Fortescue posts record iron ore shipments but profits tank 40%

Fortescue (ASX: FMG) posted its second largest profit on record, even after net profits slumped -40% year-on-year to US$6.2bn. The profit figure was in-line with Bloomberg estimates of US$6.1bn.

Fortescue investors will receive a $1.21 per share final dividend.

Based on last Friday's close, this represents a yield of 6.1%. The stock will go ex-dividend next Monday, 5 September.

Earnings at a glance:

Source: Fortescue | Table: Market Index

Still the second largest profit

Fortescue posted a strong operational performance in light of unfavourable weather conditions, supply chain challenges and industry wide labour shortages.

The Group mined 228.8m wet metric tonnes (wmt) of iron ore, up 1% compared to last year and shipped a record 189m wmt, up 4%.

The decline in financial performance reflects a -26% decline in average realised iron ore prices, down from US$135 to US$100 a tonne.

C1 cash costs also increased 14% from US$13.93/wmt to US$15.91/wmt.

Still, the result being the second largest profit on record goes to show how elevated iron ore prices remain, relative to pre-covid levels.

Year in review: China

A one liner from Fortescue's annual report summarises the downward pressure on iron ore prices for most of FY22:

"Reduction in crude steel production, linked to 25 per cent lower steel demand and steel production curtailments particularly in the first half of FY22, with COVID-19 restrictions disrupting China's downstream steel demand and a weak global economic outlook impacting the second half."

"However, growth targets set by China in the second half, coupled with increasing global inflationary pressures, supported strong market conditions with steel prices surging and crude steel production recovering." noted CEO Elizabeth Gains.

FY23 guidance

"This coming year, we expect to break further records, with guidance for shipments of 187 to 192 million tonnes, " said Chairman Andrew Forrest.

The guidance includes a 1m tonne contribution from the US$3.8bn Iron Bridge Magnetite Project which is expected to deliver 22mtpa of high grade concentrate from the March 2023 quarter.

Fortescue forecasts C1 costs to land between US$18.00 to US$18.75/wmt, up 13-18% compared to FY22.

Fortescue share price chart (Source: TradingView)