Andrew Forrest collects $327m as Fortescue steps up investor returns despite profit slip
Fortescue’s decision to pay a bigger than expected dividend has delivered billionaire Andrew Forrest a $327m payday.
Billionaire Andrew “Twiggy” Forrest will collect a $327 million dividend cheque after his iron ore miner Fortescue Metals announced a far bigger dividend than expected.
The Perth-based company announced 30c of dividends this morning after posting a $US644 million ($898.6m) net profit.
The payout, made up of a 19c per share interim dividend and an 11c per share special dividend, was well ahead of analyst expectations. Macquarie had expected a 10c per share dividend for the period, while RBC Capital Markets had modelled a 14c per share payout.
Mr Forrest will be the biggest beneficiary thanks to his 35.4 per cent stake in Fortescue.
In the past, Mr Forrest has used much of his dividend income from Fortescue to fund the philanthropic Minderoo Foundation he founded with his wife in Nicola 2001.
Net profit for the period was down 5 per cent from a year ago, but was 66 per cent higher than the preceding half, thanks to a sharp recovery in iron ore markets in recent months.
That turnaround in prices has been exacerbated more recently by the tragic tailings dam collapse in Brazil that had prompted the shutdown of several Brazilian mines, knocking more than 50 million tonnes of annual supply out of the market.
Fortescue chief executive Elizabeth Gaines said the higher dividend reflected the company’s confidence in the iron ore outlook.
“Maintaining our disciplined approach to capital management together with our flexible balance sheet positions Fortescue strongly for the next phase of growth and delivery of returns to our shareholders,” Ms Gaines said.
Shares in Fortescue were sharply higher on Wednesday morning, with the stock gaining 6.1 per cent to $6.74 and on track for its highest closing price in two years.
RBC analyst Paul Hissey said the result was much stronger than he had estimated.
“FMG remains in a strong position from a balance sheet perspective (as evidenced by the special dividend announced today), and as such, we believe any continuation of elevated iron ore prices could translate into additional returns to shareholders,” he said.
Analysts at Macquarie said Fortescue offered “material upside” if current high spot iron ore prices hold their current levels.
“FMG’s decision to pay a special dividend in the 1HFY19 is a positive step and in our view is a clear signal that FMG plans to return surplus cash to shareholders,” the analysts said.
Fortescue, which has also been buying back its own shares, has meantime been working to reinvigorate earnings by changing the type of iron ore it sells. The company has in recent years grappled with a stubbornly wide price gap between benchmark 62 per cent iron ore prices and the low-grade ore, with about 58 per cent iron, it typically sells.
As a result, it has invested in a new 60 per cent iron-content product that it began shipping in December. To support sales, Fortescue will build its $US1.3 billion Eliwana mine and rail project, which Fortescue’s board approved last year. Fortescue aims to have the Eliwana mine running by the end of 2020.
With Dow Jones Newswires
Dow Jones Newswires