Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — H1 FY2016 Earnings Presentation
39 slides from Fortescue's earnings presentation, Feb 24, 2016
Slide 1: HY16 Results
For personal use only HY16 Results Working together. Delivering 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 165mt Production rate 620mt 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 4: Ww Fortescue Integrity Determination Set yourself Enthusiasm Empowerment Generating ideas Frugality
Slide 5: Strategic delivery of targets
Strategic delivery of targets For personal use only Culture, continuous improvement, speed and flexibility maximise asset base FY14 165mt achieved & maintained FY12-16 Costs to $13/t FY16 exit FY15-16 Capex lowered < $2/t FY13-16 Net debt $4.4bn lower FY11 Consistent dividend policy 5
Slide 6: 1HY16 Earnings
1HY16 Earnings For personal use only Operational performance + sustainable cost reductions support financial results Underlying NPAT EBITDA 1 84mt shipped US$319m Rate maintained US$1.3bn Capex $88m Net debt Interim dividend A$0.03/share 1HFY16 US$1.1bn lower 1 Refer to attached glossary for definit
Slide 7: Continuous + sustainable cost improvements
Continuous + sustainable cost improvements For personal use only Through development of assets, efficiencies, productivity and cost savings US$/wmt 1 Solomon operations 60 50 48 44 2 Blending strategy 58% Fe 40 34 3 Processing, wet plants + de-sands 30 27 20 15 4 Operational efficiencies Exit FY16 a
Slide 8: Delivering US$13/wmt
Delivering US$13/wmt For personal use only Continuing efficiency and productivity improvements Savings Sustainable cost reductions Savings initiatives (US$/wmt) US$/wmt 16 • Improved upgrades and yield Processing • Shutdown optimisation 0.70 14 3 • Enhanced plant reliability 1 12 • Maximising equipm
Slide 9: Breakeven index price
Breakeven index price For personal use only Continuing to reduce breakeven price US$/t 40 USD:AUD 0.71 3.3 28.8 30 2.5 1.5 23.0 3.2 20 0.4 18.3 1.4 3.5 13.0 10 0 C1 exit rate Shipping Royalty Admin Delivered Interest Sustaining Total wmt Moisture Dmtu Breakeven cost to China capex cost adjustments p
Slide 10: Operating and financial performance
For personal use only Operating and financial performance
Slide 11: Financial keys
Financial keys For personal use only Maintaining margins through cost + production performance C1 cost Operating cashflow $16/wmt US$3.5bn US$1.4bn Operating cost savings 1HFY16 FY14 - FY16 US$1.1bn Net debt US$200m Debt repurchased US$6.1bn Sustaining capital FY16 11
Slide 12: Earnings
Earnings For personal use only Operational performance supports strong financial results Revenue and Price Underlying EBITDA, US$ millions 6 140 Price realisation, US$/dmt Operating revenue, US$bn 3,220 105 4 2,416 70 1,440 1,301 2 1,066 35 0 - 1HY14 2HY14 1HY15 2HY15 1HY16 1HY14 2HY14 1HY15 2HY15 1
Slide 13: Underlying EBITDA
Underlying EBITDA For personal use only Cost + production performance offsetting price weakness Underlying EBITDA, US$ millions Underlying EBITDA Margin 55% 1,387 41% 39% Average 30% 29% 1,440 27 96 1,301 54 27 1,568 HY15 Volume Cost Price Royalty Fx Other HY16 1HY14 2HY14 1HY15 2HY15 1HY16 13
Slide 14: Cash savings
Cash savings FY14 – 16 cash savings since achieving full operating capacity For personal use only US$bn 4.0 3.0 0.8 1.1 2.0 3.5 2.7 0.8 1.0 0.8 - FY14 FY15 1HY16 Delivered savings Expected 2HY16 Savings FY14 - FY16 14
Slide 15: Balance sheet
For personal use only Balance sheet
Slide 16: Available cash balances
Available cash balances For personal use only Operating cash flows supporting continuing debt repayments US$bn • US$2.3bn cash at 31 Dec 2.5 2 • Strong cash flows Available for 1.5 debt repayment • Target 40% gearing 1 (Debt:Debt + equity) 0.5 Base liquidity • Target liquidity US$1-1.5bn 0 1H16 cash
Slide 17: Capital expenditure
Capital expenditure For personal use only Post expansion, capex is sustainable at current levels Capital profile • Sustaining capex US$200m US$bn mt shipped 7.5 175 • Sustainable mine lives 6.0 140 4.5 105 • No expansion capex 3.0 70 1.5 35 • D&A ~US$7.50/wmt 0.0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 0
Slide 18: Debt maturity profile
Debt maturity profile For personal use only Net debt reduced by US$4.4bn to date US$ millions 5,000 4,839 4,000 3,000 2,000 1,000 2,160 Extended Runway 577 478 0 CY2016 0 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 Senior Secured Credit Facility Senior Unsecured Notes Senior Secured Notes 18
Slide 19: Debt repayments
Debt repayments For personal use only Free cash flows support debt reduction to initial 40% gearing target US$ millions % 14,000 80 12,000 70 60 10,000 50 8,000 40 12,691 6,000 10,533 30 9,557 9,569 4,000 8,448 7,159 7,188 20 6,130 2,000 10 - 0 FY13 FY14 FY15 HY16 Total Debt Net Debt Net Gearing (RH
Slide 20: Key credit metrics
Key credit metrics For personal use only Operating cash flows supporting metrics Cash and debt (US$bn) Gearing: Debt / (Debt + Equity) 11.6 9.6 9.6 63% 9.1 8.4 56% 56% 54% 52% 2.9 2.4 1.6 2.4 2.3 1HY14 2HY14 1HY15 2HY15 1HY16 1HY14 2HY14 1HY15 2HY15 1HY16 Underlying EBITDA / Interest Debt / Underlyi
Slide 21: Maximising value
For personal use only Maximising value
Slide 22: Product strategy
Product strategy For personal use only Strategy continues to evolve to maximise value from asset base Solving to maximise • Optimised 58% product range • Product blending Product • Enhanced processing • Improved ore body definition Mine Costs Life 22
Slide 23: Revised strip ratios
Revised strip ratios For personal use only FY16 strip ratio remains consistent in 2HFY16 at 1.2 Maintained mine life FY17 - FY20 LOM Chichester 1.6 2.3 C1 Solomon 1.2 1.8 Strip Costs Combined 1.4 2.1 ratios Improvements to continue as ore processing and blending optimised 23
Slide 24: Market
For personal use only Market
Slide 25: Core supplier to Asia
Core supplier to Asia For personal use only Well established 17% market share of imported iron ore to China • Low impurity 58% Fe average • High value in use • Large diverse customer base • Reliable consistent delivery • Proximity to high growth region 25
Slide 26: China's long term growth remains strong
China’s long term growth remains strong For personal use only 300 million people expected to be urbanised by 2030 • Steel stock-in-use 1/3 USA • Steel demand above 800mtpa • Competitive and rising steel exports: - One Belt One Road over billion tonnes • Short term growth stabilising • Real estate ma
Slide 27: Steel consumption to build economy
Steel consumption to build economy Above 800mtpa – driven by policy decisions For personal use only Source: Wood Mackenzie 27
Slide 28: 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 28
Slide 29: Iron ore supply in balance…sentiment driving price
Iron ore supply in balance…sentiment driving price For personal use only Port stocks remaining stable Days Coverage US$ 50 $210 IO Inventory days coverage (days) $190 62% Fe CFR (RHS) 40 $170 $150 30 $130 $110 20 $90 $70 10 $50 0 $30 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr
Slide 30: Price realisation
For personal use only US$/dmt $20 $40 $80 $100 $60 $0 29/07/2014 29/08/2014 29/09/2014 29/10/2014 Platts 62 CFR 29/11/2014 Price realisation 29/12/2014 29/01/2015 28/02/2015 31/03/2015 30/04/2015 MBIO58 [P] CFR 31/05/2015 30/06/2015 Consistently realising at 85-90% of 62 Platts index 31/07/2015 31/0
Slide 31: Reserves and resources
For personal use only Reserves and resources
Slide 32: Resource portfolio supports asset base
Resource portfolio supports asset base For personal use only Largest Pilbara tenement footprint 12,000 2,463 2,463 Mineral Resources dry in situ (Mt) 10,000 2,463 740 740 8,000 2,013 624 1,032 624 624 6,000 4,877 4,793 3,504 3,070 3,070 2,860 4,000 2,224 1,715 695 303 491 695 695 5,504 695 695 695 5
Slide 33: Supporting our local community
For personal use only Supporting our local community
Slide 34: Ending Aboriginal disparity in the Pilbara
Ending Aboriginal disparity in the Pilbara For personal use only Creating opportunities through training, employment and business opportunity 34
Slide 35: Focused strategy
For personal use only Focused strategy
Slide 36: Strategic delivery
Strategic delivery For personal use only Culture, continuous improvement, speed and flexibility maximise asset base Consistent 165mtpa Lowering costs to US$13/wmt Maximising cash flows Debt repayment Expect further improvements 36
Slide 37: The new force in iron ore
The new force in iron ore For personal use only Continuous improvement, reliable + efficient delivery Sustainable low cost World class producer assets & people 165mt Unique culture drives performance Production rate 37
Slide 38: For personal use only
For personal use only www.fmgl.com.au @FortescueNews Proudly supporting:
Slide 39: Glossary
Glossary For personal use only C1: Operating costs of mining, processing, rail and port. The reconciliation of C1 to the amounts disclosed in the financial statements prepared under the Australian accounting standards is provided in the Financial Report for the half year ended 31 December 2015 accom
Fortescue Metals Group — H1 FY2016 Earnings Presentation on 6ix