Fortescue joins the mega mining profit party

Photo: iStock.

Fortesuce Metals Group joined its fellow miners in posting a surge in profit amid a rally in iron ore prices.

The Perth-based company said net profit soared almost four-fold to $US1.2 billion from $US319 million, a year earlier. Revenue climbed 34% to $US4.5 billion and it announced a dividend of 20 Australian cents a share from 3 cents a year earlier. Macquarie analysts expected a first half net profit of $US1.16 billion and dividend of 22 cents a share.

Fortescue’s results follow bigger rivals BHP Billiton and Rio Tinto, which both saw big increases in earnings and boosted dividends.

This table summarises Fortescue’s earnings

Miners are rebounding from a commodities downturn that forced asset sales, cost curbs and a cut in investment to check supply amid a glut. Iron ore surged more than 80% last year thanks to Chinese stimulus that boosted steel output, leading to better demand. While the price of the metal has now surged to its highest level since August 2014, there are concerns over whether the price gains will be sustainable amid increasing supply and potential for a slowdown in Chinese demand.

“Our successful operational performance combined with positive market conditions produced strong cash flows facilitating further debt repayments of US$1.7 billion,” Chief Executive Officer New Power said. “‚ÄúCapital management remains our key priority and we will continue to repay debt, invest in the long term sustainability of our business.”

The company maintained it 2017 iron ore shipments estimate at of 165-170 million tonnes.

Fortescue has cut production costs and debt after iron ore prices slumped amid a supply glut. Production cost fell to $US13.06 per wet tonnes and the company aims to bring down to $US12-$US13, it said.

This chart shows declining debt levels

Net debt fell to $US4 billion after $US1.7 billion in repayments, it said.

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