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Fortescue Metals Group Ltd FMG Stock Quote

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Morningstar‘s Stock Analysis FMG

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Lower Iron Ore Prices and Higher Costs Drive Fortescue’s 2022 Result; AUD 14 FVE Retained

Jon Mills, CFA Equity Analyst

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.

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Company Profile FMG

Business Description

Fortescue is an Australia-based iron ore miner. It has grown from obscurity at the start of 2008 to become the world's fourth-largest producer. Growth was fuelled by debt, now repaid. Expansion from 55 million tonnes in fiscal 2012 to about 185 million tonnes in 2022 means Fortescue supplies nearly 10% of global seaborne iron ore. Further expansion above 200 million tonnes is likely once it completes construction of its 22 million tonne Iron Bridge magnetite mine. However, with longer-term demand likely to decline as China's economy matures, we expect Fortescue's future margins to be below historical averages. More recently, Fortescue has diversified into green energy, with ambitions to become a major supplier of green hydrogen and green ammonia. Its efforts here are at an early stage.

87 Adelaide Terrace, Level 2, East Perth
Perth, WA, 6004, Australia
T +61 862188888
Industry Other Industrial Metals & Mining
Most Recent Earnings
Fiscal Year End Jun 30, 2023
Employees 3,898