The ore processing facility at Solomon.
JOHANNESBURG (miningweekly.com) – Chinese steelmakers’ demand for better-quality ore has had a significant impact on Australian miner Fortescue Metals’ half-year financial performance, with revenue contracting by 18% and net profit falling sharply, sending shares down about 4% on Wednesday.
Australia’s third major iron-ore producer reported revenue of $3.68-billion in the six months ended December 2017, compared with $4.49-billion in the same period of 2018, as blast furnaces in China turn to higher iron content ores to reduce emissions.
Fortescue generated underlying earnings before interest, taxes, depreciation and amortisation of $1.83-billion, which was 31% lower than the first half of the 2017 financial year, owing to the lower revenue.
Net profit after tax slumped 44% year-on-year to $681-million, with basic earnings a share down 44% year-on-year to 21.9c a share.
According to newswire Reuters, the net profit performance is better than what analysts had expected. Three analysts on average had expected the iron-ore miner to post profit of $610-million.
Fortescue said that it sold iron-ore at a 32% discount to the 62% CFR Platts index, compared with a 14% discount in the corresponding period.
The weaker financial performance resulted in the board trimming the interim dividend to A$0.11 a share, which equates to a payout ratio of 40% of net profit after tax, but is well short of the A$0.20 a share that Fortescue paid out in the first half of 2017.
Total iron-ore shipments in the six months were 84.5-million tonnes with C1 cash costs of $12.11 a wet metric tonne (wmt). Fortescue achieved a record low C1 cash cost of $12.08/wmt in the December quarter, which it attributed to productivity and efficiency initiatives that are offsetting the impact of higher strip rations, exchange rates and fuel prices.
Fortescue maintained its full-year guidance of 170-million tonnes at a C1 cash cost of $11/wmt to $12/wmt.
Shares in the company fell to A$5.12 a share on Wednesday, from the previous day’s closing price of A$5.36 apiece.