Fortescue Ltd · ASX:FMG
Fortescue — H1 FY23 Earnings Presentation
37 slides from Fortescue's earnings presentation, Feb 13, 2023
Slide 1: FY23 Half Year Results
FY23 Half Year Results We are Fortescue 15 FEBRUARY 2023 © 2023 FORTESCUE
Slide 2: Forward Looking Statements Important Notice
Forward Looking Important Notice Statements The purpose of this presentation is to provide general information about Fortescue Metals Group Ltd (“Fortescue”), including general information in relation to Fortescue’s wholly owned subsidiary Fortescue Future Industries Pty Ltd and its subsidiaries (co
Slide 3: Safety and unique culture
Safety and unique culture 1.8 TRIFR 23% female 15% Indigenous Consistent with Employment Australians December 2021 rate Employment rate across Pilbara operations FORTESCUE | FY23 HALF YEAR RESULTS | 3
Slide 4: Stepping beyond fossil fuels
Stepping beyond fossil fuels Real Zero by 2030 Scope 1 and 2 emissions Green fleet development Investing in renewable energy technologies Stationary energy Energy infrastructure Net Zero Scope 3 emissions by 2040 Addressing emissions across the value chain FORTESCUE | FY23 HALF YEAR RESULTS | 4
Slide 5: Stepping beyond fossil fuels
Stepping beyond fossil fuels US$6.2bn capital investment De-risking cost profile US$3bn Cumulative operating cost savings by 2030, payback of capital by 2034 US$818m per annum Net operating cost savings from 2030 Refer to ASX release 20 September 2022 FORTESCUE | FY23 HALF YEAR RESULTS | 5
Slide 6: A safe and inclusive workplace
A safe and inclusive workplace Strong and unique culture Encouraging our team members to speak up Workplace Integrity Review Ongoing engagement Additional training Over 10,500 team members completed training Enhanced safety Initiatives to enhance physical and personal safety FORTESCUE | FY23 HALF YE
Slide 7: Empowering Indigenous Australians
Empowering Indigenous Australians >A$4 billion AMEC award 1,200 Contracts awarded In recognition of our Indigenous Australians through Billion pioneering Billion employed through Opportunities Opportunities program VTEC since 2006 FORTESCUE | FY23 HALF YEAR RESULTS | 7
Slide 8: H1 FY23 iron ore production highlights
H1 FY23 iron ore production highlights 96.9mt Record H1 shipments – 4% increase on H1 FY22 US$17.43/wmt Industry leading C1 cost US$87/dmt Average revenue 86% Average revenue realisation FORTESCUE | FY23 HALF YEAR RESULTS | 8
Slide 9: H1 FY23 financial highlights
H1 FY23 financial highlights US$7.8bn US$4.4bn US$2.4bn Revenue Underlying EBITDA Net profit after tax 56% US$52/dmt US$0.77 Underlying EBITDA margin Underlying EBITDA Earnings per share (A$1.15) per tonne1 1Excludes Fortescue Future Industries costs FORTESCUE | FY23 HALF YEAR RESULTS | 9
Slide 10: H1 FY23 financial highlights
H1 FY23 financial highlights US$2.9bn US$1.6bn US$4.0bn Net operating cashflow Free cash flow Cash on hand US$6.1bn US$2.1bn 26% Gross debt Net debt Gross gearing FORTESCUE | FY23 HALF YEAR RESULTS | 10
Slide 11: Shareholder returns
Shareholder returns A$0.75 per share Fully franked interim dividend 65% of H1 FY23 NPAT Dividend payout ratio A$2.3bn Value of H1 FY23 dividends FORTESCUE | FY23 HALF YEAR RESULTS | 11
Slide 12: FY23 guidance
FY23 guidance 187 – 192mt Iron ore shipments US$2.7 – US$3.1bn Capital expenditure excluding FFI US$18.00 – US$18.75/wmt C1 cost for hematite US$730 – US$830m FFI anticipated expenditure Guidance is based on an assumed FY23 average exchange rate of AUD:USD 0.70 FORTESCUE | FY23 HALF YEAR RESULTS | 1
Slide 13: FY23 Half Year Financial Results
FY23 Half Year Financial Results FORTESCUE | FY23 HALF YEAR RESULTS | 13
Slide 14: Strong balance sheet
Strong balance sheet Structured on low cost, investment grade terms Gross debt (US$m) Debt maturity profile excluding leases (US$m) 6,103 Senior Unsecured Notes Syndicated Term Loan Green Senior Unsecured Note 6,077 5,113 4,252 3,952 1,500 978 800 750 700 600 FY19 FY20 FY21 FY22 H1 FY23 FY23 FY24 FY
Slide 15: Strong balance sheet
Strong balance sheet Targeting investment grade credit metrics Gross debt to EBITDA (x) Gross gearing (%) Target 1 - 2x Target 30 - 40% 0.7 27 28 0.6 0.6 0.6 26 26 19 0.3 FY19 FY20 FY21 FY22 H1 FY23 FY19 FY20 FY21 FY22 H1 FY23 FORTESCUE | FY23 HALF YEAR RESULTS | 15
Slide 16: Underlying EBITDA
Underlying EBITDA H1 FY22 NPAT to H1 FY23 NPAT reconciliation (US$m) v FORTESCUE | FY23 HALF YEAR RESULTS | 16
Slide 17: Earnings
Earnings Half year earnings profile Underlying EBITDA (US$m) NPAT (US$m) 6,211 9,736 6,639 4,084 5,799 3,420 4,762 4,352 2,777 2,368 H1 FY21 H2 FY21 H1 FY22 H2 FY22 H1 FY23 H1 FY21 H2 FY21 H1 FY22 H2 FY22 H1 FY23 FORTESCUE | FY23 HALF YEAR RESULTS | 17
Slide 18: Price and margins
Price and margins Prices and Underlying EBITDA margin (US$/dmt) 160 140 120 100 99 80 60 63* 52 52* 40 39 20 20 0 FY18 FY19 FY20 FY21 FY22 H1 FY23 Underlying EBITDA 62 Platts CFR Index Realised price Average Underlying EBITDA Average realised price *Excludes FFI costs FORTESCUE | FY23 HALF YEAR RESU
Slide 19: Cash generation
Cash generation Net cash flow from operations (US$m) Capital expenditure Free cash flow 1,891 8,184 6,442 1,742 1,586 1,488 1,381 4,410 4,510 2,924 2,519 2,948 2,136 1,567 648 H1 FY21 H2 FY21 H1 FY22 H2 FY22 H1 FY23 H1 FY21 H2 FY21 H1 FY22 H2 FY22 H1 FY23 H1 FY21 H2 FY21 H1 FY22 H2 FY22 H1 FY23 FORT
Slide 20: Capital expenditure
Capital expenditure H1 FY23 capital expenditure (US$m) Excludes FFI capital expenditure of US$51m Sustaining and development capital 596 624 US$1,330m Major projects and decarbonisation Exploration and studies 110 FORTESCUE | FY23 HALF YEAR RESULTS | 20
Slide 21: Disciplined capital management
Disciplined capital management Earnings and cash flows FY14 – H1 FY23 1 Includes share buyback FORTESCUE | FY23 HALF YEAR RESULTS | 21
Slide 22: Return on capital
Return on capital Return on equity (%) Return on capital employed1 (%) 66 66 40 37 35 35 36 36 31 29 FY19 FY20 FY21 FY22 H1 FY23 FY19 FY20 FY21 FY22 H1 FY23 1 ROCE is calculated as earnings before interest and tax divided by average capital (total assets minus current liabilities) FORTESCUE | FY23 H
Slide 23: Delivering returns to our shareholders
Delivering returns to our shareholders Dividends (A$/share) and payout ratio (%) 4.50 78% 80% 85% 77% 75% 4.00 75% 3.58 65% 62% 3.50 65% 52% 3.00 55% 2.50 38% 45% 36% 2.07 2.00 1.76 35% 1.50 21% 21% 25% 17% 1.14 16% 1.00 0.75 15% 0.45 0.50 0.20 0.23 5% 0.08 0.10 0.05 0.15 0.07 -5% FY11 FY12 FY13 FY1
Slide 24: Fortescue Future Industries
Fortescue Future Industries FORTESCUE | FY23 HALF YEAR RESULTS | 24
Slide 25: Technology and innovation
Technology and innovation Metal Membrane Technology • Developed by FFI in partnership with CSIRO • Key to producing high-purity hydrogen from ammonia cracking process Tree Energy Solutions • Development of green hydrogen import facility in Germany WAE Technologies • Delivery of first prototype batte
Slide 26: Green market development
Green market development 5 FFI green energy projects • For Final Investment Decision this calendar year • Australia, Brazil, USA and Norway Norway • Providing potential for development of 300MW green hydrogen and green ammonia facility Gibson Island • Finalising Front End Engineering Design FORTESCU
Slide 27: FFI capital allocation
FFI capital allocation US$730 – US$830m FY23 anticipated operating expenditure US$230m of capital expenditure US$500 – US$600m of operating expenditure 10% of NPAT Capital allocation US$1.0bn Capital commitment unutilised FORTESCUE | FY23 HALF YEAR RESULTS | 27
Slide 28: Integrated operations and marketing
Integrated operations and marketing FORTESCUE | FY23 HALF YEAR RESULTS | 28
Slide 29: Integrated mine to market infrastructure
Integrated mine to market infrastructure FORTESCUE | FY23 HALF YEAR RESULTS | 29
Slide 30: Marketing strategy
Marketing strategy Direct engagement Customers and stakeholders Flexible and innovative Product and logistics offering Long term relationships Built on mutual respect and trust Product suite Aligns with the needs of the market FORTESCUE | FY23 HALF YEAR RESULTS | 30
Slide 31: Price realisations
Price realisations Platts 62 Fe Index $/dmt 250 200 150 100 50 0 Mar 20 Mar 21 Mar 22 Jul 20 Jul 21 Jul 22 Sep 20 Nov 20 Sep 21 Nov 21 Sep 22 Nov 22 May 20 May 21 May 22 Jan 20 Jan 21 Jan 22 Jan 23 Average price realisation of the Platts 62% CFR Index (%) 89% 91% 88% 86% 86% 84% 85% 82% 78% 73% 70%
Slide 32: Growth and development
Growth and development FORTESCUE | FY23 HALF YEAR RESULTS | 32
Slide 33: Iron Bridge
Iron Bridge US$3.9bn Capital estimate 67% Fe High grade magnetite concentrate 22mtpa First production at the end of March 2023 quarter FORTESCUE | FY23 HALF YEAR RESULTS | 33
Slide 34: Minerals exploration
Minerals exploration Pilbara • Extensive iron ore tenement footprint • Focus on programs at Nyidinghu and Mindy South Australia • Target generation for copper-gold in WA, NSW and SA • Drilling underway in NSW and SA International • Drilling programs in Argentina, Chile and Brazil • Activities in Lat
Slide 35: Belinga Iron Ore Project
Belinga Iron Ore Project High grade deposit • Very large scale, high Fe grade deposit • Geological similarities to the Simandou deposit • Dovetails with Pilbara operations First iron ore shipped this year • Legal, fiscal and regulatory regimes established • Ivindo Iron Joint Venture US$200m • Capita
Slide 36: We are Fortescue
We are Safety Integrity Fortescue Family Enthusiasm Empowerment Courage and determination Frugality Generating ideas Stretch targets Humility FORTESCUE | FY23 HALF YEAR RESULTS | 36
Slide 37: We are Fortescue fortescue.com
We are Fortescue fortescue.com