Revenue (US$m)

22,284

12,820

+74%

Iron Ore Sold (m wmt)

181.1

177.2

+2%

Average Price (US$/dmt)

135.32

78.62

+72%

C1 Cost (US$/wmt)

13.93

12.94

+8%

Underlying EBITDA (US$m)

16,375

8,375

+96%

Net Profit After Tax (NPAT) (US$m)

10,295

4,735

+117%

Final Dividend (A$)

2.11

1.00

+111%

What happened?

  • Fortescue Metals Group (FMG) has released a set of record numbers for the past financial year with net profit after tax more than doubling to US$10.3 billion while revenue jumped 74% to US$22.3 billion. FMG achieved record revenue, earnings, cashflow and iron ore shipments in FY21. 
  • FMG has also more than doubled its final dividend of A$2.11 per share on a year ago, with payment to be made on 30 September 2021. The ex-dividend date will be on 6 September 2021. The payment represents an 80% payout ratio of NPAT.

Why did it happen?

  • The strength of FMG’s results was underpinned by the surging price in iron ore over the year. Average realised price or revenue in FY21 was US$135.32/dry metric tonne (dmt) compared to US$78.62/dmt in FY20, an improvement of 72%. FMG also managed to improve the amount of ore mined and sold. 
  • There were several reasons for FMG’s realised average price increase. This included the continued strength in the benchmark iron ore price due to rising demand from China in response to elevated levels of steel production. FMG also expanded its sales channels through its China based company which has helped improve realised prices and FMG has integrated its operating and marketing strategies.
  • Margins remained strong as costs were generally well maintained, although C1 costs did rise 8% on the year before, coming in at US$13.93/wet metric tonne (wmt). This was primarily impacted by changes in the AUD/USD exchange rate, external operating conditions and ramping up Eliwana operations (Pilbara, WA). State royalties and shipping costs also increased due to the rising price of iron ore.
  • During FY21, Fortescue also continued its transition towards renewable energy and move away from being a major fossil fuels importer by setting itself a target of carbon neutrality by 2030 (for Scope 1 and Scope 2 emissions) and establishing a decarbonisation pathway. FMG also allocates 10% of NPAT (~US$1b in FY21) to fund its Fortescue Future Industries (FFI) with expenditure of US$122 million to produce green electricity, hydrogen, ammonia and other green industrial products. 

Where to now?

  • Fortescue is expecting iron ore shipments of 180-185mt in FY22 with C1 costs expected to rise to be in the range of US$15/wmt and US$15.50/wmt. Capital expenditure (excluding FFI) is anticipated to be US$2.8-US$3.2 billion. This guidance is based on an average exchange rate of AUD buying 75 US cents in FY22.
  • FFI’s FY22 expenditure is estimated to be US$400-US$600 million with key areas of activity to include green fleet development and decarbonisation technologies.

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