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FMG share price: What’s the outlook following interim results?

We examine the highlights and market reaction from the miner’s interim results.

FMG share price mixed on interim results

Fortescue Metals Group (FMG) yesterday revealed another strong set of operational results for the half ending December 31, 2020.

Commenting on these results, FMG’s Chief Executive, Elizabeth Gaines, said:

'Fortescue's performance for the first half of FY21 has been outstanding, and we are very proud of the whole team who have delivered our best half year operating and financial results since the Company was established.'

Record or not, investors responded with mixed feelings to the H1: The stock opened higher on the day of the interim release, but has since trended lower, hitting $23.84 per share by Friday's afternoon session.

Despite that lukewarm reaction, FMG remains one of the best performing large caps in Australia over the last year, with the pure play iron ore miner up over 100% in that period.

Interim results unpacked

Looking at the miner's headline shipment results, FMG said it shipped an impressive 90.7 million wet metric tonnes of iron ore during the half, representing a 2% increase on a year-over-year basis.

Ore mined during the half increased 3%, coming in at 108.4 million wet metric tonnes and realised prices hit US$114.02 per dry metric tonne.

With the miner reporting significantly higher realised prices in the half as a result of rising iron ore prices, FMG reported revenues of US$9,335 million, representing a 44% increase on a year-over-year basis.

The miner saw this mammoth top-line growth translate well to earnings and net profits, too. Here, FMG reported underlying earnings (EBITDA) of US$6,639 million, representing a 57% increase, while recording an impressive EBITDA margin of 71%. Net profits (NPAT) hit US$4,084 million, equating to a basic EPS figure of AUD 184 cents per share.

The miner’s commitment to income-focused investors also remained strong in the half, with the Board declaring an interim dividend of AUD$1.47 per share – equal to 80% of H1 net profits.

FMG has a dividend yield of 7.33%.

Despite buoyant iron ore prices, costs inched higher in the half, with C1 costs reaching US$12.78 per wet metric tonne, up from US$12.73 per wet metric tonne in the first-half of 2020.

FY21 outlook in focus

Fortescue slightly tweaked its FY21 full-year guidance as part of its interim results, raising the upper end of its production guidance, upping cost expectations slightly, while CAPEX expectations remained the same.

Here, for the full-year, the miner said it expected iron ore shipments to come in at between 175-182 million tonnes, C1 costs of between US$13.50-14.00 per wet metric tonne, and CAPEX of between US$3.0-3.4 billion.

These guidance revisions were made on updated exchange rate assumptions, with the miner now assuming a AUD/USD exchange rate of $0.75 (previously $0.70).

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