Fortescue Metals Group Ltd (ASX: FMG) has always been a key player in the Australian mining industry, but FY24 was a particularly eventful year for the company. Despite some challenges, Fortescue delivered solid results that have put many investor worries to rest. With shares currently sitting at $18.63, the company’s performance in the 2024 financial year reflects resilience and strategic planning. Let’s dive into the details of how Fortescue played its cards right in FY24.
Strong Financial Performance Eases Concerns
One of the most reassuring aspects of Fortescue’s FY24 results is the robust financial performance. The company reported an 8% increase in revenue, reaching a whopping US$18.2 billion. This is no small feat, considering the global economic uncertainties and the fluctuating prices of commodities. Even more impressive is the 18% rise in net profit after tax (NPAT) to US$5.7 billion. This growth is a testament to Fortescue’s ability to manage costs and capitalise on opportunities in the market.
Underlying earnings per share also saw a modest increase of 3% to US$1.85 per share, which further solidifies the company’s strong position. The final fully franked dividend was declared at 89 AUD cents per share, which, while 11% lower than the previous year, still represents a substantial return for shareholders.
The Impact of Ore Production
Fortescue’s production figures tell an interesting story. Ore mined and processed both saw a slight decrease of 1%, with 216.9 million wet metric tonnes mined and 189.9 million wet metric tonnes processed. While these numbers might seem concerning at first glance, they need to be viewed in the context of the broader market conditions. The reduction was largely due to operational challenges, but Fortescue managed to maintain stability, which is crucial in such a volatile industry.
The price of hematite, a key iron-containing compound, played a significant role in Fortescue’s financial success. The average price rose by 8% to US$103 per dry metric tonne, helping to offset the slight decline in production volumes. This increase in the price of hematite contributed to the company’s third-highest annual earnings in its history.
Managing Costs Efficiently
Cost management is a critical aspect of any mining operation, and Fortescue has excelled in this area. The hematite C1 costs — a measure of the cost to produce iron ore — were reported at US$18.24 per wet metric tonne, up 4% from the prior year. While rising labour costs and mine plan-driven expenses contributed to this increase, Fortescue’s costs remain industry-leading. This efficiency has been a key factor in the company’s ability to maintain profitability even when production volumes were slightly down.
Expanding into Green Energy
One of the most exciting developments for Fortescue in FY24 was its expansion into green energy. The company made significant progress on its energy projects, with a final investment decision for its first energy projects. Fortescue Energy CEO Mark Hutchinson highlighted the launch of Arizona Hydrogen, a green hydrogen project in the United States, and the commencement of work on the Gladstone PEM50, a 50 MW green hydrogen project utilising Fortescue’s own electrolyser technology.
These projects mark a significant step forward in Fortescue’s transition towards sustainable energy solutions. The company’s first production of liquid green hydrogen is expected in 2026, positioning Fortescue as a leader in the green energy sector. This diversification not only strengthens Fortescue’s business model but also aligns with global trends towards sustainability.
Milestones Achieved
FY24 was a year of milestones for Fortescue. The company celebrated first ore from the Flying Fish and Hall Hub deposits and the commissioning of Australia’s largest gaseous and liquid hydrogen plant on a mine site. These achievements underscore Fortescue’s commitment to innovation and growth.
Furthermore, Fortescue achieved its lowest-ever total recordable injury frequency rate (TRIFR) of 1.3, down from 1.8 in FY23. This improvement in safety performance is a critical achievement, reflecting the company’s dedication to maintaining a safe working environment.
Consistent Returns for Shareholders
Fortescue’s dedication to returning value to shareholders remained strong throughout FY24. The company declared a final dividend of 89 cents per share, bringing the full-year dividend to A$1.97. This represents a 13% increase compared to FY23, with a dividend payout ratio of 70% of FY24’s net profit. At the current share price, this translates to a fully franked dividend yield of approximately 4.75% and a grossed-up yield of 6.8%.
Investors looking to benefit from this dividend should note the ex-dividend date on September 4, 2024. The final dividend is expected to be paid on September 27, 2024, offering a solid return to shareholders.
Looking Ahead to FY25
As Fortescue looks to the future, the company has provided guidance for key figures in FY25. The company expects iron ore shipments to be between 190 million tonnes and 200 million tonnes, including 5 million tonnes to 9 million tonnes from Iron Bridge. Hematite C1 costs are projected to be between US$18.50 and US$19.75 per wet metric tonne, with capital expenditure expected to range from US$3.2 billion to US$3.8 billion.
Fortescue Energy also plans to invest approximately US$500 million in its energy projects, further expanding its green energy portfolio. This strategic investment in both traditional and renewable resources positions Fortescue well for continued growth and success.
Fortescue’s performance in FY24 has shown that the company is more than capable of navigating challenges and seizing opportunities. With strong financial results, efficient cost management, and a clear vision for the future, Fortescue has alleviated many concerns and demonstrated its resilience. As the company continues to innovate and expand into green energy, shareholders can look forward to a promising future. The worry is indeed over; Fortescue played well in FY24.
