Andrew Forrest takes home $2.4bn dividend on record Fortescue profit
High iron ore prices have helped Fortescue more than double its annual profit and deliver a $2.4bn dividend to chairman Andrew Forrest.
Fortescue Metals Group boss Elizabeth Gaines says she believes Chinese demand for iron ore may rebound in the December quarter, offsetting recent sharp falls in the commodity’s price, after the miner declared record annual profits and dividends.
Fortescue declared a $2.11 a share dividend on Monday, delivering a $2.39bn cheque for founder and chairman Andrew Forrest, after booking a $US10.3bn after-tax profit, up 117 per cent on the previous period. It finished June 30 with $US2.7bn in net cash.
Benchmark iron ore prices have tumbled in the last two months, hitting record highs of about $US230 a tonne earlier this year before dipping below $US200 in late July and trading at about $US150 a tonne last week – with prices for lower grade ores briefly falling even more sharply.
The falls came after Chinese authorities pushed steel mills to curb production to meet the country’s goal of keeping annual steel production in line with that achieved in 2020, and as surging coking coal prices – which hit $US380 a tonne in China last week, according to CBA analysts – undercut steel mill margins.
While analysts have suggested those falls are likely to continue, Ms Gaines said Fortescue believed demand for steel in China is likely to rebound in December quarter.
“Obviously there’s some curbing of steel capacity but we’ve also seen the impact of floods, as well as Covid-19 outbreaks. We think some of that’s transitory, but there’s no doubt that there has been restrictions, or curbing of some of the capacity,” she said.
“Year on year we still think steel production will grow, and we do expect a seasonal rebound in steel demand in the fourth quarter of this calendar year. And that‘s particularly from the construction sector.”
Even at lower prices closer to $US150 a tonne, rivers of cash are still pouring into Fortescue’s coffers and Ms Gaines said the $2.11 a share final dividend brought the company’s total payout to $3.58 a share for the year – about 80 per cent of Fortescue’s net profit after tax, at the top end of the company’s policy of returning 50 to 80 per cent of net profits to shareholders.
Including the final dividend, Fortescue will now have paid out more than $6bn in dividends to Dr Forrest over the last three years as the iron ore price surged.
Fortescue’s revenue lifted 74 per cent to $US22.3bn for the full year, with the company’s underlying earnings before interest, tax, depreciation and amortisation up 96 per cent to $US16.4bn on revenue of $US22.3bn.
Ms Gaines said the result was Fortescue’s best ever return.
“The Fortescue family has delivered a second consecutive year of record performance, with shipments, earnings and operating cashflow surpassing any year in Fortescue’s history,” she said in a statement.
“Through the Iron Bridge Magnetite project and Fortescue Future Industries, we are investing in the growth of our iron ore operations, as well as pursuing ambitious global opportunities in renewable energy and green industries.”
In July the iron ore major again lifted its export guidance for the current financial year, saying it expected to ship 180 to 185 million tonnes in the full year to the end of June 2022.
Fortescue’s monster $US5.7bn dividend adds to the run of huge shareholder returns from the iron ore majors, after BHP declared a $US10bn final shareholder payout for its full financial year, and Rio Tinto declared a $US9.1bn interim return.
Fortescue also flagged it would join Rio Tinto and BHP in announcing targets to reduce its so-called scope 3 carbon emissions – those produced by its customers, using Fortescue’s iron ore.
Fortescue already has the most aggressive carbon reduction targets in the industry, have pledged carbon neutrality by 2030.
Rio and BHP have so far committed to only very limited targets for scope 3 emissions, promising to work with steel mills to find new technologies to reduce the amount of carbon produced in the steelmaking process, as well as reductions in the carbon released from shipping their iron ore to customers.
Ms Gaines said on Monday the iron ore major would announce “specific targets” for Fortescue’s scope 3 emissions by the end of September.
“As we execute on our strategy to become a global leader in the battle against climate change we will establish goals to tackle emissions across our value chain, with specific targets, and a framework for our approach to Scope 3 emissions, to be announced by 30 September 2021,” she said.
Fortescue is ramping up its green energy this financial year, saying in July it planned to spend $US400 to $US600m on its Fortescue Future Industries subsidiary, its flagship vehicle carrying out Dr Forrest’s bold plan to make the company the biggest renewable energy company in the world through the development of clean energy projects in fuels like hydrogen.
About 350 people at Fortescue are dedicated to FFI and other green projects, and the company’s financial accounts reveal it spent $US122m on FFI last financial year.
Fortescue says it wants to be shipping 15 million tonnes of green hydrogen by 2030, with a goal of making it the world’s most traded seaborne commodity.
Dr Forrest used the company’s annual report to take a shot at fossil fuel companies trying to position themselves in the emerging hydrogen production sector, saying only green hydrogen – produced by using renewable power to crack water into oxygen and hydrogen, rather than using methane to achieve the same results – would reduce global carbon emissions.
“We are focusing our efforts on renewable green hydrogen, because any other kind of hydrogen – as a recent study by researchers at Stanford and Cornell University confirmed – is a distraction,” he told shareholders.
Fortescue shares closed up $1.32, or 6.6 per cent, to $21.32 on Monday.
More Coverage
