Fortescue Ltd · ASX:FMG
Fortescue — H1 FY21 Earnings Presentation
43 slides from Fortescue's earnings presentation, Feb 18, 2021
Slide 1: FY21 Half Year Results
FY21 Half Year Results 18 February 2021 1
Slide 2: Important Notice
Important Notice Forward The purpose of this presentation is to provide general information about Fortescue Metals Group Ltd (“Fortescue”). It is not recommended that any person makes any investment decision in relation Looking to Fortescue based on this presentation. This presentation contains cert
Slide 3: World class company
World class company Long term sustainability Balance sheet strength Wholly Industry owned, fully leading integrated cost Vision supply chain position and Values Secure and reliable supplier Growth and of iron ore Enhanced development returns to shareholders 3
Slide 4: Integrated mine to market infrastructure
Integrated mine to market infrastructure Delivering sustained operational efficiencies 4
Slide 5: Our strategic focus
Our strategic focus Underpinned by operational excellence Sustainability and balance sheet strength ✓ Ensuring communities benefit from Fortescue’s success Optimising ✓ Returns and growth from our operations Diversifying ✓ Commodities that support decarbonisation Pursuing ✓ Green energy opportunitie
Slide 6: Approach to Sustainability
Approach to Sustainability We are a global force, committed to empowering thriving communities Setting Safeguarding the Creating positive high standards environment social change ▪ Employee health and safety ▪ Climate change action and ▪ Creating employment and disclosure business opportunities for
Slide 7: Setting high standards
Setting high Safety, diversity, integrity standards 2.1 TRIFR 13% improvement from 30 June 2020 20% female employment rate 10% Aboriginal employment rate across total workforce Recognition Inclusion in the 2020 Dow Jones Sustainability Indices 7
Slide 8: Protecting Aboriginal heritage
Protecting Detailed processes for Aboriginal heritage engagement and heritage management Seven agreements with Native Title Groups Heritage avoidance Primary objective ~6,000 heritage sites Protected and avoided 2.7 million ha of land Ethnographically surveyed 8
Slide 9: Safeguarding the environment
Safeguarding the An ambitious, industry leading environment emissions reduction target Net zero Operational emissions by 2040 26% reduction Scope 1 and Scope 2 emissions by 2030 Decarbonisation pathway Energy infrastructure to increase use of renewables Technology and innovation Hydrogen and battery
Slide 10: Pathway to decarbonisation
Pathway to decarbonisation Underpinned by practical initiatives that will deliver goals in an economically sustainable manner Chichester solar gas Pilbara Energy Connect Hydrogen hybrid project ▪ US$100 million investment by ▪ US$250 million Pilbara ▪ Reduce carbon emissions and Alinta Energy Transm
Slide 11: Creating positive social change
Creating positive Building thriving communities and social change empowering Aboriginal people through training, employment and business development 900 jobs to Aboriginal people via VTEC since 2006 Fortescue’s Trade Up Providing an accredited pathway to a trade qualification Billion Opportunities A
Slide 12: Safety and unique culture
Safety and Empowering the Fortescue family to look out unique culture for their mates on the journey to zero harm Total Recordable Injury Frequency Rate 9.2 7.6 6.0 5.1 4.3 3.7 2.9 2.8 2.4 2.1 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 H1 FY21 12
Slide 13: Ongoing response to COVID-19
No cases of COVID-19 across Fortescue’s Ongoing operational sites response to COVID-19 Incident Management Communications Team Providing regular updates to Regular meetings to review team members, contractors, operations and latest suppliers and key stakeholders government advice Strict hygiene and
Slide 14: H1 FY21 operational highlights
H1 FY21 Record half year shipments and first ore operational celebrated at the Eliwana mine highlights US 90.7 mt shipped $12.78 /wmt Record shipments C1 cost 2% on H1 FY20 No change US $114 /dmt 90% Average revenue Average revenue realisation 42% on H1 FY20 7% on H1 FY20 14
Slide 15: H1 FY21 financial highlights
H1 FY21 financial highlights US $9.3bn US $6.6bn Revenue Underlying EBITDA at a 71% margin US $4.1bn 47% Net profit after tax Return on equity US $1.33 A $1.47 Earnings per share Interim dividend (A$1.84) Payout ratio of 80% 15
Slide 16: H1 FY21 financial highlights
H1 FY21 financial US US highlights $4.4bn $2.5bn Net operating cashflow Free cashflow US $4.0bn US $110m Cash on hand Net debt 21% 0.4x Gross gearing Gross debt / EBITDA 16
Slide 17: Shareholder returns
Shareholder returns Dividend policy to payout 50 to 80 per cent of full year NPAT, targeting Highest single dividend in the top end of the range Fortescue’s history A $1.47per share Fully franked interim dividend 80% of H1 FY21 NPAT Dividend payout ratio Growth Intention to allocate 10 per cent of N
Slide 18: Revenue and earnings
Revenue and earnings Record half year revenue and earnings Revenue (US$m) Underlying EBITDA NPAT 6,639 9,335 4,084 6,425 6,485 6,335 4,414 4,228 4,147 2,543 2,453 2,282 3,540 1,633 644 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 FY19 FY19 FY20 FY20 FY21 FY19 FY19 FY20 FY20 FY21 FY19 FY19 FY20 FY20
Slide 19: Underlying EBITDA
Underlying EBITDA Strong price realisations, higher volumes and disciplined cost control 19
Slide 20: Focus on margins
Focus on Generating strong margins through the cycle margins Prices and EBITDA margin (US$/dmt) Underlying EBITDA Realised price 62 Platts CFR Index Average Underlying EBITDA Average realised price 140 120 100 80 80 60 40 52 39 20 30 21 20 0 FY16 FY17 FY18 FY19 FY20 H1 FY21 20
Slide 21: Strong cashflow generation
Strong cashflow generation After reinvesting in the business and investing in growth Net cash from operations (US$m) Capital expenditure Free cash flow 4,410 3,425 3,301 3,114 2,906 2,519 2,257 2,192 1,891 948 1,109 857 526 519 422 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 FY19 FY19 FY20 FY20 FY2
Slide 22: Capital expenditure
Capital expenditure Increased investment in major projects H1 FY21 Capital expenditure (US$m) FY20 Capital expenditure (US$m) 647 771 US US US$1,890m US$1,966m 1,079 1,185 58 116 - Sustaining and development capital Sustaining and development capital Exploration and studies Exploration and studies M
Slide 23: Balance sheet capacity
Balance sheet capacity Maintain targeted investment grade credit metrics Gross debt (US$m) Debt maturity profile excluding leases (US$m) 6,771 Syndicated Term Loan Senior Unsecured Notes 5,113 750 750 4,471 600 600 3,975 3,952 4,084 500 FY16 FY17 FY18 FY19 FY20 H1 FY21 CY20 CY21 CY22 CY23 CY24 CY25
Slide 24: Disciplined capital allocation
Disciplined capital allocation Aggregate earnings and cashflows FY14 – H1 FY21 1 Includes share buyback 2 From peak debt of US$12.7 billion at 30 June 2013, including lease payments 24
Slide 25: High returns on capital
High returns A profitable and capital efficient business on capital Return on capital employed, ROCE1 (%) ROCE Average ROCE 45 46 40 35 37 30 25 29 20 20 15 10 10 11 5 0 FY16 FY17 FY18 FY19 FY20 H1 FY21 1ROCE is calculated as earnings before interest and tax divided by average capital (total assets
Slide 26: Capital returns a priority
Targeting the top end of the dividend Capital returns policy to payout 50-80 per cent of full year a priority net profit after tax Dividends (A$/share) and payout ratio (%) 2.00 77% 0.9 78% 1.76 80% 1.80 0.8 1.60 0.7 1.47 62% 1.40 0.6 52% 1.14 1.20 0.5 1.00 38% 36% 0.4 0.80 0.3 0.60 21% 21% 0.45 17%
Slide 27: Integrated operations
Integrated operations 27
Slide 28: Forefront of innovation
Forefront of innovation Delivering safety, productivity and efficiency benefits Operational excellence Data and analysis Renewable energy Optimising value from Driving informed Maximising our asset base decision making opportunities Current Current Current • Autonomous haulage • Fortescue Hive • Sol
Slide 29: Value chain
Value chain ¢. = i 4 Shippin, and recovery a port °- loading "= °— =—_s—_2 2222 7.2.2 : Modelling, j Blending and . . planning and ® Processing stockpiling Ue | Marketing ching port development sales of Fortescue Exploration and discovery
Slide 30: Operational development projects
Autonomous haulage Operational Completion of Chichester Hub project development projects >62 million kilometres safely travelled 183 trucks in operation Wet High Intensity Magnetic Separation (WHIMS) plant Maximising production rates Enhancing the value of our ore Extension of relocatable conveyor E
Slide 31: Eliwana Mine and Rail
Eliwana Mine and Rail Delivered in line with schedule at an industry-low capital intensity Eliwana Ore Processing Facility Eliwana rail 31
Slide 32: Marketing strategy
Marketing Aligning with needs of customers and market; strategy creating value through supply chain optimisation Integrated operations Direct customer and marketing engagement Timely and coordinated supply Aligning our products with what chain response to customer our customers need and value needs
Slide 33: Global steel demand exceeded expectations
Global steel demand exceeded expectations With record crude steel production in China, as well as robust global recovery China crude steel production (2020) Pig iron production Steel margins (2H 2020) (mt) RMB/t (mt) 85 1000 100 80 900 95 90 800 75 85 700 70 80 600 65 500 75 70 60 400 65 300 55 60 2
Slide 34: Supporting strong iron ore demand
Supporting strong iron ore demand China’s iron ore imports increase to 1.7bn tonnes in calendar year 2020 YoY China iron ore imports Iron ore stocks Iron ore prices (days of consumption) (mt) 120 100 200 90 100 180 80 160 80 70 140 60 120 60 50 100 40 80 40 30 60 20 40 20 10 20 - 0 0 Jan 19 Apr 19 J
Slide 35: Strong realisations
Fortescue’s average realised price of US$114/dmt Strong or 90% of the Platts CFR index realisations $126.1 $95.3 $91.1 $91.4 Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Platts 62% Fe Index Half yearly Platts price SSF (Portside) FB (Portside) 92% 91% 89% 86% 86% 86% 83% 82% Q3 FY19 Q4 FY
Slide 36: Growth and development
Growth and development 36
Slide 37: Iron Bridge Magnetite Project
Detailed review complete, further Iron Bridge technical and commercial assessment underway Magnetite Project Up to US$3.0 billion Total capital estimate subject to validation through further technical assessment and Joint Venture approval 22mtpa Production capacity; first production revised to secon
Slide 38: Exploration
Exploration Western Australia Extensive tenement footprint Focus on copper and commodities that support decarbonisation Australia NSW 3,000km2 tenure SA 15,000km2 tenure South America Argentina 450,000ha of tenements Ecuador 135,000ha of tenements Colombia, Chile, Peru Other international opportunit
Slide 39: Fortescue Future Industries
Fortescue Future Renewable energy driving new Industries green industries Assessing A portfolio of renewable energy and green industry opportunities Maintaining Fortescue’s disciplined capital allocation framework and dividend policy Funding Separately secured without recourse to Fortescue 39
Slide 40: Building on our track record
Building on our Leveraging Fortescue’s value track record chain and project development capabilities Rapid development Ability to safely develop large, complex projects quickly and at low cost Innovative culture Adapting technology and innovation to drive safety and productivity improvements Stakeho
Slide 41: FY21 guidance
FY21 guidance 178 – 182 mt Iron ore shipments US$13.50 – US$14.00/wmt C1 cost based on assumed exchange rate of AUD:USD 0.75 US$3.0 – US$3.4 billion Capital expenditure at the upper end of the range 41
Slide 42: Our Purpose
Our Purpose Thriving communities | Global force Fortescue’s Values
Slide 43: Visit Fortescue
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