Fortescue posts record results, shareholders get big payout

Iron ore miner Fortescue Metals Group has delivered a record result and declared a whopping shareholder payout.

Record iron ore shipments, lower production costs and high prices for the steel-making commodity have combined to deliver a record full-year result for Fortescue Metals Group.

The company booked a net profit for the 2019-20 financial year of $US4.7 billion ($A6.55 billion), up 49 per cent, allowing it to declare a final dividend of $A1 per share, which lifted the total annual payout to $A1.76, up 54 per cent.

Chief executive Elizabeth Gaines said the miner achieved records across all key operating and financial measures.

“Delivering enhanced returns to our shareholders remains a key priority, and for FY20 we have declared $US3.7 billion ($A5.16 billion) in dividends, representing a payout ratio of 77 per cent of full year NPAT,” Ms Gaines said.

“We are proud to have achieved the number one ranking in the S&P/ASX100 Index for total shareholder returns over the three years to 30 June 2020 of 266 per cent.”

Fortescue Metals Group chief executive Elizabeth Gaines says the miner remains focused on rewarding shareholders.

Moody’s Investors Service vice-president Matthew Moore said the company’s balance sheet was strong enough to manage the substantially higher dividends and a forecast surge in capital expenditure over 2020-21, with net debt around the lowest level in recent years.

Fortescue lowered production costs from $US13.11 ($A18.28) per wet metric tonne to $US12.94 ($A18.04), while the realised price jumped from $US65.06 ($A90.73) to $US78.62 ($A109.64).

“Fortescue’s ability to achieve record iron ore shipments and lower its unit costs, despite COVID-related impacts, supports its credit profile and allowed the miner to take advantage of stronger realised prices,” Mr Moore said.

“While Fortescue’s large Iron Bridge project development raises near-term execution challenges and will likely require some debt funding, we view the move towards higher-grade production over time as credit positive as it provides product diversification and should lead to increased longer-term price realisations and margins.”

The company previously had an ambitious goal to achieve production costs below $US10/wmt and hit it for one month in 2017, but Ms Gaines said the following year external factors, including inflation in the Pilbara, would make it challenging to deliver again.

Fortescue shares rose 3.55 per cent in morning trade to $18.63.