FMG profit up 14%, shipments up 44%

Iron ore miner Fortescue Metals Group has posted a 14 per cent rise in annual net profit and a surge in shipments of the steelmaking commodity.

Fortescue says its net profit for the 12 months to June 30 was $US581 million, up from $US508 million previously.

FMG's reported an underlying EBITDA of $US1,288 million as an indication of its improved performance.

However this was before a series of adjustments including the re-estimation of the subordinated loan note, net foreign exchange and before a tax credit.

The company's total iron ore shipments of 40.1 million tonnes were up 44 per cent.

It also says its Christmas Creek expansion in Western Australia's Pilbara region is on track to deliver ore in the March quarter of 2011.

Cashflow from operations totalled $US1.1 billion, a 134 per cent leap from $US473 million for the 2008/09 financial year.

"The 2010 financial results mark a turning point for Fortescue as the company delivers strong cashflow after years of project development," chief executive Andrew Forrest said in a statement.

"Production and price increases are generating significant revenues and increasing cash balances.

"This is a great result for our shareholders."

Net earnings per share was 18.85 US cents, up six per cent from 17.77 cents per share.

Of the 40.1 Mt shipped, Fortescue said third party shipments comprised 1.16 Mt, up from 0.4 Mt previously.

Ore prices were up by 17 per cent due to the expiry of the company's China Price Agreement (CPA) and the movement to an index-based price system in the fourth quarter of the 2009-10 financial year.

Under the CPA, Fortescue sold ore to its Chinese customers at "about three per cent under the price agreed by other Australian producers with non-Chinese steel mills", the company said in August last year.

Fortescue said higher sales prices had been offset by increases in underlying unit costs, mainly as a result of the appreciation of the Australian dollar and a larger contribution from the first stage of the Christmas Creek mine, which is currently a higher cost operation.

Fortescue said Christmas Creek was more costly because the company had to truck ore from this mine to its first mine, Cloudbreak, 50km away, for processing.

"These costs will reduce when the Christmas Creek OPF (ore production facility) is completed in March quarter 2011," Fortescue said.

The miner said it had cash on hand of $US1.235 billion ($A1.4 billion) at the end of the period, which meant its balance sheet was strengthened for future expansion.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was a record $US1.288 billion, up 129 per cent.

"The 129 per cent increase in EBITDA to $US1,288 million is a true reflection of the company's ability to generate superior returns," chief financial officer Stephen Pearce said.

"With strong operating margins and growing cash balances, Fortescue is developing a major platform for growth."

The balance sheet value of its Leucadia subordinated loan note, however, rose from $US382 million ($A432.08 million) in the 2008/09 financial year to $US826 million ($A934.28 million).

Its total liabilities are now $US3.8 billion, up from $US3.3 billion previously.

Fortescue also said it was on target to produce about 9.5 Mt of iron ore in the September quarter and was targetting a 55 Mt per annum run rate by the June quarter of next year.

Feasibility reports for both its Chichester and Solomon stage one expansions were slated for board review in the next few months, the company said.

Shares in the company closed up 16 cents, or 3.69 per cent, at $4.50.