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Fortescue 1st Half Profit Falls 32% on Higher Costs, Weaker Prices — Update

   By Rhiannon Hoyle 
 

Fortescue Metals Group Ltd. reported a 32% fall in first-half net profit, because of higher operating costs and weaker prices for the iron ore that it produces.

The world's fourth-largest producer of iron ore, used in steel, said it made a net profit of $2.78 billion in the six months through December. That was down from $4.08 billion in the year-earlier period.

Directors declared an interim dividend of 86 Australian cents (US$0.62) a share, down from A$1.47 a share a year ago.

Fortescue said direct production costs were roughly 20% higher than the year-prior period, in large part because of the transition to three mining hubs following the start of operations at its Eliwana site. However, Fortescue--like its peers--grappled with inflation pressures as well, including a significant increase in fuel prices.

"Total delivered costs were further impacted by a 79% increase in shipping costs," Fortescue said.

The miner also received less cash for the ore it shipped. Fortescue mines lower grade ore than many of its peers, so sells its cargoes at a fluctuating discount to the industry's benchmark price.

While the average benchmark price was higher in the six months though December, versus a year earlier, Fortescue's realized price fell to $96 a metric ton, down 16% year-on-year.

Fortescue said this reflected a sharp fall in China's steel output and demand during the period, that resulted in less appetite for iron ore and an oversupply of low-grade material.

Underlying earnings before interest, tax, depreciation and amortization totaled $4.76 billion, down from $6.64 billion, it said. That included higher expenses for its clean energy venture, known as Fortescue Future Industries.

 

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

February 15, 2022 18:16 ET (23:16 GMT)

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