FY17 results highlights:
Source: FMG, FIIG Securities
Key points:
- FMG’s FY17 key financial results were generally within Bloomberg consensus estimates. Revenue at USD8.5bn was 19% higher per corresponding period (pcp) and underlying EBITDA was 48% higher pcp at USD4.7bn. The material improvements were primarily underpinned by an increase of 35% pcp in average iron ore prices during the year to USD69.53 per dry metric tonnes, and the company’s ongoing improvement in productivity and efficiency which resulted in C1 costs reduced by 17% pcp to USD12.82 per wet metric tonne (wmt)
- Free cash flow from operations increased by 65% pcp to USD3.5bn, reflecting positive cash margins due to higher iron ore prices and lower costs partially offset by an increase in capital expenditure by 136% to USD0.7bn
- The group’s net debt reduced by half to USD2.6bn as at 30 June 2017 (USD5.2bn at 30 June 2016), resulting in net gearing improving to 21% pcp from 38%. Fortescue’s nearest term maturity is in 2020 when USD2.16bn of its senior secured notes are due to mature. The group also has a USD525m revolving credit facility of liquidity available as at 28 July 2017
A link to the results is available here.
Outlook
Key highlights of Fortescue’s guidance for FY18:
- Shipped production of 170 metric tonnes
- C1 cost of USD11-12/wmt (average Australian dollar exchange rate of USD0.75; average fuel price USD53 per barrel WTI)
- Price realisations of 75-80% on the Platts 62 CFR index
- Sustaining capex of USD3/wmt
- Dividend payout ratio increasing to 50-80% of net profit after tax