Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — FY2013 Earnings Presentation
41 slides from Fortescue's earnings presentation, Aug 22, 2013
Slide 1: Full Year Results August 2013
2013 For personal use only Full Year Results August 2013
Slide 2: Disclaimer
Disclaimer For personal use only Important Notice The purpose of this presentation is to provide general information about Fortescue Metals Group Limited ("Fortescue"). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation. This prese
Slide 3: Company Overview
For personal use only Company Overview
Slide 4: Fortescue
Fortescue World’s fourth largest seaborne exporter For personal use only 80.9mt shipped in FY13 NPAT US$1.7bn on record operational performance 15.6bt Costs resource base efficiency focus 155 mtpa by December 2013 Kings A$0.10 construction complete final fully franked October 2013 dividend declared
Slide 5: FY13 pivotal in Fortescue's history
FY13 pivotal in Fortescue’s history Operationally and financially well positioned For personal use only Strong cash balance with Commence debt pay flexibility to manage debt down to targeted levels Expansion on time and budget Transition to a dividend payout ratio Operations delivering record result
Slide 6: A differentiated model
A differentiated model Delivering results For personal use only Relationships Direct relationships with sub contractors and local suppliers China Leveraging China’s growth and manufacturing capability Speed Speed of delivery – time is money Planning Planning for scale today and efficiency into the f
Slide 7: Growth across all areas
Growth across all areas Continuing growth trajectory over FY13 For personal use only Mining Processing Port Ore Mined (wmt) Ore Processed (wmt) Total Ore Shipped (wmt) 40 25 30 35 25 20 Third Party Ore 30 20 Million tonnes Million tonnes Million tonnes 25 15 20 15 15 10 10 10 5 5 5 0 0 0 7
Slide 8: The path to 155mtpa
The path to 155mtpa For personal use only Execution Strategy – Production – June 2012 Execution Strategy – Production – Dec 2012 Chichester Hub Port Chichester Hub Port Hedland Hedland Fortescue Fortescue 55 Infrastructure 95 Infrastructure Dampier Dampier Fortescue Rail Fortescue Rail Karratha Rio
Slide 9: Highlights
Highlights FY13 For personal use only • Average realised CFR sales price of US$114/dmt • June run rate of 120mtpa shipped • Shipped 80.9mt, a 41% increase • C1 costs US$44/wmt, 9%, US$400m of savings • Cash on hand of US$2.2bn • Fully franked final dividend A$0.10 per share 9
Slide 10: Looking forward
Looking forward Count down to 155mtpa and de-gearing For personal use only • Prepayments – Iron Bridge JV Port access US$500m – Customer prepayments US$330m + US$170m in August 2013 • Kings complete October 2013 • 155mtpa run rate December 2013 • Focus on productivity, costs and efficiency • Debt re
Slide 11: Financials
For personal use only Financials
Slide 12: Financial Summary FY13
Financial Summary FY13 For personal use only • Record revenue US$8.1bn 21% higher than FY12 • EBITDA of US$3.6bn and NPAT of US$1.7bn • Capital expenditure of US$6.2bn • Net debt US$9.9bn* • Flexible debt structure with early call options • Fully franked final dividend of A$0.10 declared 12 * Net de
Slide 13: Operating margins support
Operating margins support Fortescue’s average realised selling price and C1 costs For personal use only US$/wmt 62% Platts US$/dmt 180 180 160 160 146 140 140 127 127 120 114 120 110 100 74 100 96 100 65 57 45 80 77 28 53 80 44 64 58 60 32 22 22 20 18 60 8 18 24 18 22 40 24 40 21 19 50 48 49 50 20 3
Slide 14: EBITDA analysis
EBITDA analysis For personal use only US$m 4,500 1,281 1,214 4,000 503 133 129 3,575 122 3,500 96 3,035 3,000 2,500 2,000 FY2012 Volume Price Costs Royalty Loan note re- Fx Other FY2013 estimation EBITDA driven by record production + operational efficiencies 14
Slide 15: Sustained operating cost reduction
Sustained operating cost reduction C1 trending lower as steady state operations commence For personal use only US$/wmt 55 50 45 40 50 49 48 44 44 35 38 36 30 Q1 Q2 Q3 Q4 FY12 FY13 FY14 FY13 Break even at Platts Index price in low US$70s on a 62% CFR basis 15
Slide 16: Capital Expenditure
Capital Expenditure FY13 actual and FY14 indicative For personal use only FY13 FY14 US$bn Actual Indicative 155mtpa expansion 3.9 0.5 Operational capital 0.7 0.8 Other capital projects 0.3 0.2 Exploration 0.1 0.1 Fleet 1.1 0.3 Total 6.2* 1.9 • T155 expansion completing in FY14 • Significant positive
Slide 17: Simplified debt capital structure
Simplified debt capital structure Voluntary repayment or refinancing options over US$7.7bn of facilities For personal use only US$/bn 5.0 4.5 4.0 NO DEBT MATURITY until November 2015 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 Senior S
Slide 18: Simplified debt capital structure
Simplified debt capital structure Voluntary repayment or refinancing options over US$7.7bn of facilities For personal use only US$/bn 5.0 4.5 4.0 NO DEBT MATURITY Callable at until November 2015 Fortescue’s option 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY201
Slide 19: Iron Bridge joint venture
Iron Bridge joint venture US$1.2bn joint venture arrangement with Formosa For personal use only • Transaction structure • US$123m gives Formosa a 31% interest in JV • US$527m to Iron Bridge to develop Stage 1 of the joint venture • US$500m to Fortescue for 4.5 years of access to port infrastructure
Slide 20: Financial analysis
Financial analysis Sustained return to shareholders For personal use only 60% Return on equity 45% 30% 49.9% 52.3% 50.3% 38.6% 15% 0% 2010 2011 2012 2013 25% Return on assets employed 20% 15% 10% 20.5% 15.0% 16.7% 5% 11.1% 0% 2010 2011 2012 2013 Returns to increase following a period of significant
Slide 21: Financial analysis
Financial analysis For personal use only US$ cents 100 EPS CFPS 80 60 89.3 90.2 96.5 40 50.1 56.1 20 41.6 32.9 18.9 0 2010 2011 2012 2013 18x 16x FY14 forecast PE ratio 14x 12x 10x 8x 6x 4.83x 4x 2x 0x Source: Bloomberg as at August 13, 2013 21
Slide 22: Capital management
Capital management For personal use only • Flexible debt maturity profile • Continued drive to reduce operating costs • Disciplined capital allocation to key projects • 2013 commence debt repayments to de-gear balance sheet • Transition to a profit payout ratio dividend policy 22
Slide 23: Market
For personal use only Market
Slide 24: Long term confidence in China
Long term confidence in China Lower growth rates but still strong in absolute volumes For personal use only • Strong underlying economy ~ 7.5 per cent GDP growth • New leaders committed to growth • Steel consumption greater than 2.0mt per day • Urbanisation and infrastructure driving steel demand •
Slide 25: 'Ghost City' hysteria
‘Ghost City’ hysteria Despite heat coming out of the market, real estate prices continue to rise For personal use only • Out of the 658 cities in China only 12 new suburbs labelled ‘ghost cities’ • These are under-populated suburbs of third and fourth tier cities • Real estate prices in first and se
Slide 26: China GDP Volume
China GDP Volume Lower growth rates but very strong in absolute volumes For personal use only GDP Trillion RMB GDP % Growth 60 16 14 50 12 40 10 30 8 6 20 4 10 2 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP % Growth 26
Slide 27: Steel consumption per capita
Steel consumption per capita China has only just reached levels of consumption of developed countries For personal use only Kg per capita 900 800 700 600 500 400 300 200 100 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 China USA Japan Germany Source: Macquarie 27
Slide 28: Steel production continues to rise
Steel production continues to rise Steel production grew by 7.4% in first half CY13 For personal use only 28
Slide 29: Strong rebounds follow price drops
For personal use only 29 $100 $110 $120 $130 $150 $160 $170 $180 $190 $200 $80 $90 $140 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Strong rebounds follow price drops Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Au
Slide 30: Trends reinforce seaborne advantage
Trends reinforce seaborne advantage New super mills built to capatalise on seaborne trade For personal use only • 460 mills – 51% private owned • 35 iron ore coastal ports • Coastal mines highest cost • New ~10mtpa Tonkin Gulf Baosteel and Wisco super mills • 88% steel produced in H1-CY13 from Easte
Slide 31: Strategic geographic location
Strategic geographic location Freight from Australia compares favourably to domestic ore by rail For personal use only Radius marks equivalent transport cost by domestic bulk railway compared to transport cost by sea Hebei freight to Hebei with Australia at the centre China ~US$8 / tonne of the bull
Slide 32: Clear Strategy
For personal use only Clear Strategy
Slide 33: Product strategy
Product strategy Revised product strategy at 155mtpa - average grade 58% For personal use only Bonnie Fines 6mtpa Super Special Fines 30mtpa Fortescue Blend Rocket 70mtpa 10mtpa Kings CID 40mtpa Delivering value to our customers 33
Slide 34: Moving down the global cost curve
Moving down the global cost curve Targeting bottom quartile For personal use only CFR equivalent Cost of China's Iron Ore Supply: March 2013 US$/dry tonne Domestic Chinese Ore 150 Australia Brazil India South Africa Other 100 50 Fortescue Fortescue 0 0 100 200 300 400 500 600 700 800 900 1,000 1,100
Slide 35: Flexible design for future growth
Flexible design for future growth Fourth berth commissioned with fifth berth approved For personal use only 35
Slide 36: Resource portfolio sets expansion platform
Resource portfolio sets expansion platform To leverage existing assets for low cost growth For personal use only 18,000 Annualised growth of 16,000 14,000 2bt per annum 5,205 12,000 Mineral Resources (Mt) 3,236 10,000 2,465 2,463 8,000 2,013 1,032 624 624 624 1,230 6,000 1,230 3,247 3,070 3,070 2,86
Slide 37: Supporting the Community
Supporting For personal use only the Community
Slide 38: Making a difference
Making a difference Fortescue is changing lives through training and employment For personal use only Direct Aboriginal 461 employees 12.2% Aboriginal people in Fortescue workforce 504 Aboriginal people employed by contractors Contracts awarded to $1.1bn Aboriginal companies and joint ventures 38
Slide 39: Delivering on targets
Delivering on targets For personal use only Strong financial results Expansion to 155mtpa Improved liquidity reduces net debt and enables debt repayments in 2013 Move to a dividend pay out ratio Flexible incremental growth Unique culture drives performance 39
Slide 40: For personal use only
For personal use only Sign up to alerts online: www.fmgl.com.au Proudly supporting:
Slide 41: Glossary
Glossary Definition of non-IFRS terms For personal use only EBITDA Profit before income tax adjusted for depreciation and amortisation, impairment expense, other write offs, net finance costs and gain on refinancing. Return on equity Profit for the year after income tax divided by total equity. Retu
Fortescue Metals Group — FY2013 Earnings Presentation on 6ix