Fortescue Metals Group has suffered a 44 per cent drop in half-year profit due to lower prices for its Pilbara iron ore.
The Perth-based company recorded profits of $681 million for the December 2017 half, down on the $1.22 billion from a year earlier. Fortescue’s revenues fell by 18 per cent from $4.5 billion to $3.68 billion.
It explained the fall in revenue was due to steel mills maximising production by using high iron content ore. This factor lowered Fortescue’s revenues to $US47/tonne of iron ore during the six-month period compared to the $US56/t it achieved in the first half of fiscal 2017.
Fortescue did, however, continue to lower its cash costs during the half year to $US12.11/t, a 7 per cent improvement on the previous period. In the December quarter, its cash costs were even lower than the six-month average at $US12.08/t.
The miner shipped 84.5 million tonnes (Mt) of iron ore during the six months.
Fortescue chief executive officer Elizabeth Gaines said the company continued to deliver during the first half, improving safety, lowering cash costs in the December quarter and maintaining production in line with its 170Mt/y guidance.
“We are also very pleased to have finalised a $US1.4 billion funding agreement with key Chinese, domestic and international relationship banks,” Gaines said.
“This facility lowers Fortescue’s average cost of capital, improves flexibility, strengthens the balance sheet and further develops our strong relationships with China.
“Our consistent operating performance and financial outlook has led to the board declaring an interim fully franked dividend of 11 cents per share, which is a 40 per cent pay-out of net profit after tax.”
Fortescue established the $US1.4 billion loan to partially repay the company’s 2022 senior secured notes and to lower its borrowing costs.