Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — CLSA (September 2018)
38 slides from Fortescue's conference presentation, Sep 11, 2018
Slide 1: Fortescue Metals Group CLSA September 2018
For personal use only Fortescue Metals Group CLSA September 2018
Slide 2: Disclaimer
Forward looking For personal use only 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 n
Slide 3: Building a world class company
Building a world class company For personal use only 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 For personal use only 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 For personal use only Our Vision: The safest, lowest cost, most profitable mining company 05 FY18 Full Year Results
Slide 6: Delivering FY18 results
Delivering For personal use only FY18 results TRIFR 3.7 170mt C1 cost Shipped US$12.36/wmt A$0.23per share 24% US$4.0bn Total dividends Net gearing Gross debt 62% of FY18 NPAT 06 FY18 Full Year Results
Slide 7: Integrated mining and infrastructure operations
Integrated mining and infrastructure operations For personal use only Focus on safety, production and cost 07 FY18 Full Year Results
Slide 8: Placeholder – new corporate video
For personal use only • PLACEHOLDER – NEW CORPORATE VIDEO 8
Slide 9: Sustainable cost improvements
Sustainable cost improvements For personal use only C1 US$/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 F
Slide 10: Financial performance
Financial performance For personal use only 15 FY18 Full Year Results
Slide 11: FY18 financial outcomes
FY18 financial outcomes For personal use only US$3.2bn US$1.1bn US$878m Underlying Underlying NPAT Reported NPAT EBITDA US$3.0bn A$ US$863m 0.12per share Cash from Fully franked Cash on hand operations final dividend 16 FY18 Full Year Results
Slide 12: FY18 highlights
FY18 highlights For personal use only Continuing to deliver strong returns US$m US$m Underlying EBITDA US$m Underlying NPAT Revenue 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
Slide 13: Underlying EBITDA
Underlying EBITDA For personal use only 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 F
Slide 14: Price and margins
Price and margins For personal use only 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$/dmt 19 Fortescue realised price, US$/dmt Avg Underlying EBITDA, US$/d
Slide 15: Credit metrics
Credit metrics For personal use only 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
Slide 16: Capital allocation
Capital allocation For personal use only Increased returns to shareholders following rapid de-gearing of balance sheet FY16 – US$3.1bn FY17 – US$4.0bn FY18 – US$2.2bn Capital expenditure Net debt repayments Dividends 25 FY18 Full Year Results
Slide 17: Returns to shareholders
Returns to shareholders For personal use only Dividend payout ratio policy 50% - 80% of full year NPAT US$ A$ Earnings per share cents Declared dividends + payout ratios % cents 50 70 45 88 45 90 60 40 75 67 35 50 60 30 40 25 23 45 20 30 20 32 15 28 30 15 20 10 15 10 5 10 5 - - 0 26 FY14 FY15 FY16 F
Slide 18: FY19 capital expenditure
FY19 capital expenditure For personal use only 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 Explo
Slide 19: Eliwana mine and rail project
Eliwana mine For personal use only 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 20: Market
Market For personal use only 29 FY18 Full Year Results
Slide 21: Core supplier to Asia
Core supplier For personal use only to Asia Competitive value in use 2017 global steel production 1,691mt Diverse customer base 572 832 Responsive to market needs 82 Proximity to high growth region 101 105 China Japan India United States Rest of World 30 FY18 Full Year Results Source: World Steel As
Slide 22: Developing and emerging Asia
Developing and For personal use only 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 23: Iron ore prices
For personal use only 40% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 17/01/2016 FY18 Full Year Results 17/02/2016 17/03/2016 17/04/2016 17/05/2016 17/06/2016 17/07/2016 Platts 62 17/08/2016 17/09/2016 17/10/2016 17/11/2016 17/12/2016 Platts 65 17/01/2017 17/02/2017 17/03/2017 17/04/2017 17/05
Slide 24: Steel mill profitability
Steel mill profitability For personal use only 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 25: Product and processing strategy
Product and processing strategy For personal use only Eliwana Blending Key to 60% Fe Chichester product Solomon Eliwana Greater Operational Optimise flexibility margins 34 FY18 Full Year Results
Slide 26: West Pilbara Fines
West Pilbara For personal use only 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 27: FY18 production
FY18 production For personal use only 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 28: FY19 and beyond
FY19 and beyond For personal use only 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 29: Innovation
Innovation For personal use only 40 FY18 Full Year Results
Slide 30: Embracing technology
Embracing technology For personal use only World leading autonomous Autonomous Relocatable haulage drills Conveyor technology Data analytics Remote Fortescue Ore Systems and integrated Carriers processes operations centre Purpose built 30 FY18 Full Year Results
Slide 31: Growth and development
Growth and development For personal use only 42 FY18 Full Year Results
Slide 32: Significant Pilbara footprint for long life production
Significant Pilbara footprint for long life production For personal use only 44 FY18 Full Year Results
Slide 33: Active exploration
Active For personal use only 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 34: Focussed strategy
Focussed strategy For personal use only 46 FY18 Full Year Results
Slide 35: FY19 Guidance
FY19 Guidance For personal use only 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 36: Key strategic focus
Key strategic focus For personal use only Balance sheet strength Long term sustainability Growth and development options Returns to shareholders 48 FY18 Full Year Results
Slide 37: Fortescue: The New Force in Iron Ore
For personal use only Fortescue The New Force in Iron Ore www.fmgl.com.au Ww FortescueNews WE minderoo
Slide 38: Glossary
Glossary For personal use only 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 an