Fortescue Metals Group has more than tripled its half-year profit to a record $US1.71 billion, as cost cutting measures and expansion plans pay off for the world’s fourth largest iron ore miner.
In the six months to December, FMG posted a net profit of $US1.714 billion ($1.9 billion), a massive 259 per cent increase on the $US478 million recorded in previous corresponding period.
In the same period revenue was $US5.873 billion, a 77 per cent increase on the previous corresponding period.
Chief executive Nev Power said the record result was due to the success of FMG’s strategy to construct new capacity, ramp up production, and drive down costs.
”The ongoing strong demand for our products has allowed us to accelerate debt repayment, de-risk the balance sheet, and increase returns to our shareholders,’’ Power said.
Strong iron ore prices during the period also helped, with the miner’s iron ore shipments rising by 51 per cent from the prior period.
The company maintained its full year guidance of 127 million tonnes of iron ore and said it remains on track to deliver iron ore at a rate of 155 million tonnes annually by the end of March 2014 as expansion plans near completion.
Capital expenditure was slashed during the period, falling by $US3.1 billion to $US1.4 billion.
“As the expansion projects near completion capital expenditure will continue to decline and is expected to total $US2.1 billion in FY 2014,” the company explained.
The miner has used debt to fund its $US10.75 billion expansion, but early repayments over the half reduced this debt from $US10.5 billion to $US8.6 billion, it said.
The company expects to repay more than $US2 billion more in 2014 to meet its gearing target of 40 per cent by the end of the calendar year.
“The combination of voluntary debt repayments and term loan re-pricing provide significant benefits to the overall cost structure, strengthening our balance sheet, increasing confidence in the outlook and our ability to generate shareholder returns,” Fortescue chief financial officer Stephen Pearce said.
FMG also saw a more positive year ahead in commodities.
Power said the iron ore price will average between $US110 to $US120 per tonne for the remainder of 2014, but predicts some short term volatility.
"There is quite a bit of new supply coming into the market, but most of that now has really already come in and we're seeing that supply absorbed by strong steel and imported iron ore demand," he said.
Shareholders will receive a fully-franked dividend of 10 cents a share.