Slide 1: Fortescue Metals Group FY18 Results
Fortescue Metals Group FY18 Results 20 August 2018
Slide 2: Forward looking statements
Forward looking statements Disclaimer Important Notice Additional Information The purpose of this presentation is to provide general information about Fortescue This presentation should be read in conjunction with the Annual Report at Metals Group Limited ("Fortescue"). It is not recommended that an
Slide 3: Building a world class company
Building a world class company Shipped over Core supplier 1 billion to China tonnes Low cost 170mt producer Annual production rate 03 FY18 Full Year Results
Slide 4: Safety and unique culture
Safety and unique culture Looking out 3.7 for our mates TRIFR 23% 94% reduction Safety and Culture SIFR survey participation 04 FY18 Full Year Results
Slide 5: Fortescue's values
Fortescue’s values Our Vision: The safest, lowest cost, most profitable mining company 05 FY18 Full Year Results
Slide 6: Delivering FY18 results
Delivering FY18 results TRIFR 3.7 170mt C1 cost Shipped US$12.36/wmt A$0.23per share 24% US$4.0bn Total dividends Net gearing Gross debt 62% of FY18 NPAT 06 FY18 Full Year Results
Slide 7: Integrated mining and infrastructure operations
Integrated mining and infrastructure operations Focus on safety, production and cost 07 FY18 Full Year Results
Slide 8: Sustainable cost improvements
Sustainable cost improvements C1 US$/wmt 48 44 Structural improvements Solomon + blending + processing 34 27 Productivity and efficiency FY19 Utilisation, recoveries, maintenance 15 Guidance 13 12.36 12 - 13 Innovation and technology Autonomy, gas, ore carriers, data analysis FY12 FY13 FY14 FY15 FY1
Slide 9: Lowest cost provider of seaborne iron ore to China
Lowest cost provider of seaborne iron ore to China 2012 2018 (projected) 09 Q4 FY18 FY18 Full Highlights Document March Year Results 2019 Metalytics – October 2017 Source:
Slide 10: Corporate Social Responsibility
Corporate Social Responsibility 10 FY18 Full Year Results
Slide 11: Communities benefit from our success
Communities benefit from our success Empowering 14.1% Aboriginal employment communities A$2bn contracts with Aboriginal businesses 814 Aboriginal people employed via VTEC A$50m Guaranteed Leasing Facility 11 FY18 Full Year Results
Slide 12: Embracing diversity
Embracing diversity Practical initiatives 17.4% female employment in the workplace 24% female senior managers 971 stays in Fortescue Family room Flexible working arrangements 12 FY18 Full Year Results
Slide 13: Safeguarding the environment
Safeguarding the environment Responsible 91.7 million kL of water directly reinjected into aquifers environmental management 86% recycled waste GHG emissions intensity reduced by 13.5% since FY15 13 FY18 Full Year Results
Slide 14: Protecting human rights
Protecting human rights Modern Slavery Voluntary Statement Zero tolerance to modern slavery Work with all suppliers Fortescue supports the introduction of the Australian Modern Slavery Act 14 FY18 Full Year Results
Slide 15: Financial performance
Financial performance 15 FY18 Full Year Results
Slide 16: FY18 financial outcomes
FY18 financial outcomes US$3.2bn US$1.1bn US$878m Underlying Underlying NPAT Reported NPAT EBITDA US$3.0bn US$863m A$ 0.12per share Cash from Fully franked Cash on hand operations final dividend 16 FY18 Full Year Results
Slide 17: FY18 highlights
FY18 highlights Continuing to deliver strong returns US$m Revenue US$m Underlying EBITDA US$m Underlying NPAT 12,000 6,000 3,000 10,000 5,000 2,500 8,000 4,000 2,000 6,000 3,000 1,500 4,000 2,000 1,000 2,000 1,000 500 - - - FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 1
Slide 18: Underlying EBITDA
Underlying EBITDA Strong margins maintained from an average received price US$44/dmt US$m Underlying EBITDA margin 5,000 60% 4,744 18 1,531 56% 4,000 46% 77 222 129 3 3,182 40% 3,000 2,000 20% 1,000 - 0% FY17 Volume Price C1 Shipping Royalty Other FY18 FY17 FY18 18 costs FY18 Full Year Results
Slide 19: Price and margins
Price and margins Cost leadership and efficient operations generating cash margins US$/dmt 140 120 100 80 60 40 20 51 30 17 21 20 - FY14 FY15 FY16 FY17 FY18 Underlying EBITDA, US$/dmt 62 Platts CFR Index, US$/dmt 19 Fortescue r ealised price, US$/dmt Avg Underlying EBITDA, US$/dmt FY18 Full Year Res
Slide 20: Cash flows
Cash flows Generating strong underlying cashflows from operations US$m Net cash from operations US$m Capital expenditure US$m Free cash flows 4,256 4,000 4,000 4,000 3,540 3,000 3,000 3,000 2,000 2,000 2,000 1,601 1,000 1,000 890 1,000 716 711 - FY17 FY18 - FY17 FY18 - FY17 FY18 20 FY18 Full Year Re
Slide 21: Net debt
Net debt Reduction in net debt after adjusting for timing of FY17 tax payments US$m Net debt Key FY18 cash outflows 3,000 667 Tax (FY17 + FY18) 1,062 Dividend 874 2,000 Capital 890 3,112 2,633 Net debt repayments 474 1,000 Interest 368 - FY17 FY18 Cash reserved for FY17 tax payments 21 FY18 Full Yea
Slide 22: Debt reduction
Debt reduction Disciplined allocation of free cash flow to reduce debt and gearing levels US$m % 16,000 80 14,000 70 12,000 12,691 60 10,000 50 10,533 9,557 9,569 8,000 40 6,000 7,159 7,188 30 6,771 4,000 5,188 20 4,471 3,975 2,000 3,112 10 2,633 - - FY13 FY14 FY15 FY16 FY17 FY18 Debt Net debt Gross
Slide 23: Debt profile
Debt profile Flexible structure, lower annual interest costs with investment grade terms supports ongoing operations and future growth US$m 2,000 1,500 1,400 1,000 750 750 500 500 0 CY2018 CY2019 CY2020 CY2021 CY2022 CY2023 CY2024 Syndicated Term Loan Senior Unsecured Notes 23 FY18 Full Year Results
Slide 24: Credit metrics
Credit metrics Key metrics reflecting financial strength Gross gearing (%) Net gearing (%) 56 56 45 49 49 31 38 29 21 24 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 Gross debt to underlying EBITDA (x) Net debt to underlying EBITDA (x) 3.8 2.9 2.1 1.7 1.6 1.2 1.3 0.9 1.0 0.6 FY14 FY15 FY16 FY17
Slide 25: Capital allocation
Capital allocation Increased returns to shareholders following rapid de-gearing of balance sheet FY16 – US$3.1bn FY17 – US$4.0bn FY18 – US$2.2bn Capital expenditure Net debt repayments Dividends 25 FY18 Full Year Results
Slide 26: Returns to shareholders
Returns to shareholders Dividend payout ratio policy 50% - 80% of full year NPAT US$ A$ cents Earnings per share cents Declared dividends + payout ratios % 50 70 45 90 88 45 60 40 75 67 35 50 60 30 40 25 23 45 20 30 20 32 15 30 28 15 20 10 15 10 5 10 5 - - 0 26 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY1
Slide 27: FY19 capital expenditure
FY19 capital expenditure Disciplined capital allocation, investing in the core iron ore business, innovation and growth 80 Sustaining capital ~$3.50/wmt 100 100 Investing in innovation 580 Exploration and growth 340 Eliwana mine and rail Project Sustaining capital Eliwana Exploration 27 Development
Slide 28: Eliwana mine and rail project
Eliwana mine and rail project US$1.275bn capital investment World leading development 143kms rail; 30mtpa dry OPF Initial strip ratio 1.1:1 First ore on train Dec 2020 28 FY18 Full Year Results
Slide 29: Market
Market 29 FY18 Full Year Results
Slide 30: Core supplier to Asia
Core supplier to Asia Competitive value in use 2017 global steel production 1,691mt Diverse customer base 572 832 Responsive to market needs Proximity to high growth region 82 101 105 China Japan India United States Rest of World 30 FY18 Full Year Results Source: World Steel Association Crude Steel
Slide 31: Developing and emerging Asia
Developing and emerging Asia Representing two thirds of global growth 31 Q4 FY18 FY18 Full Highlights Document Year Results March Source: 2019 Economic Database; GDP % change; April 2018 IMF World
Slide 32: Iron ore prices
100% 110% 120% 130% 140% 150% 40% 50% 60% 70% 80% 90% 1/17/2016 FY18 Full Year Results 2/17/2016 3/17/2016 4/17/2016 5/17/2016 6/17/2016 7/17/2016 Platts 62 8/17/2016 9/17/2016 10/17/2016 11/17/2016 12/17/2016 Platts 65 1/17/2017 2/17/2017 3/17/2017 4/17/2017 5/17/2017 6/17/2017 Iron ore prices 7/17
Slide 33: Steel mill profitability
Steel mill profitability Strong growth in steel margins High steel margins Mills focus on productivity High Fe ores in demand 33 FY18 Full Year Results Source: Wood McKenzie
Slide 34: Product and processing strategy
Product and processing strategy Eliwana Blending Key to 60% Fe Chichester product Solomon Eliwana Greater Operational Optimise margins flexibility 34 FY18 Full Year Results
Slide 35: Integrated operations
Integrated operations 35 FY18 Full Year Results
Slide 36: West Pilbara Fines
West Pilbara Fines 60% iron, low Underpinned by Eliwana’s alumina product maiden 60.1% Fe reserve Flexibility to optimise margins Maintain low cost base 36 FY18 Full Year Results
Slide 37: FY18 production
FY18 production Leveraging operational flexibility and integrated operations Cloudbreak 170mt Firetail Fortescue Blend 75mt Christmas Creek Kings Super Special Fines 80mt Kings Fines 15mt 37 FY18 Full Year Results
Slide 38: FY19 and beyond
FY19 and beyond Development of Eliwana underpins long term production of West Pilbara Fines Eliwana From FY21 Cloudbreak West Pilbara Fines Firetail Fortescue Blend Christmas Creek Super Special Fines Kings Kings Fines 38 FY18 Full Year Results
Slide 39: Strip ratios
Strip ratios FY19 average strip ratio of 1.5 OPF beneficiation Strip Ratios FY19- FY23 LOM Chichester 1.7 2.9 Blending Ore body Optimise for modelling margin + Solomon 1.3 1.5 mine lives Eliwana* 1.1 2.2 Mining Combined 1.5 2.4 hygiene Infill drilling 39 FY18 Full Year Results *From Dec 2020
Slide 40: Innovation
Innovation 40 FY18 Full Year Results
Slide 41: Embracing technology
Embracing technology World leading autonomous Autonomous Relocatable haulage drills Conveyor technology Data analytics Remote Fortescue Ore Systems and integrated Carriers processes operations centre Purpose built 41 FY18 Full Year Results
Slide 42: Growth and development
Growth and development 42 FY18 Full Year Results
Slide 43: Resource portfolio supports asset base
Resource portfolio supports asset base 13 billion tonnes of hematite, 8 billion tonnes of magnetite maintain long mine life 14,000 12,000 Mineral Resources dry in situ (Mt) 10,000 8,000 6,000 4,000 2,000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 43 Chichester Hub Greater Chichester Hu
Slide 44: Significant Pilbara footprint for long life production
Significant Pilbara footprint for long life production 44 FY18 Full Year Results
Slide 45: Active exploration
Active exploration Pilbara NSW Iron ore, lithium ~2,000km2 tenure South South Australia America ~6,000km2 tenure Ecuador, Colombia Argentina 45 FY18 Full Year Results
Slide 46: Focussed strategy
Focussed strategy 46 FY18 Full Year Results
Slide 47: FY19 Guidance
FY19 Guidance 165-173mt US$12-13/wmt Shipments C1 cost US$1.2bn Dividend policy 50-80% Capital spend pay-out of NPAT 47 FY18 Full Year Results
Slide 48: Key strategic focus
Key strategic focus Balance sheet strength Long term sustainability Growth and development options Returns to shareholders 48 FY18 Full Year Results
Slide 49: Fortescue www.fmgl.com.au
4: Fortescue www.fmgl.com.au The New Force in Iron Ore WY FortescueNews WE minderoo
Slide 50: Glossary
Glossary C1 - Operating costs of mining, processing, rail and port on a per tonne basis, Underlying EBITDA - Earnings before interest, tax, depreciation and amortisation, including allocation of direct administration charges and production overheads. exploration, development and other expenses. CFR