Analyst Note
| Jon Mills, CFA |No-moat Fortescue’s fiscal 2022 profit declined, but was still strong and reflective of above-cycle iron ore prices. Adjusted net profit after tax was USD 6.2 billion, or USD 2.01 per share—around AUD 2.77—down from USD 10.3 billion in the prior year. The decline was driven by lower iron ore prices, with increased cash operating costs offset by higher sales volumes. Adjusted EBITDA was USD 10.6 billion, 36% below the USD 16.4 billion earned in fiscal 2021. The USD 5.8 billion sequential decline in adjusted EBITDA reflected the lower average iron ore price. The company’s lower-grade ore, around 57%-58% iron content, receives a discount to the 62% benchmark price. Fortescue achieved an average realised price of about USD 100 per metric ton in fiscal 2022, down from USD 135 in the prior year and discounts of 28% and 12% versus the benchmark respectively. Modestly higher iron ore sales volumes of 189 million metric tons, up from 182 million metric tons, offset higher cash operating costs due to rising labour, fuel, and logistics expenses.