00 apiece, but higher than a Visible Alpha consensus estimate of A$0.85.
“It’s a pretty much in-line result. Balance sheet is strong, so they can support a slightly higher payout ratio. The headline numbers look fine with a slight beat on dividend,” said Glyn Lawcock of Barrenjoey.
Fortescue maintained its dividend payout ratio at 70 per cent, to the top end of its 50 to 80 per cent target range, allaying analyst concerns that it would cut its payout ratio to fund its green energy ambitions.
The company’s strategy is bolstered by improved market conditions, with haematite average realised prices rising to US$103 per dry metric tonne (dmt) from US$95 dmt a year earlier.
Fortescue is capitalising on the higher prices for its high-grade iron ore to finance its green energy business expansion.
Fortescue’s board has approved the acceleration of two hydrogen projects – Holmaneset in Norway and Pecem in Brazil – to the feasibility study stage, it said. REUTERS
