Fortescue share price backtracks as final dividend is slashed by 43%

The Fortescue Metals Group Limited (ASX: FMG) share price is losing ground on Monday morning.

This comes as the company just released its full-year results for the 2022 financial year.

At the time of writing, the mining giant’s shares are down 0.96% to $19.68.

Fortescue share price retraces amid dividend cut

• Record shipments of 189 million tonnes, exceeding the top end of guidance
• Total revenue down 22% to US$17,390 million
• Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) down 36% to US$10,561 million
• Net profit after tax (NPAT) down 40% to US$6,197 million
• Earnings per share (EPS) down 40% to US 201 cents
• Final dividend down 43% to A$1.21 per share, fully franked
• Strong balance sheet with cash on hand of US$5.2 billion at 30 June 2022

What happened in FY 2022?

For the 12 months ended 30 June, Fortescue achieved record annual shipments of 189 million tonnes, exceeding the top end of guidance. This was driven through the integration of the Eliwana mine and rail project, combined with a consistent performance from existing operations.

The outstanding performance contributed to the second highest earnings and operating cash flow in Fortescue’s history.

However, revenue fell 22% to US$17,390 million due to a 26% reduction in price realisation to US$100 per dry metric tonne (dmt). In FY 2021, the average realised price for iron ore stood at US$135/dmt.

Fortescue linked this to steel demand and steel production curtailments, particularly in the first half of FY 2022. COVID-19 restrictions disrupting China’s steel demand as well as a weakening global economic outlook impacted the second half.

C1 costs averaged US$15.91 per wet metric tonne (wmt) for the year, which was 14% higher compared to the prior period. The increase in C1 costs reflected market inflationary pressures such as a disrupted labour market and an increase in energy and fuel costs.

Cash generated from operations came to US$10,515 million which represented a 37% decline over FY 2021. This was largely a result of lower underlying EBITDA.

At 30 June, Fortescue had US$5,224 million of cash on hand and US$1,025 million available under the revolving credit facility. Total debt was US$6,103 million, inclusive of US$755 million of lease liabilities.

The board declared a final dividend of A$1.21 per share for FY 2022, which is 43% lower than the $2.11 paid out in the prior comparable year.

What’s the outlook?

Looking ahead, Fortescue provided a guidance for FY 2023, stating the following:

• Iron ore shipments in the range of 187 million tonnes to 192 million tonnes
• C1 costs for hematite between US$18.00 to US$18.75 (based on assumed average exchange rate of AUD: USD 0.70)
• Capital expenditure (excluding Fortescue Future Industries) of US$2.7 billion to US$3.1 billion
• Fortescue Future Industries expenditure is anticipated to be around US$600 million to US$700 million

Fortescue CEO Elizabeth Gaines briefly touched on Fortescue’s outlook, saying:

We have experienced a strong start to FY23 and through operational excellence, a sustained focus on productivity and a disciplined approach to capital allocation, we will continue to deliver benefits to all our stakeholders

Fortescue share price snapshot

The Fortescue share price has risen by 3% in 2022 but is flat when looking over the last 12 months.

The post Fortescue share price backtracks as final dividend is slashed by 43% appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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