Friday 22nd Jan, 2021

Fortescue spruiks assets as profit slumps

Fortescue Chief Executive Officer Andrew Forrest aboard the first train loaded with iron ore. Photo: FMG
Andrew Forrest . Photo: FMG

A year of declining commodities prices have led many to question the future viability of Australia’s third player in iron ore. This week’s announcement of Fortescue Metals Group’s financial results for 2014/15 have put all the cards on the table.

Fortescue recorded an 88% decline in net profit after tax to US$316 million in 2014/15.

According to its calculations, Fortescue made US$2.2bn-worth in volumes gains compared to 2013/14, and made gains of US$1.6bn through cost cutting. But the declining price of iron ore meant a US$7.2bn decline in earnings, leaving the company with an EBITDA of US$2.5bn in 2014/15, down 56% from last year.

Chief executive Nev Power said the results reflected the ongoing improvement in productivity and efficiency with strong production and costs outcomes achieved.

“In a challenging environment of lower iron ore prices, this focus on efficiency and productivity from our world class assets will continue to see operational improvements and cost reduction while we maintain production at 165mtpa to create long term value for Fortescue shareholders,” Power told the ASX.

Stephen Pearce, the company’s chief financial officer, spend the day emphasising the value of the company’s cashflow position, and infrastructure assets.

“Our successful debt refinancing, closing cash balance of US$2.4bn and sustained operational efficiency and productivity gains have delivered solid operating cashflows, further strengthening Fortescue’s balance sheet,” Pearce said to the ASX.

He was later quoted by Fairfax saying the company’s infrastructure and mining assets are now worth “way more” than the $20bn that went into developing them, before emphasising there was “no need to hurry one way or another” on rumoured assets sales.

“We have four years until our next debt maturity,” Pearce was quoted as saying.

“We don’t need to do a transaction at all; it is really if with any discussions that we do have with parties from time to time, there is an appropriate view of long-term value.

“We have created absolutely world-class assets in the Pilbara, and we are quite unique in that we own 100% of them, so we have the opportunity to entertain those discussions but it does have to be at appropriate long-term value.”