The Fortescue Metals Group Ltd (ASX: FMG) share price has declined 5% after the ASX resources share revealed a tough FY23 result.
Fortescue mines huge amounts of iron ore, it’s also working on making green hydrogen and high-performance batteries.
Fortescue share price
FY23 result
Here are some of the highlights for the 12 months to 30 June 2023:
- Revenue declined 3% to US$16.9 billion
- Underlying EBITDA (EBITDA explained) dropped 6% to US$10 billion
- Free cashflow increased 19% to US$4.25 billion
- Net profit after tax (NPAT) fell 23% to US$4.8 billion
- Underlying NPAT dropped 11% to US$5.5 billion
- Profit / earnings per share (EPS) dropped 4% to A$2.67
- Final dividend per share down 17.5% to A$1.00 per share
- Annual dividend per share down 15% to A$1.75
The main reason that statutory net profit fell harder than underlying profit, and may have hurt the Fortescue share price, is because it recognised a $1 billion impairment charge (pre-tax) on the Iron Bridge project, which included the impact of increasing discount rates due to the flow-on effect of higher interest rates.
Fortescue’s energy division has made more progress. It’s getting close to a final investment decision (FID) on five projects, and it’s seeing positive global developments such as the Inflation Reduction Act in the US and Hydrogen Headstart in Australia.
It revealed advanced offtake discussions underway with Australian, European, American and Asian customers for green hydrogen and other green products.
The business has commenced manual assembly of in-house designed proto exchange membrane (PEM) electrolyser stacks, with the assembley line due for delivery and installation in FY24.
Fortescue Energy has also expanded the battery WAE division’s battery and electric power train production operations in the UK.
Outlook for the Fortescue share price
The business is expecting to ship between 192mt to 197mt of iron ore in FY24, including approximately 7mt for Iron Bridge. FY23 was a record year of production was 192mt.
Fortescue Energy is expecting FY24 net operating expenditure to be approximately US$800 million, with capital expenditure and investments of approximately US$400 million, excluding projects subject to a final investment decision.
It seems as though Fortescue’s green energy division has a very positive future, but the impairment to Iron Bridge is disappointing.
If it can keep making progress with Fortescue (green) Energy, whilst paying relatively appealing dividends, I’m a happy shareholder. However, if I were looking to invest, I’d want to do so at a lower iron ore price when market pessimism is worse, which is normally when a better Fortescue share price appears.