Fortescue board considering major job cuts despite recent strong performance
The mining giant is considering slashing up to 1000 jobs across its head office and green energy arm as it looks to cut costs, it is understood.
Fortescue Metals Group is preparing a major cost-cutting exercise across its head office and green energy arm, with hundreds of jobs set to disappear at the mining giant, despite the iron ore price returning to levels above $US120 a tonne this year.
It is understood Fortescue is considering slashing up to 1000 jobs, and potentially more according to some sources, with a significant reduction likely at Fortescue Future Industries – which now has as many as 1300 employees – and the rest to come from Fortescue’s corporate, support and associated functions such as finance, IT and head office.
It is understood Fortescue is also likely to shed jobs across its Pilbara mining operations, although safety staff and workers directly involved in the production and delivery of iron ore are believed to be exempted from the cost-cutting exercise.
Sources say the Fortescue board will consider the cuts ahead of the company’s half-year financial results on February 15. Its directors are still to review both the targeted cost savings and headcount reduction, and details such as whether employees made redundant would still be entitled to short-term cash bonus payments and incentive shares for the part of the year they were employed.
No major cuts are expected unless the Fortescue board, led by chairman Andrew Forrest – also the company’s biggest shareholder – tick off on the proposal.
It is understood Fortescue has been drafting the plans since late last year. Rumours of substantial job cuts at FFI have been circulating among staff since before Christmas, with some sources suggesting as many as 500 FFI staff could go as the green energy company shifts its focus away from its broad array of global options to those it believes it can deliver.
Fortescue declined to comment on the details of the job cuts and cost-cutting when approached for comment.
A spokeswoman for the company said that “people and performance are always our focus”.
“We are always looking for opportunities for continuous business improvement. That is how we retain our status as the lowest cost producer in the world,” she said.
Some of the job losses are believed to have been triggered by the end of major projects, such as Fortescue’s Iron Bridge mine, which is due to enter production this year.
FFI is also in the process of narrowing down its green energy options, with FFI boss Mark Hutchinson telling analysts in January that the company expects to make a final investment decision on five projects this year.
Fortescue had more than 18,500 employees and contractors across its iron ore and FFI divisions last financial year, according to its annual sustainability report. The company directly employed 11,693 people at June 30, including 1122 employed by FFI.
The report suggests the company added more than 1500 staff to its own ranks during the 2022 financial year, and about 5000 permanent staff including contractors.
The previous year’s report said the company had just over 13,500 permanent employees and contractors, and 10,164 direct employees.
Iron ore is back at levels above $US120 a tonne, and Fortescue said it posted record exports in the December quarter.
Fortescue booked a $US6.2bn net profit last financial year and, despite lower iron ore prices in the first half of the financial year, is still expected to deliver a strong result when it delivers its first-half financial results next week.
But like most Australian mining companies inflationary pressures linked to fuel and material costs – and the intense pressure for labour in the WA mining industry – has pushed up the company’s costs.
Fortescue’s average cash production costs were $US12.81 a tonne in the December 2020 quarter, and 34 per cent higher in the final three months of 2022, at $US17.17.
Fortescue expects its cash production costs to average $US18 to $US18.75 this financial year.
The company’s spending and staffing levels at FFI have also come under growing criticism from analysts.
A week ago Credit Suisse downgraded Fortescue to underperform, partly on concerns about the ongoing lack of detail on its future spending on FFI.
Goldman also cut Fortescue to a sell recommendation this month, saying the company was overvalued relative to its peers, and on “uncertainties around Fortescue Future Industries diversification and Pilbara decarbonisation and impact on dividend and balance sheet”.
Fortescue has form for making deep job cuts, but previously major redundancies have coincided with sharp falls in the iron ore price before the company’s completed major expansion programs and got its debt levels under control.
The company shed up to 700 jobs in 2015, as the iron ore prices fell below $US50 a tonne, and notoriously sacked up to 1000 people in a matter of days in 2012 when the iron ore price dipped below $US90 a tonne and the company approached the brink of collapse under the weight of its debts.
The plan also coincides with the start date of new iron ore chief executive Fiona Hick, recruited from Woodside last year to take charge of its iron ore operations.
Fortescue shares were trading at $22.76 at 1330 AEDT, up 28c or 1.2 per cent.
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