FY15 HALF YEAR FINANCIAL RESULTS
Media Release I 17 February 2015
Record volume and lower costs underpin earnings strength
"Fortescue is delivering record operational performance and consistent, sustained cost reductions through focusing on the things we can control - safety, productivity and efficiency. As a result, we are generating positive cash margins and continuing to strengthen our financial position to deliver long
term value for shareholders." Nev Power, Chief Executive Officer
HIGHLIGHTS
Operational performance | 31 December 2014 | 31 December 2013 | % |
Shipments | 82.7 mt | 53.9 mt | 53 |
Processing | 75.6 mt | 53.7 mt | 41 |
• Net profit of US$331 million and Underlying EBITDA1 of US$1.4 billion
• 82.7 million tonnes (mt) shipped, 53 per cent greater than the prior comparable period
• US$30/wmt C1 costs, a further 9 per cent improvement over the prior comparable period
• US$25-26/wmt C1 cost guidance for the second half of FY15
• US$43/wmt delivered costs for the first half reducing to US$35/wmt in the second half
(inclusive of C1, shipping, royalty and admin costs)
• Capital guidance halved to US$650 million with focus on working capital and cash management
• US$1.6 billion cash on hand at 31 December 2014
• US$500 million voluntary debt repayment reducing gross debt to US$9.1 billion
• A$0.03 per share fully franked interim dividend
1 Refer to the attached glossary for definitions of non-IFRS measures.
FY15 Half Year Financial Results Media Release I Fortescue Metals Group Limited I 1
FINANCIAL PERFORMANCE
31 December 2014
US$m
31 December 2013
US$m
31 December 2012
US$m
Revenue 4,858 5,873 3,324
Profit before income tax 440 2,417 678
Net cash flow from operating activities 905 3,646 479
Operating cash flow per share (US cents) 29.07 117.09 15.38
UNDERLYING EBITDA US$1.4 BILLION
Underlying EBITDA of US$1.4 billion reflects shipping at an annualised shipping rate of 165mt during the first half. Improvements in operational performance, lower strip ratios, enhanced processing and a continued focus on cost reductions were offset by the impact of lower iron ore market prices as shown in the chart below:
6,000
5,000
4,000
3,000
2,000
1,000
3,220
2,019
414
4,322
88
21 1,440
1HY14 Volume
Cost
Price Royalty Other 1HY15
2 I Fortescue Metals Group Limited I FY15 Half Year Financial Results Media Release
Total revenue of US$4,858 million
(1HY14: US$5,873 million) reflects a 53 per cent increase in shipments to 82.7mt offset by a decrease in iron ore market prices.
During the half year, Fortescue's realised price was
US$66/dmt (1HY14: US$124/dmt), based on the
62 per cent Platts index of US$82/dmt
(1HY14: US$134/dmt).
Fortescue continued to reduce C1 costs which averaged US$30/wmt for the half year, a nine per cent improvement compared to the prior period as a result of:
• achieving full operational capacity across all mines and the integrated rail and port operations;
• a focus on mine efficiencies and planning improving strip ratios;
• enhanced processing capability;
• productivity and efficiency improvements across all sites; and
• a lower Australian dollar and lower fuel prices.
The Australian dollar and price of oil both fell significantly towards the end of the half year, positively impacting C1 cost. The full impact of these falls will
be realised in the second half of the financial year, assuming consistent pricing.
Fortescue's total delivered cost to customers, inclusive of C1, shipping, royalty and administration costs, has further decreased to US$43/wmt (1HY14: US$53/wmt).
CASH FLOW
Cash on hand at 31 December 2014 was US$1.6 billion. Operations continued to generate solid cash margins
with total cash inflows from operations of US$5.1 billion,
inclusive of customer prepayments, generating net cashflow of US$905 million after FY14 final tax payments.
Capital expenditure for the half year decreased to US$436 million (1HY14: US$1,354 million), reflecting completion of the 155mtpa expansion in the previous financial year. As announced, Fortescue identified significant capital reductions and deferral opportunities across its operational and expansion projects reducing full year guidance by half to US$650 million.
Total delivered cost to China
80
68
60 18 57
18
53 50
43
40
50
20
0
1HY13
39
2HY13
20
33
1HY14
16
34
2HY14
13
30
1HY15
35
10
25
2HY15 Guidance
C1 costs Shipping, royalty and administration costs
FY15 Half Year Financial Results Media Release I Fortescue Metals Group Limited I 3
BALANCE SHEET
Fortescue's net debt at 31 December 2014 was
US$7.5 billion, including cash on hand of US$1.6 billion and finance lease liabilities of US$315 million.
An additional US$500 million of debt was repaid during the period, bringing the total repayments, including term loan amortisation, since November 2013 to US$3.7 billion. This has resulted in an interest saving of approximately US$330 million per annum.
Fortescue's flexible debt profile does not contain any maintenance covenants and allows for voluntary repayments, refinancing of debt prior to maturity and facilitates debt repayments to achieve the initial targeted gearing level of 40 per cent.
As illustrated in the debt maturity profile below, the earliest debt maturity is in 2017. Approximately
60 per cent of long term debt is available for voluntary repayment or refinance prior to maturity dates and
at Fortescue's sole option.
DIVIDEND
The Board declared a A$0.03 per share interim fully franked dividend representing a 21 per cent payout ratio for the half year.
Fortescue is committed to its strategy of moving to a
30 to 40 per cent dividend payout ratio as the initial gearing target of 40 per cent is achieved.
GUIDANCE
Fortescue maintains its shipping guidance of 155 to
160 million tonnes for the full year, reflecting allowance for the second half wet season. Costs guidance for the second half of the year is revised down to US$25-26/wmt based
on an average exchange rate of A$0.80 and continuing low oil prices, bringing the full year C1 operating cost to US$28-29/wmt.
Total delivered costs are forecast to reduce to
US$35/wmt by the end of the financial year based on the
C1 cost guidance and current shipping and royalty rates.
5,000
4,500
4,000
3,500
4,888
Pre-payable at Fortescue's option
3,000
2,500
2,000
Pre-payable at Fortescue's option from April 2015
Pre-payable
Pre-payable at Fortescue's option from April 2017
1,500
1,000
500
0
1,000
at Fortescue's option
400
1,500 Pre-payable at Fortescue's option from Nov 2015
1,000
CY2015
CY2016
CY2017
CY2018
CY2019
CY2020 CY2021 CY2022
Senior secured credit facility Senior unsecured notes
"Underlying cash generation provided the basis for an additional half a billion US dollars of voluntary debt repayment ahead of maturity whilst comfortably maintaining liquidity thresholds. Our flexible debt profile with no maintenance covenants provides further opportunities for refinancing or early debt repayments as we continue to strengthen our balance sheet."
Stephen Pearce, Chief Financial Officer
4 I Fortescue Metals Group Limited I FY15 Half Year Financial Results Media Release
GLOSSARY
CFR Cost and freight rate
dmt Dry metric tonnes
FY Full year
HY Half year
wmt Wet metric tonnes NPAT Net profit after tax Underlying EBITDA Earnings before interest, tax,
depreciation and amortisation, exploration, development and other expenses.
The reconciliation of Underlying EBITDA to the financial metrics disclosed in the financial statements prepared under the Australian accounting standards is presented below.
mtpa Million tonnes per annum
C1 Operating costs of mining, processing, rail and port. The reconciliation of
C1 to the amounts disclosed in the financial statements prepared under the Australian accounting standards
is provided in the Financial Report for the half year ended 31 December 2014 accompanying this announcement.
Reconciliation of Underlying EBITDA to IFRS measures | 31 December 2014 31 December 2013 US$m US$m | |
Profit before income tax Finance income Finance expenses Depreciation and amortisation Exploration, development and other | 440 (9) 315 658 36 | 2,417 (12) 409 399 7 |
Underlying EBITDA | 1,440 | 3,220 |
FY15 Half Year Financial Results Media Release I Fortescue Metals Group Limited I 5
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