Fortescue shows strong growth on back of improving market

Cloudbreak iron ore operations. Image: Fortescue Metals Group

Fortescue has posted a large boost in profits and a surge in iron ore prices in the December 2018 half year.

The Perth-based company recorded an underlying net profit after tax of $US644 million ($898 million) in its 2019 financial year first half results, up 66 per cent on the $US387 million in the previous half. The company’s average realised price improved by 18 per cent over the previous half.

While this was a large improvement for the company in just six months, the $US644 million figure was still down 5 per cent on the $US693 million posted one year ago.

The company’s rising figures in the past six months signal the growing strength of the iron ore export market.

Fortescue launched its West Pilbara Fines 60.1 per cent iron blend in December, and estimates 8–10 million tonnes of delivery in the 2019 financial year.

Only 10 per cent of the company’s export sales in the half year were delivered to countries other than China, including maiden shipments to new customers in Indonesia and Germany.

This is expected to grow to by around 40 million tonnes per year upon completion of Fortescue’s newest mine, the $US1.25 billion Eliwana project in the Pilbara, Western Australia.

Contractor NRW Holdings announced a $62 million deal with Fortescue earlier this week to provide rail services to the site, with the first ore train expected to begin operation in December 2020.

Fortescue’s West Pilbara Fines blend is designed to meet a mid-market need for customers that want better quality than low-grade 58 per cent fines, but want to pay less than the cost of high-grade 62 and 65 per cent fines.

Fortescue’s primary iron products, Fortescue Blend and Super Special Fines (SSF) have both ascended since the start of 2019 to their highest levels since April 2016.

The company’s share price has also jumped by 62 per cent since the start of the year from $4.15 to $6.76 as of today.

Fortescue has announced it will pay a dividend on March 22 of 30 cents per share. This includes an interim dividend at 19 cents per share and a special dividend at 11 cents per share.

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