Andrew “Twiggy” Forrest-backed Fortescue Metals Group (ASX: FMG) has unveiled record half year revenue of US$6.5 billion (A$9.71 billion), underpinned by the company’s highest ever iron ore production and shipments and a strong iron ore price.
For 1H 2020, Fortescue’s revenue rocketed 83% to almost US$6.5 billion from US$3.5 billion in the previous corresponding period.
This generated a 283% increase to underlying net profit after tax of US$2.46 billion (A$3.68 billion) compared to US$644 million in the prior 1H 2019.
Iron ore mined for the period was 105.2 wet metric tonnes – 4% higher than 101.1wmt extracted in 1H 2019.
Contributing to the record revenue was an average realised iron ore price of US$80 per dry metric tonne, which was 73% higher than US$47/dmt in 1H 2019.
Boosting Fortescue’s improved margins even further was a 3% pare-back in C1 costs, which came in at US$12.73/wmt for 1H 2020 compared to US$13.11/wmt.
Fortescue’s chief executive officer Elizabeth Gaines described the company’s 1H 2020 results as “excellent”.
“We are continuing to generate strong margins, driven by our industry leading cost position and product strategy, resulting in a 281% increase in net profit after tax to ~US$2.5 billion, delivering outstanding shareholder returns.”
Ms Gaines added shareholders would benefit from the record profit with a fully franked interim dividend of A$0.76 per share compared A$0.30 received in the same period last year.
Carbon emission reduction strategy
As part of the mounting pressure on the mining industry to reduce its carbon footprint, Ms Gaines noted Fortescue is investing US$700 million towards powering its Pilbara projects from solar.
As part of the company’s carbon emission reduction strategy, Ms Gaines said the US$700 million would fund energy transmission infrastructure and solar-gas hybrid power to provide lower cost energy to Iron Bridge and optimise existing assets.
About US$450 million of this will fund 275km of high voltage transmission lines, 150MW of solar photovoltaic generation, along with 150MW of gas and large-scale battery storage.
This adds to the US$250 million allocated to the Pilbara Transmission project, which involves construction of 60km energy transmission line, a 60MW solar photovoltaic facility, and a 35MW battery facility at the Chichester Hub to provide energy to Fortescue’s Christmas Creek and Cloudbreak operations.
Ms Gaines said between 25-30% of the company’s stationary energy will be powered by these initiatives.
By mid-morning trade, Fortescue’s shares were up 1.63% to $11.24.