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Date : 05/09/2022

Fortescue Metals Group Share Price Declined After Announcing FY22 Results

Fortescue Metals Group Ltd (ASX: FMG) is Australia’s largest pure-play iron ore mining business. It is also the world’s fourth-largest producer, a remarkable turnaround from its obscurity in 2008. With offices throughout Australia, China, and the rest of the world, FMG specialises in the mining, refining, and exporting iron ore.

Fortescue Metals delivers roughly 10% of worldwide seaborne iron ore due to the company’s growth from 55 million tonnes in fiscal 2012 to about 185 million tonnes in 2022. After finishing development on its 22-million-ton Iron Bridge magnetite mine, it is anticipated to expand to 200 million tonnes.

Fortescue has recently ventured into green energy to become a significant provider of green hydrogen and green ammonia. This move comes after the company’s success in the iron ore mining industry.

Following the release of its FY22 result, investors sold off shares of mining giant Fortescue Metals Group Ltd (ASX: FMG), sending Fortescue Metals share price down by 3%.

Fortescue Metals ASX: FY22 Results

Fortescue Metals shares are trading at $18.95 and have gained more than 0.32% after announcing its FY22 results. The current market cap of the company is around 58.35 Billion AUD.

ASX FMG

  1. As the iron ore benchmark price declined, average price realisation resulted in a 22% drop in revenue, to US$17.4 billion, compared to FY21.
  2. Ore sold and ore exported by the firm grew by almost 4%, to about 189 metric tonnes.
  3. On average, FMG made $99.8 less per dry metric tonne (DMT) than it did a year earlier, a decrease of 26%.
  4. To the tune of US$10.56 billion, they reported a 36% decline in underlying EBITDA.
  5. The business reported a 40% drop in NPAT to $6.2 billion.
  6. The firm reported earnings per share of US$2.01.
  7. In FY 2022, the board of directors declared a final dividend of A$1.21 per share, a 43% decrease from the $2.11 paid out in FY 2021.
  8. Fortescue Metals had $5,224 million in cash and $1,025 million in revolving credit at the end of June. Leasing obligations added an additional $755 million to the total debt of $6,103 million.

The Important Events of FY22

For the year ending 30 June, Fortescue Metals set a new annual shipping record of 189 million tonnes, beating the company’s own high estimates. This was propelled by the integration of steady performance from existing operations and the Eliwana mine and rail project.

Fortescue’s earnings and operating cash flow during the second quarter of 2018 were the company’s highest.

A 26% drop in price realisation to US$100 per dry metric tonne led to a 22% drop in revenue to US$17,390 million (DMT). Iron ore averaged a realised price of US$135/DMT in FY2021.

According to Fortescue Metals, this is because of decreased demand for steel and more restrictions on steel output, especially in the first half of FY 2022. COVID- The second half was hurt by a decline in the global economic outlook and by the 19 limitations that disrupted China’s steel demand.

The annual average price of C1 was US$15.91 per wet metric tonne (wmt), an increase of 14% from the previous period. Market inflationary factors, such as a stuttering labour market and rising energy and fuel prices, are reflected in the rise in C1 expenses.

ASX: FMG: What is the Outlook?

  1. The company expects shipping volumes of 187–192 million metric tonnes of iron ore.
  2. In FY23, FFI estimates to spend between $600 million and $700 million, with $100 million going toward capital expenditures.
  3. Hematite at FMG costs C1 between $18 and $18.75 per pound (based on the assumed average exchange rate of AUD: USD 0.70).
  4. The current capital expenditure is estimated at US$2.7 billion, but the business plans to boost it to US$3.1 billion. This estimate does not include Fortescue Future Industries.
  5. It is estimated that Fortescue Future Industries will spend between $600 million and $700 million.

Is Fortescue Metals A Good Buy?

Fortescue Metals is making progress with its plans to develop renewable energy, but the company is spending a lot of money on FFI. The price of iron ore will need to remain elevated for it to organically fund the programmes and maintain its high dividend payouts.

So, is Fortescue Metals a good buy?

It is hoped that FFI will be able to begin paying for itself before it exhausts the funding it has been allotted. Investors will have to keep a close eye to see if a Fortescue Metals trading halt will happen, or if FMG will see a powerful jump towards 2023.

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