Fortescue feels iron ore pinch

Fortescue Metals Group took a 32 per cent hit to profits and has trimmed its interim dividend after a volatile iron ore market during the first half of the financial year.

Fortescue shareholders will receive an 86 cents fully franked interim dividend at the end of March, 41 per cent less than the $1.47 payment they received at the same time last year.

While a marked discount, it still represents a 70 per cent payout of FMG’s first-half net profit after tax, which came to $US2.8 billion ($A3.9 billion).

That’s a 32 per cent decrease on the $US4.1 billion ($A5.7 billion) amassed in the first half of financial year 2021, however.

Improved first half shipments of 93.1 million wet metric tonnes were countered with elevated C1 costs, which were up 20 per cent at $US15.28 per wet metric tonne, and 16 per cent lower average revenues of $US95.58 per dry metric tonne.

Overall, revenue was down 13 per cent on the prior corresponding period at $US8.1 billion. ($A11.3 billion).

Fortescue chief financial officer Ian Wells said the first half had not been without its challenges.

He cited the impact of COVID-19, a tight labour market, increased diesel costs and general market volatility in a media conference this morning.

Worker shortages also had a part to play, although chief executive Elizabeth Gaines said more relaxed quarantine requirements in Western Australia had granted some respite in getting skilled labour to site.

“We remain focused on managing industry cost pressures and challenges posed by Western Australia’s ongoing border restrictions, and we are working closely with the Western Australian government and relevant authorities to ensure we have access to the specialist skills required,” Ms Gaines said.

As announced last year, Fortescue is contributing 10 per cent of net profits to Fortescue Future Industries, with anticipated expenditure for its green energy faction set to hit between $US400 million and $US600 million ($A559.1 million to $A838.7 million) for the financial year.

It has a suite of projects in the pipeline, including a green energy manufacturing centre in Gladstone, Queensland, and emerging most recently, plans for a renewable energy hub in the Pilbara.

Despite the weaker performance, shipments, C1 costs and capital expenditure for the financial year remains unchanged, with Ms Gaines advising the business had made a solid start to H2 FY22.

Fortescue shares are down 2.04 per cent to trade at $21.14.