Shares for Fortescue Metals Group [ASX:FMG] were down more than 4% on Monday after the iron ore miner announced FY22 results, despite announcing a hefty dividend.
FMG’s FY22 total dividend came in at $2.07 per share as the giant mining stock reported net profit after tax of US$6.2 billion.
Over the past 12 months, FMG shares are down about 10%.
Source: www.tradingview.com
Dividends go up while profits come down
On Monday, Fortescue announced a total, fully franked dividend of $2.07 a share, a healthy boost that the company attributes to ‘record shipments’ contributing to net profits of US$6.2 billion.
Let’s take a closer look at the company’s FY22 breakdown:
- ‘Record shipments of 189 million tonnes exceeded the top end of guidance, contributing to the second highest earnings and operating cash flow in Fortescue’s history
- ‘Underlying EBITDA of US$10.6 billion with an Underlying EBITDA margin of 61 per cent
- ‘Net profit after tax (NPAT) of US$6.2 billion and earnings per share of US$2.01 (A$2.77)
- ‘Net cash flow from operating activities of US$6.6 billion, and free cash flow of US$3.6 billion after capital expenditure of US$3.1 billion
- ‘Fully franked final dividend of A$1.21 per share, increasing total dividends declared in FY22 to A$2.07 per share, equating to A$6.4 billion and a 75 per cent payout of NPAT
- ‘Strong balance sheet with cash on hand of US$5.2 billion and net debt of US$0.9 billion at 30 June 2022’
US$17.4 billion in 2022 revenue decreased 22% on 2021, which FMG said was due to a reduction in the iron ore benchmark price.
The C1 cost of US$15.91wmt was 14% higher than in 2021 after an increase in diesel prices, labour, and consumables.
US$10.6 billion in underlying EBITDA was 36% lower with an underlying margin of 61% (73% in 2021), and NPAT was down 40% in 2022:
Source: FMG
Fortescue’s CEO Elizabeth Gaines said:
‘Reflecting our ongoing commitment to delivering enhanced shareholder returns, the Board has declared a fully franked final dividend of A$1.21 per share, bringing total dividends declared for FY22 to A$2.07 per share. This represents a 75% payout of full year net profit after tax, consistent with our stated intent to target the upper end of our policy to payout a range of 50 to 80% of NPAT.
‘We have experienced a strong start to FY23 and through operational excellence, a sustained focus on productivity and a disciplined approach to capital allocation, we will continue to deliver benefits to all our stakeholders.’
FMG caught in a bear market
Profits did come down year-on-year, however, Ms Gaines appeared unperturbed by the fact, dubbing the results in 2022 as ‘the second highest annual profit in Fortescue’s history’.
The miner said it’ll focus on supporting operations and funding future growth, with a stable cash balance, access to US$400 million loan facility, US$800 million in bonds issues, and US$1.5 billion in Senior Notes.
Like Fortescue, caught up in increased labour, fuel, and general operating costs for 2022, many businesses have had it tough during the current climate.
This can make it tricky to figure out what to do next.
Our Editorial Director Greg Canavan has been through this before.
And given the state of market sentiment right now, he thought he’d put together a report on how to play a bear market.
Check out Greg’s ‘The Stocks You Should Own in a Bear Market’ here.
Regards,
Kiryll Prakapenka
