Fortescue Ltd · ASX:FMG
Fortescue — FY23 Earnings Presentation
41 slides from Fortescue's earnings presentation, Aug 25, 2023
Slide 1: FY23 Full Year Results
FY23 Full Year Results AUGUST 2023 © 2023 FORTESCUE FORTESCUE | 1
Slide 2: Forward Looking Statements Important Notice
Forward Looking Important Notice The purpose of this presentation is to provide general information about Fortescue Metals Group Statements Ltd and its subsidiaries (“Fortescue”). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation.
Slide 3: We are the number 1 integrated green technology, energy and metals company
We are the number 1 integrated green technology, energy and metals company FORTESCUE | 3
Slide 4: FY23 highlights
FY23 highlights TRIFR of 1.8 192.0mt US$5.5bn Commitment to prioritising Record iron ore shipments Third highest underlying safety in everything that we do earnings in Fortescue’s history US$17.54/wmt US$1.0bn net debt 65% payout ratio Robust balance sheet to In line with dividend policy Operational
Slide 5: Safety: 1.8 TRIFR
Safety Total Recordable Injury Frequency Rate 7.6 6.0 1.8 TRIFR 5.1 4.3 3.7 2.9 2.8 Total Recordable 2.4 2.0 1.8 1.8 Injury Frequency Rate at 30 June 2023 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FORTESCUE | 5
Slide 6: FY23 iron ore production highlights
FY23 iron ore production highlights 192.0mt Record annual shipments US$17.54/wmt Industry leading C1 cost US$95/dmt Average revenue 86% Average revenue realisation FORTESCUE | 6
Slide 7: FY23 financial highlights
FY23 financial highlights US$16.9bn US$10.0bn US$4.8bn Revenue Underlying EBITDA Net profit after tax 59% US$60/dmt* US$5.5bn Underlying EBITDA margin Underlying EBITDA per tonne Underlying net profit after tax *Excludes Fortescue Future Industries expenditure. FORTESCUE | 7
Slide 8: FY23 financial highlights
FY23 financial highlights US$7.4bn US$4.3bn Net operating cash flow Free cash flow US$5.3bn US$4.3bn Gross debt Cash on hand FORTESCUE | 8
Slide 9: Shareholder returns
Shareholder returns A$1.00 per share Fully franked final dividend A$1.75 per share FY23 total dividends 65% payout ratio A$5.4bn Value of FY23 dividends FORTESCUE | 9
Slide 10: FY24 guidance
FY24 guidance 192 - 197mt US$2.8 - US$3.2bn Iron ore shipments Fortescue Metals capital expenditure US$18.00 - US$19.00/wmt US$800m C1 cost for Pilbara hematite Fortescue Energy net operating expenditure US$400m Fortescue Energy capital expenditure Guidance is based on an assumed FY24 exchange rate
Slide 11: Pilbara Operations
Pilbara Operations Integrated mine to market infrastructure FORTESCUE | 11
Slide 12: Iron Bridge
Iron Bridge 67% High grade magnetite concentrate 22mtpa Annual production capacity US$45/wmt Life of mine attributable C1 cost FORTESCUE | 12
Slide 13: Minerals exploration
Minerals exploration Pilbara Programs at Nyidinghu, Mindy South and Western Hub Australia Target copper and lithium Drilling underway in SA, QLD and WA International Targeting critical minerals - copper, lithium and rare earths FORTESCUE | 13
Slide 14: Belinga Iron Ore Project, Gabon
Belinga Iron Ore Project, Gabon Exploration Exploration drilling campaign underway Studies advancing for a potential large-scale development Mining Convention Signed in February 2023 Early stage development Mining commenced FORTESCUE | 14
Slide 15: Delivering opportunities in Gabon
Delivering opportunities in Gabon Local employment Approximately 300 Gabonese employed Engaging communities More than 160 community engagements Supporting the economy US$10m local contract spend in Gabon since January 2023 FORTESCUE | 15
Slide 16: Building sustainable communities
Building sustainable communities 1.8 TRIFR A$26.3bn A$102m 22% reduction in injury Total global economic Social investment in FY23 risk profile from FY22 contribution in FY23 FORTESCUE | 16
Slide 17: Diversity, Inclusion and Equity
Diversity, Inclusion and Equity Fortescue Family Diversity Plan A safe and inclusive workplace for all Workplace Integrity Review Initiatives implemented to enhance safety 30% female employment in senior leadership roles FORTESCUE | 17
Slide 18: Human rights, Heritage and Culture
Human rights, Heritage and Culture Respecting human rights Committed to respecting and promoting Native Title Partners Seven Native Title Agreements with Native Title groups in the Pilbara Co-management Establishing a collaborative approach to decision making FORTESCUE | 18
Slide 19: Thriving communities going global
Thriving communities going global >A$4.6bn in contracts awarded to First Nations businesses since 2011* 1,289 First Nations people employed representing 16% of our operational workforce >1,400 First Nations people employed through Fortescue’s Vocational Training Employment Centre since 2006 *Through
Slide 20: Safeguarding natural systems
Safeguarding natural systems Zero significant environment incidents in FY23 Protecting biodiversity and water resources Building circularity Designing out waste and keeping products in use FORTESCUE | 20
Slide 21: Eliminating emissions
Eliminating emissions Real Zero by 2030 Scope 1 and 2 terrestrial emissions target across Fortescue’s Australian iron ore operations Net Zero Scope 3 emissions targeted by 2040 Decarbonisation plan Costed plan to eliminate fossil fuels FORTESCUE | 21
Slide 22: Real Zero by 2030 emission pathway
Real Zero by 2030 Emission pathway Emissions projected to fall after FY26 No voluntary offsets to be purchased from FY24 for Scope 1 and 2 emissions Reducing exposure to regulatory, reputational and supply chain risk *Our emissions are forecast to fall within the shaded range based on our current de
Slide 23: Fortescue Energy
Fortescue Energy Fortescue Future Industries Green energy production Fortescue WAE Battery and fleet technology development and manufacturing Fortescue Hydrogen Systems Electrolyser and hydrogen production systems development and manufacturing FORTESCUE | 23
Slide 24: Integrated energy division
Integrated energy division Global footprint of green electron and molecule projects Advanced GH2 pipeline Target of five projects to Final Investment Decision in 2023 Technology developer Investing across the hydrogen value chain FORTESCUE | 24
Slide 25: Gibson Island, Decarbonising Australia
Gibson Island, our Decarbonising Australia iron ore operations New and existing infrastructure Upgrade of existing ammonia facility, with JV partner Green hydrogen and ammonia 550MW of installed electrolysis, ammonia synthesis plant, storage and export facility 385,000tpa Green ammonia for domestic
Slide 26: Phoenix Hydrogen Hub, USA
Decarbonising Phoenix Hydrogenour iron ore Hub, USAoperations Advanced project Final stages of permitting underway Phase 1 80MW electrolyser and liquefaction facility 12,000tpa Liquified green hydrogen production for the domestic mobility sector Project subject to Final Investment Decision; image is
Slide 27: Fortescue Hydrogen Systems Gladstone
Fortescue Hydrogen Systems Gladstone Electrolyser facility construction works complete PEM technology Manual assembly of in-house Proton Exchange Membrane (PEM) stacks Automated assembly line 2GW capacity to be installed in FY24 FORTESCUE | 27
Slide 28: Fortescue WAE
Fortescue WAE Battery and electric powertrains Expansion of UK production operations Banbury facility Targeting zero emissions products for heavy industry Kidlington facility Prototype testing facility Formula E Designing and manufacturing Gen 3 Formula E battery FORTESCUE | 28
Slide 29: FY23 Results
O Fortescue. FY23 Results nea FORTESCUE | 29
Slide 30: Earnings
Earnings Full year earnings profile Revenue (US$m) Underlying EBITDA (US$m) Underlying NPAT (US$m) 10,295 22,284 16,375 17,390 16,871 10,561 9,963 6,197 12,820 5,522* 8,375 4,735 9,965 6,047 3,187 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 *FY23 Statutory NPAT of US$4
Slide 31: Earnings reconciliation
Earnings reconciliation Volume growth and disciplined cost control FY22 NPAT to FY23 NPAT Reconciliation (US$m) EBITDA Breakdown 560 980 244 314 6,197 598 151 199 34 216 60 143 1,037 559 4,796 Price Other C1 Cost Fx Income tax YTD Volume Research development and YTD Impairment expense EBITDA Shippin
Slide 32: Price realisations
Price realisations FY23 average revenue of US$95/dmt Average price realisation of the Platts 62% CFR Index (%) Platts 62% CFR Index (US$/dmt) US$/dmt 200 88% 87% 87% 180 85% 78% 160 73% 70% 68% 140 120 100 80 60 40 20 0 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Sep-21 Dec-21 Mar-22 Jun
Slide 33: Prices and margins
Prices and margins Strong historical margins Prices and Underlying EBITDA margin (US$/dmt) US$/dmt 160 140 120 100 99 80 60 63 60 40 52 39 20 0 FY19 FY20 FY21 FY22 FY23 Underlying EBITDA Platts 62% CFR Index Realised price 5-year Average Underlying EBITDA margin 5-year Average realised price FY21 -
Slide 34: Cash generation
Cash generation Strong operating performance and disciplined capital investment Net cash flow from operations (US$m) Capital expenditure (US$m) Free cash flow (US$m) 3,633 8,961 12,594 3,181 3,074 7,432 1,966 6,415 6,646 4,449 4,251 3,572 3,328 4,373 1,045 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY2
Slide 35: Capital expenditure
Capital expenditure Investing across Metals and Energy FY23 Capital expenditure and investments (US$m) FY24 Capital expenditure and investments guidance (US$m) 394 400 300 US$3.2 - 1,436 1,900 - US$3.2bn 300 - 500 US$3.6bn 2,100 949 300 169 233 Sustaining and Hub Development Decarbonisation FFI Expl
Slide 36: Strong balance sheet
Strong balance sheet With a balanced debt maturity profile Gross debt (US$m) Debt maturity profile excluding leases (US$m) Syndicated Term Loan Senior Unsecured Notes 6,103 Green Senior Unsecured Notes Syndicated Term Loan (undrawn) Revolving Credit Facility (undrawn) 5,321 1,500 5,113 4,252 3,952 1
Slide 37: Credit metrics
Credit metrics Targeting minimum BB+ / Ba1 credit ratings Gross debt to EBITDA (x) Gross gearing (%) 0.7 28 27 0.6 0.6 26 23 0.5 19 0.3 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 FORTESCUE | 37
Slide 38: Return on capital
Return on capital Profitable and capital efficient Return on equity (%) Return on capital employed 1 (%) 66 66 40 37 36 35 31 29 27 27 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 1ROCE is calculated as earnings before interest and tax divided by average capital (total assets minus current liab
Slide 39: Delivering returns to our shareholders
Delivering returns to our shareholders Dividend policy to pay out 50-80% of Underlying NPAT Dividends (A$/share) and payout ratio (%) 4.50 80% 85% 78% 77% 75% 4.00 75% 3.58 65% 3.50 62% 65% 3.00 52% 55% 2.50 45% 38% 36% 2.07 2.00 1.76 35% 1.50 21% 21% 25% 17% 16% 1.14 1.00 1.00 15% 0.45 0.75 0.50 0.
Slide 40: FY24 guidance
FY24 guidance 192 - 197mt US$2.8 - US$3.2bn Iron ore shipments Fortescue Metals capital expenditure US$18.00 - US$19.00/wmt US$800m C1 cost for Pilbara hematite Fortescue Energy net operating expenditure US$400m Fortescue Energy capital expenditure Guidance is based on an assumed FY24 exchange rate
Slide 41: We are Fortescue
We are Safety Integrity Fortescue Family Enthusiasm Empowerment Courage and determination Frugality Generating ideas Stretch targets Humility FORTESCUE | 41