Fortescue posts blowout $1.3 billion profit

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Andrew “Twiggy” Forrest’s Fortescue has resumed a full flow of dividends to shareholders after posting a 210% rise in full year profits to $US985 million ($A1.3 billion), smashing analyst expectations of about $US800 million.

The pure play iron ore miner says the results was driven by a sustained focus on productivity, bringing costs per wet metric tonne to $US14.31 in June, the tenth consecutive quarterly fall.

Fortescue’s average realised price for iron ore in 2016 was $US45.36 a dry metric tonne.

Chairman Forrest says Fortescue is now one of the world’s most efficient iron ore producers.

“We have gone on to finally prove our mettle as an operations company with very few peers worldwide,” he says.

Fortescue CEO Nev Power labelled the result outstanding.

“Successful cost improvement measures and lower capital expenditure have more than offset the impact of falling iron ore prices to generate strong free cash flow,” he says.

Fortescue, like the rest of the mining industry, has been cutting costs and increasing production, trying to catch falling commodity prices.

Here’s how Fortescue has brought down the cost of producing a tonne of iron ore:

Source: Fortescue

The company also repaid $US2.9 billion of debt in 2016. The current net debt is $US5.2 billion and more repayments are on the way.

The result was on a 17% fall in revenue to $US7.08 billion, reflecting weak prices for iron ore.

Fortescue declared a 12 Australian cents a share final fully franked dividend, bringing the annual payout to 15 Australian cents, a ratio of 36% of profit after tax, in line with guidance of 30% to 40%.

In 2015, Fortescue cut its final dividend to 2 cents a share from 10 cents after profit fell 88% to $US316 million.

The results in detail:

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