Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — FY2016 Earnings Presentation
40 slides from Fortescue's earnings presentation, Aug 22, 2016
Slide 1: FY16 Results
For personal use only FY16 Results
Slide 2: Forward looking statements
Forward looking statements For personal use only Important Notice Additional Information The purpose of this presentation is to provide general information about This presentation should be read in conjunction with the Annual Report at 30 Fortescue Metals Group Limited ("Fortescue"). It is not recom
Slide 3: Building a world class company
Building a world class company Core supplier to China’s growth For personal use only Safety focus First ore Low cost Engagement Empowerment Leadership in 2008 producer Shipped over 165-170mt Production rate 720mt Unique culture 3
Slide 4: Our Vision: The safest, lowest cost, most profitable iron ore producer
Our Vision: The safest, lowest cost, most profitable iron ore producer v Fortescue i Determination The New Force in Iro! Set yourself stretch targets Enthusiasm Empowerment Generating ideas
Slide 5: Delivering on targets
Delivering on targets For personal use only Focus on safety, productivity and efficiency in response to the market Safety 165-170mt shipped Productivity + efficiency Debt repayments Consistent dividend policy 5
Slide 6: FY16 snapshot
FY16 snapshot For personal use only Operational performance delivers sustainable cost reductions and financial results 169.4mt US$3.2bn US$5.2bn Shipped Underlying Net debt EBITDA C1 Cost US$985m A$ 12 cent $15.43/wmt Final dividend 43% reduction NPAT Refer to attached glossary for definition of non
Slide 7: Continuous + sustainable cost improvements
Continuous + sustainable cost improvements For personal use only Through development of assets, efficiencies, productivity and cost savings US$/wmt 1 Solomon operations 60 50 48 44 2 Blending strategy 58% Fe 40 34 3 Processing, wet plants + de-sands 30 27 15 4 Operational efficiencies 20 10 $12 - $1
Slide 8: Strip ratios
Strip ratios For personal use only FY17 strip ratios maintained at 1.1 OPF beneficiation Strip Ratios FY17 - FY21 LOM Blending Ore body Chichester 1.5 2.3 Optimisation modelling improving Solomon 1.3 1.8 strip ratios Combined 1.4 2.1 Mining Infill hygiene drilling 8
Slide 9: Breakeven price
Breakeven price For personal use only FY17 continuing to lower all in breakeven price on Platts 62% CFR basis US$/t 40 Fx:0.75 30 2.6 28.3 3.1 22.6 2.5 18.1 1.9 20 0.3 1.3 4.5 12-13 10 - C1 Shipping Royalty Admin Delivered Moisture Dmtu Total dmt Interest Capex Breakeven cost to China adjustments co
Slide 10: Financial performance
For personal use only Financial performance
Slide 11: Financial drivers
Financial drivers For personal use only Focused on delivering shareholder value SHAREHOLDER RETURNS AND VALUE Debt repayments and capital management Price realisations + cost improvements + lower capex 11
Slide 12: FY16 financial outcomes
FY16 financial outcomes For personal use only Operational performance delivering financial results US$985m US$1.6bn US$2.7bn NPAT Cash on hand Free cashflows 4.00 FY16 share price US$0.32 A$ 12 cent 3.50 3.00 83% 2.50 Earnings per share 36% dividend 2.00 210% payout ratio 1.50 1.00 Jul- Aug- Sep- Oc
Slide 13: Underlying EBITDA increased by 27%
Underlying EBITDA increased by 27% For personal use only Cost improvements offset falling iron ore price US$m Underlying EBITDA Margin 377 5,000 50% 1,956 45% 4,000 40% 70 3,195 3,000 70 18 29% 117 1,743 30% 2,506 2,000 20% 1,000 10% - 0% FY15 Volume C1 costs Shipping Price Royalty Fx Other FY16 FY1
Slide 14: FY16 Highlights
FY16 Highlights For personal use only Earnings increase driven by significant cost performance US$m Revenue US$m Underlying EBITDA US$m NPAT 985 10,000 3,500 1,000 3,195 8,574 8,000 7,083 2,800 800 2,506 6,000 2,100 600 4,000 1,400 400 316 2,000 700 200 - - - FY15 FY16 FY15 FY16 FY15 FY16 17% 27% 21
Slide 15: Cost savings delivered
Cost savings delivered For personal use only US$3.5bn in operating cost savings delivered since achieving full operational capacity US$bn 4.0 1.9 3.5 3.0 2.0 0.8 1.0 0.8 - FY14 FY15 FY16 Delivered savings 15
Slide 16: Returns to shareholders
Returns to shareholders For personal use only Increasing returns through operational performance US US Free cash flows per share A$ Dividends per share Earnings per share cents cents cents 15 87.4 15 45 90 31.6 30 60 10 45.3 5 15 30 5 10.2 - - - FY15 FY16 FY15 FY16 FY15 FY16 210% 93% 200% 16
Slide 17: Balance sheet
For personal use only Balance sheet
Slide 18: Cash flows
Cash flows For personal use only Strong positive cash margins generated by operations US$m Net cash flow from operations US$m Capital expenditure Free cash flows US$m 4,000 4,000 4,000 3,023 3,000 3,000 3,000 2,719 2,037 2,000 2,000 2,000 1,411 1,000 1,000 626 1,000 304 - - - FY15 FY16 FY15 FY16 FY1
Slide 19: Debt reduction
Debt reduction For personal use only Cash flows applied to reduce debt + gearing levels Gross debt Cash Net debt US$m US$m US$m 10,000 9,569 10,000 10,000 Why $2,541m in MR as comparative? 8,000 8,000 8,000 6,771 7,188 6,000 6,000 6,000 5,188 4,000 4,000 4,000 2,381 2,000 1,583 2,000 2,000 - - - FY1
Slide 20: Debt repayments
Debt repayments For personal use only Free cash flows lowering debt and gearing US$ millions % 16,000 80 14,000 70 12,000 60 10,000 50 8,000 40 6,000 12,691 30 10,533 9,557 9,569 4,000 20 7,159 7,188 6,771 5,188 2,000 10 - - FY13 FY14 FY15 FY16 Gross debt Net debt Gross gearing (RHS) Net gearing (RH
Slide 21: Debt maturity
Debt maturity For personal use only Flexibility to continue early repayments prior to first maturity in June 2019 $USm 6,000 5,000 4,000 3,000 2,000 3,676 1,000 2,160 478 - CY2016 0 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 Senior Secured Credit Facility Senior Unsecured Notes Senior Secured Notes R
Slide 22: Available cash balances
Available cash balances For personal use only Cash levels supporting additional repayments US$bn 1.8 1.6 • US$1.6bn cash at 30 June 1.4 Available for debt 1.2 repayment • Strong cash flows 1.0 0.8 • Target <40% gross gearing 0.6 Base liquidity 0.4 • Target liquidity US$1-1.5bn 0.2 0.0 FY16 cash bala
Slide 23: Capital expenditure
Capital expenditure For personal use only Capex sustainable at current levels FY17 Guidance US$m Capital expenditure 800 • Sustaining capex US$2/wmt 626 600 • Assessing funding options 400 304 340 – VLOCs US$270m 200 – Tugs US$90m 0 • D&A US$7.10/wmt FY15 FY16 FY17 Guidance Refer to attached glossar
Slide 24: For personal use only
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Slide 25: Core supplier to Asia
Core supplier to Asia For personal use only Well established 18% market share of imported iron ore to China Global steel production 2015 (mt) • Low impurity 58% Fe average 89 208 • High value in use 803 • Large diverse customer base 301 • Responsive to market needs 154 41 China India • Proximity to
Slide 26: Steel consumption to build economy
Steel consumption to build economy Steel demand – driven by policy decisions For personal use only Source: Wood Mackenzie 26
Slide 27: Chinese cities in 2030
Chinese cities in 2030 300 million people still to urbanise – 16 million per year For personal use only 70% of the population (1bn) will be living in cities Source: Wood Mackenzie 27
Slide 28: Iron ore supply in balance
For personal use only Mt 20 40 60 80 0 100 120 140 180 160 Jul-10 Sep-10 Source: Bloomberg and Umetal Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Port stocks remaining stable Mar-12 May-12 Iron ore supply in balance Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Ma
Slide 29: Price realisation
For personal use only $0 $100 $20 $40 $60 $80 US$/dmt 29/07/2014 29/08/2014 29/09/2014 29/10/2014 29/11/2014 Platts 62 CFR 29/12/2014 Price realisation 29/01/2015 28/02/2015 31/03/2015 30/04/2015 31/05/2015 30/06/2015 MBIO58 [P] CFR 31/07/2015 31/08/2015 Consistently realising at 85-90% of 62 Platts
Slide 30: Reserves and resources
Reserves and resources For personal use only
Slide 31: Resource portfolio supports asset base
Resource portfolio supports asset base For personal use only Largest Pilbara tenement footprint 12,000 2,463 2,463 2,463 10,000 Mineral Resources dry in situ (Mt) 2,463 740 740 740 8,000 2,013 624 1,032 624 624 4,877 4,793 6,000 4,755 3,504 3,070 3,070 2,860 4,000 1,715 2,224 695 303 491 491 6,706 6
Slide 32: Supporting our community
Supporting our community For personal use only
Slide 33: Building strong communities
Building strong communities For personal use only Creating opportunities through training, employment and business development 32 33
Slide 34: Championing diversity
Championing diversity For personal use only Workplace culture fundamental 34
Slide 35: Focused strategy
For personal use only Focused strategy
Slide 36: Moving down the global cost curve
Moving down the global cost curve For personal use only China's Iron Ore Supply CFR Costs (including royalties & ocean freight) 2012 2016 Source: Metalytics 26 May 2016 36
Slide 37: Strategic delivery
Strategic delivery For personal use only Culture, continuous improvement, speed and flexibility Consistent 165-170mtpa Lowering costs to US$12-13/wmt Maximising resource value Debt repayment Ongoing improvements 37
Slide 38: The new force in iron ore
The new force in iron ore For personal use only Continuous improvement, reliable and efficient delivery Sustainable low cost World class producer assets & people 165-170mt Unique culture Production rate drives performance 38
Slide 39: For personal use only
For personal use only www.fmgl.com.au @FortescueNews Proudly supporting:
Slide 40: Glossary
Glossary For personal use only C1: Operating costs of mining, processing, rail Underlying EBITDA: Earnings before interest, tax, depreciation and and port on a per tonne basis, including amortisation, exploration, development and other allocation of direct administration charges expenses. The reconc
Fortescue Metals Group — FY2016 Earnings Presentation on 6ix