Fortescue Metals Group founder and Chairman Andrew “Twiggy” Forrest will cash in a dividend of more than $102 million after his company’s 2013 profit and dividend surpassed expectations.
The company’s net profit stood at $US1.74 billion ($1.93 billion), meaning it could pay out a fully franked dividend of 10c to shareholders on Thursday.
The result will mean Forrest will pocket a huge sum since Credit Suisse was predicting a dividend of just four cents, the SMH reported.
This is despite Fortescue having more than $10 billion of debt to pay off over the next ten years.
But CEO Nev Power said considering the profit result, the board had no problem concluding the company could pay down debt and pay shareholders.
“The dividend reflects a couple of things, predominantly the strong underlying financial performance that we’ve got in the company and the confidence we have got in that continuing,” Power said.
The company was able to beat slumping iron ore prices and grow in this 2013.
This comes as a surprise considering their position 11 months ago, when a steep drop in iron ore prices resulted in short-term debt for Fortescue.
The company had blamed a drop in iron ore prices last year for its 40 per cent drop in first-half profit.
The company cut staff, had larger debts over a longer period and uncertainty about how it would clear the debt.
Power had said the company’s plans to pay off loans and restructure debt will be sufficient to offset climbing costs in the sector.
The company is looking to pay off debt before Christmas this year, even though the deadline for the first payment is only in Christmas 2015.
Power said on Thursday the company could break even with an iron ore price as low as $US70 to $US75 a tonne.
At the same time last year, Fortescue required the price to hover above $US90 a tonne to break even.
The company recently downgraded its iron ore production targets and pushed back the timing of its asset sale.
The company said it would make quick and permanent decreases to operations costs to strengthen its financial position.
Fortescue received 13 per cent less for its average iron ore price compared to last year but exports rose by just over 40 per cent and overall revenues increased by 21 per cent.
Cost cuts of $US400 million also helped boost revenue for the company.
Queensland-based Fuel-Sys Installations alleged it’s owed around $10 million by Fortescue.
The company recently said it is planning to cut operational costs in the Pilbara by building a gas pipeline to link its Solomon and Chichester iron ore mines.
Fortescue forecasts its iron ore exports to rise by another 65 per cent in the 2014 financial year.
Power predicts iron ore prices will remain between $US110 and $US130 a tonne in the near future.
He had earlier said the iron ore price will not fall below $US120 a tonne in the near future.
He said the price would stay between $US139 and $US140 a tonne in the short term and would change to $US120-$US130 in the future.
Power is still keeping options open for the sell-down of its stake in its port and rail assets but said he will only go ahead if he is satisfied with the price.
Fortescue also said it had established a small subsidiary company in Mozambique called African Fortescue.
Power would not specify what commodity it would produce and the company has not started yet.
“There is no significant activity there at all, but we see Africa as highly prospective in the longer term,” he said.
A worker was recently killed at Fortescue's Christmas Creek operation in Western Australia. Mining and processing operations stopped after the fatality.