Fortescue Ltd · ASX:FMG
Fortescue — H1 FY24 Earnings Presentation
36 slides from Fortescue's earnings presentation, Feb 22, 2024
Slide 1: FY24 Half Year Results
FY24 Half Year Results 22 FEBRUARY 2024 © 2024 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 Ltd and its Statements subsidiaries (“Fortescue”). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation. This present
Slide 3: Safety and unique culture
Safety and unique culture 1.8 TRIFR 23% 14% Total Recordable Injury Female employment rate First Nations employment rate Frequency Rate, Metals across Pilbara operations FORTESCUE | 3
Slide 4: H1 FY24 production highlights
H1 FY24 production highlights 94.6Mt Total iron ore shipments US$17.77/wmt C1 cost US$108/dmt Average revenue 89% Average revenue realisation C1 cost and revenue for Pilbara Hematite. FORTESCUE | 4
Slide 5: H1 FY24 financial highlights
H1 FY24 financial highlights US$9.5bn US$5.9bn US$3.3bn Revenue Underlying EBITDA Net profit after tax 62% US$73/dmt US$1.08 Underlying EBITDA margin Metals Underlying EBITDA Earnings per share (A$1.66) per tonne FORTESCUE | 5
Slide 6: H1 FY24 financial highlights
H1 FY24 financial highlights US$4.2bn US$2.7bn US$4.7bn Net operating cash flow Free cash flow Cash on hand US$5.3bn US$0.6bn 22% Gross debt Net debt Gross gearing FORTESCUE | 6
Slide 7: Shareholder returns
Shareholder returns A$1.08 per share Fully franked interim dividend 65% of NPAT Dividend payout ratio A$3.3bn Value of interim dividend FORTESCUE | 7
Slide 8: FY24 guidance
FY24 guidance 192 - 197Mt US$2.8 - US$3.2bn Iron ore shipments Metals capital expenditure US$18.00 - US$19.00/wmt US$800m C1 cost for Pilbara hematite Energy net operating expenditure US$500m Energy capital expenditure and investments Guidance is based on an assumed FY24 exchange rate of AUD:USD 0.6
Slide 9: Pilbara operations
Pilbara operations Integrated mine to and energy infrastructure market infrastructure Solar locations Wind location Anticipated infrastructure > 1GW ~ 1GW ~ 4GWh storage > 750 km Chichester Solar Transmission lines Gas Hybrid Operational Commissioned Under development Future development Note: Solar
Slide 10: Rail and shipping
Rail and shipping 2bn tonnes shipped Since operations commenced December shipments Record month Rail capacity uplift Through supply chain improvements FORTESCUE | 10
Slide 11: Unlocking value at Iron Bridge
Unlocking value at Iron Bridge Unique process flow Four international and national patents High grade product Supports lowering steelmaking emissions Portfolio improvement Product and market diversification FORTESCUE | 11
Slide 12: Minerals exploration
Minerals exploration Pilbara Mindy South, Wyloo North and White Knight Australia WA, NSW, SA and QLD International Argentina, Chile, Brazil, Peru and Kazakhstan FORTESCUE | 12
Slide 13: Belinga Iron Ore Project, Gabon
Belinga Iron Ore Project, Gabon Exploration Major exploration drilling campaign underway Studies advancing For a potential large-scale development First shipment Achieved in December 2023 FORTESCUE | 13
Slide 14: Delivering opportunities in Gabon
Delivering opportunities in Gabon Local employment Over 400 Gabonese employed Engaging communities More than 200 community engagements Supporting the economy US$40m local contract spend in Gabon since January 2023 FORTESCUE | 14
Slide 15: Thriving communities
Thriving communities >A$4.9bn Contracts awarded to First Nations businesses1 1,369 First Nations Australians employed,14% of operational workforce >1,400 First Nations Australians employed through Vocational Training Employment Centre since 2006 1Through Fortescue’s Billion Opportunities program, si
Slide 16: Eliminating emissions: Real Zero by 2030
Eliminating emissions Real Zero by 2030 Scope 1 and 2 terrestrial emissions target across Australian iron ore operations Net Zero Scope 3 Emissions target by 2040 No voluntary offsets To be purchased for Scope 1 and 2 emissions The Green Pioneer in Dubai for COP28 FORTESCUE | 16
Slide 17: Eliminating emissions now
Eliminating emissions now 2-3GW of renewable energy generation and battery storage to be deployed 4% emissions reduction achieved in H1 FY24, relative to forecast Pilbara Energy Connect 320km of transmission lines installed FORTESCUE | 17
Slide 18: Fortescue Energy
Fortescue Energy Green Energy Green energy production Fortescue WAE Technology development Fortescue Hydrogen Systems Electrolysers and hydrogen production systems Fortescue Capital Green energy investment platform FORTESCUE | 18
Slide 19: Global footprint
Global footprint FORTESCUE | 19
Slide 20: Phoenix Hydrogen Hub, USA
Decarbonising Phoenix Hydrogenour iron ore Hub, USAoperations Approved project Investment of approximately US$550 million Phase 1 80MW electrolyser and liquefaction facility 11,000tpa Liquified green hydrogen production targeted to start in 2026 Image is artist impression. FORTESCUE | 20
Slide 21: Gladstone PEM50 Project, Australia
Gladstone PEM50 Project, Australia Approved project Total investment of up to US$150 million Electrolyser plant Stage 1 construction of 30MW to start in 2024 8,000tpa Remaining 20MW capacity to be installed in 2028 Image is artist impression. FORTESCUE | 21
Slide 22: Green Iron Trial, Australia
Green Iron Trial, Australia Trial Commercial Plant Green iron facility at Christmas Creek Green pit to product Utilising existing green hydrogen infrastructure >1,500tpa Technology to support magnetite and hematite ores FORTESCUE | 22
Slide 23: Fortescue WAE
Fortescue WAE Develop technology Battery and electric powertrains, zero emissions products for heavy industry Expand manufacturing Technical innovation and manufacturing centres Design and build Gen 3 Formula E battery FORTESCUE | 23
Slide 24: Hydrogen Systems
Hydrogen Systems PEM technology In-house designed proton exchange membrane electrolyser stack 2GW capacity Automated assembly line to be operational in FY24 Electrolyser Manufacturing Facility FORTESCUE | 24
Slide 25: FY24 Half Year Results
FY24 Half Year Results FORTESCUE | 25
Slide 26: Earnings
Earnings Half year earnings profile Revenue (US$m) Underlying EBITDA (US$m) Underlying NPAT1 (US$m) 9,512 5,799 5,912 3,420 9,265 9,036 3,337 5,611 3,154 8,125 7,835 4,762 2,777 4,352 2,368 H1 FY22 H2 FY22 H1 FY23 H2 FY23 H1 FY24 H1 FY22 H2 FY22 H1 FY23 H2 FY23 H1 FY24 H1 FY22 H2 FY22 H1 FY23 H2 FY2
Slide 27: Earnings reconciliation
Earnings reconciliation Favorable price movements and disciplined cost performance H1 FY23 NPAT to H1 FY24 NPAT Reconciliation (US$m) EBITDA Breakdown 1,835 93 78 46 56 27 34 1,560 64 496 3,334 2,368 90 89 92 Royalty EBITDA Shipping Cost Other FX Loss Income Tax H1 FY23 Volume H1 FY24 C1 Cost Deprec
Slide 28: Price realisations
Price realisations H1 FY24 average revenue of US$108/dmt Average price realisation of the Platts 62% CFR Index (%) Platts 62% CFR Index (US$/dmt) 180 91 88 87 87 87 85 160 78 140 70 120 100 80 60 40 20 0 Jan-22 Apr-22 Jan-23 Apr-23 Jul-22 Jul-23 Dec-23 Oct-22 Oct-23 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q
Slide 29: Prices and margins
Prices and margins Strong margins through cycle Prices and Metals Underlying EBITDA margin (US$/dmt) 160 140 120 100 80 60 99 40 73 63 60 52 20 39 0 FY19 FY20 FY21 FY22 FY23 H1 FY24 Underlying EBITDA 62 Platts CFR Index Realised price Average Underlying EBITDA Average realised price FORTESCUE | 29
Slide 30: Cash generation
Cash generation Operating cash flows support growth Net cash flow from operating activities (US$m) Capital expenditure (US$m) Free cash flow (US$m)1 4,510 4,484 1,791 2,924 4,170 2,735 1,586 2,655 1,488 1,523 1,375 2,948 1,582 2,136 648 H1 FY22 H2 FY22 H1 FY23 H2 FY23 H1 FY24 H1 FY22 H2 FY22 H1 FY23
Slide 31: Capital expenditure
Capital expenditure Disciplined capital investment H1 FY24 capital expenditure (US$m) FY24 capital expenditure guidance (US$m) 165 500 104 300 - 500 134 1,900 - US$1,523m US$3.3 - US$3.7 bn 999 300 2,100 121 300 Sustaining and hub development Exploration and studies Iron ore projects Decarbonisation
Slide 32: Strong balance sheet
Strong balance sheet With long dated debt maturity profile Gross debt (US$m) Debt maturity profile excluding leases (US$m) 6,103 1,500 5,321 5,318 5,113 4,252 1,025 968 800 700 600 FY20 FY21 FY22 FY23 H1 FY24 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 Senior Unsecured Note Syndicated Term Loa
Slide 33: Credit metrics
Credit metrics Strong credit metrics through the cycle Gross debt to EBITDA (x) Gross gearing (%) 0.6 28 0.6 26 0.5 23 0.5 22 19 0.3 FY20 FY21 FY22 FY23 H1 FY24 FY20 FY21 FY22 FY23 H1 FY24 FORTESCUE | 33
Slide 34: Return on capital
Return on capital Capital efficiency driving strong returns Return on equity (%) Return on capital employed 1 (%) 66 66 40 37 36 36 35 35 27 27 FY20 FY21 FY22 FY23 H1 FY24 FY20 FY21 FY22 FY23 H1 FY24 1 ROCE is calculated as earnings before interest and tax divided by average capital (total assets mi
Slide 35: Delivering returns to our shareholders
Delivering returns to our shareholders Dividend policy to pay out 50-80% of Underlying NPAT Dividends (A$/share) and payout ratio 80% 78% 77% 4 75% 80 3.58 62% 65% 65% 70 60 52% 2.07 38% 36% 1.76 1.75 40 21% 30 21% 1.14 1.08 17% 16% 20 0.45 0.20 0.15 0.23 10 0.07 0.08 0.10 0.05 0 0 FY11 FY12 FY13 FY
Slide 36: We are Fortescue
We are Safety Integrity Fortescue Family Enthusiasm Empowerment Courage and determination Frugality Generating ideas Stretch targets Humility FORTESCUE | 36