Fortescue Ltd · ASX:FMG
Fortescue — H1 FY22 Earnings Presentation
54 slides from Fortescue's earnings presentation, Feb 16, 2022
Slide 1: 1
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Slide 2: Forward Looking Statements
Forward Looking Important Notice The purpose of this presentation is to provide general information about Fortescue Metals Group Ltd Statements (“Fortescue”). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation. This presentation co
Slide 3: Transitioning to a vertically integrated green energy and resources company
Transitioning to a vertically integrated green energy and resources company Thriving communities | Global force 3
Slide 4: Safety, Integrity and company values
Safety Integrity Family Enthusiasm Empowerment Courage and determination Frugality Generating ideas Stretch targets Humility Thriving Communities | Global force
Slide 5: H1 FY22 operational highlights
H1 FY22 operational Strong operating performance delivers highlights record half year shipments 93.1mt US $15.28 /wmt Record half year shipments Industry leading C1 cost US $96 /dmt 70% Average revenue Realisation of the Platts 62% CFR Index 5
Slide 6: H1 FY22 financial highlights
H1 FY22 financial highlights US $8.1 bn 59% Revenue Underlying EBITDA margin US $4.8 bn US $58 /dmt Underlying EBITDA Underlying EBITDA per tonne1 US $2.8 bn US $0.90 Net profit after tax Earnings per share (A$1.24) 1 Underlying EBITDA per tonne excludes FFI expenditure 6
Slide 7: H1 FY22 financial highlights
H1 FY22 financial highlights US $2.1 bn US $1.5 bn Net operating cashflow Capital expenditure US $2.9 bn US $4.6 bn Cash on hand Gross debt US $1.7 bn 23% Net debt Gross gearing 7
Slide 8: Shareholder returns
Shareholder returns Dividend policy to payout 50 to 80 per cent of full year net profit after tax A $0.86 per share Fully franked interim dividend 70% of H1 FY22 NPAT Dividend payout ratio A $2.65 bn Value of the H1 FY22 dividend 8
Slide 9: FY22 guidance
FY22 guidance 180 – 185 mt Iron ore shipments US $15.00 – US $15.50 /wmt C1 cost US $3.0 – $3.4 bn US Capital expenditure, excluding Fortescue Future Industries C1 cost and capital expenditure is based on an assumed FY22 average exchange rate of AUD:USD 0.72 9
Slide 10: Sustainability
BM Fortescue Sustainabilit a tg
Slide 11: Approach to sustainability
Approach to sustainability Ensuring communities benefit from Fortescue’s success 11
Slide 12: Sustainability performance
Sustainability performance Recognised as a global leader in sustainability Gold Class Sustainability Award in 2022 S&P Global Sustainability Yearbook Included in the Australian, Asia-Pacific and World Dow Jones Indices for third year TCFD aligned climate-related reporting Leading climate-related tar
Slide 13: Safety and unique culture
Safety and unique culture Unwavering focus on health and safety of the Fortescue family Total Recordable Injury Frequency Rate 9.2 7.6 6.0 5.1 4.3 3.7 2.9 2.8 2.4 2.0 1.8 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 H1 FY22 13
Slide 14: A safe and supportive workplace; strong and unique culture
A safe and supportive workplace Zero tolerance approach to bullying, harassment or intimidation Strong and unique culture Built on integrity and respect Workplace Integrity Review Engaging with Fortescue workforce and contractors Speak Up Empowering team members to report behaviour not aligned with
Slide 15: Setting high standards
Setting high standards A focus on safety and building a diverse workforce 1.8 TRIFR 14% improvement from 31 December 2020 22% female Employment rate 15% Aboriginal Employment rate across Pilbara operations 15
Slide 16: Safeguarding the environment
Safeguarding the environment Minimising the impact of our operations on the environment Zero Significant environment incidents Monitoring and research Continued investment in the monitoring and research of significant species 98% water reinjected Innovative managed aquifer recharge scheme 16
Slide 17: Creating positive social change
Creating positive social change Empowering thriving communities and creating opportunities through training, employment and business development Billion Opportunities >A$3.5 billion in contracts awarded to Aboriginal businesses and joint ventures since 2011 Modern Slavery Release of FY21 Modern Slav
Slide 18: Sustainability Financing Framework
Sustainability Financing Strong ongoing commitment to Framework environmental, social and governance leadership Financing framework Aligned with sustainability strategy and climate change objectives Sustainable finance Growth in sustainable, green and social sources of capital Shareholder value Furt
Slide 19: Sustainability Financing Framework
Sustainability Financing Aligned to UN Sustainable Development Goals, Eligible Framework Projects foster net-zero emissions, protection of the environment and social benefit 19
Slide 20: Climate Change
4 ‘aie Was vig" —— * ae Climate Change
Slide 21: Industry leader in addressing climate change
Industry leader in addressing climate change Carbon neutrality by 2030 Clear priorities on decarbonisation pathway Net zero Scope 3 emissions by 2040 Addressing emissions across the value chain Green fleet development Heavy industry decarbonisation initiatives Stationary energy Energy infrastructure
Slide 22: Decarbonisation progress
Decarbonisation progress Leading the world effort to decarbonise hard to abate sectors Haul trucks • Developed hydrogen powered haul truck prototype • Prototype battery electric power system under development Drill rigs • Design of hydrogen powered drill rig prototype Rail • Successful combustion of
Slide 23: Decarbonisation progress
Decarbonisation progress Focusing on emissions reduction across the value chain Shipping • Design and construction of combustion testing device for marine engines • Design of next generation ore carrier that will consume green ammonia • Planned conversion of ship to run almost entirely on green ammo
Slide 24: Williams Advanced Engineering
Williams Advanced Leading provider of high-performance battery Engineering and electrification technologies Demonstrated track record of success in advanced engineering across the premium automotive and motorsports sectors Enabling Fortescue’s decarbonisation Critical technology and expertise in hig
Slide 25: Fortescue Future Industries
Fortescue Future Industries
Slide 26: Fortescue Future Industries
Fortescue Future Green energy and green technology Industries company Enabler of decarbonisation targets Investing in decarbonisation technologies Supplier of green energy New energy business Assessing global portfolio of renewable energy and green industry opportunities Capital allocation 10 per ce
Slide 27: Portfolio of opportunities – Australia
Portfolio of opportunities – Australia Taking a global leadership position in green energy and green technology Global Green Energy Manufacturing Centre Electrolyser manufacturing facility in Gladstone, Queensland Initial capacity of 2GW per annum Convert Gibson Island ammonia facility First phase o
Slide 28: Portfolio of opportunities – International
Portfolio of opportunities – International Papua New Guinea Master Development Agreement to undertake feasibility studies on a portfolio of major green energy and hydrogen projects Indonesia Agreement to explore potential for renewable energy and green hydrogen projects in North Kalimantan New Zeala
Slide 29: Integrated operations and marketing
Integrated operations and marketing
Slide 30: Integrated mine to market infrastructure
Integrated mine to market infrastructure 30
Slide 31: Supply chain
Supply chain IN Fortescue ¥ Exploration Se Extraction . a . : Shipping Seo ° and discovery and recovery ° Mine to port Ship loading and towage Rehabilitation @—®—_®—_®—__®—__®__®—__®—__®__®—_® : Modelling, A Blending and F F planning and 8 Processing stockpiling Marketing China port development sale
Slide 32: Forefront of innovation
Forefront of innovation Delivering safety, productivity and efficiency benefits 32
Slide 33: Marketing strategy
Marketing strategy Aligned with needs of customers and market Direct engagement Customers and stakeholders Flexible and innovative Product and logistics offering Long term relationships Product suite Aligns with needs of the market 33
Slide 34: Growth in global steel production
Growth in global steel production Global crude steel production rose four per cent in 2021 Global crude steel production (mt) China crude steel production (mt) Global steel prices (US$/t) 110 110 2000 1800 100 99 100 98 1600 94 94 90 92 1400 90 87 86 83 83 1200 80 80 1000 70 74 72 800 69 70 60 600 4
Slide 35: China's iron ore imports and port stocks
China’s iron ore imports and port stocks Iron ore supply growth constrained from traditional producers China iron ore imports (mt) China port stocks by products (mt) 200 120 180 100 160 140 80 120 100 60 80 40 60 40 20 20 - 0 Mar 20 Mar 21 Nov 20 Nov 21 Sep 20 Sep 21 May 20 May 21 Jan 20 Jul 20 Jan
Slide 36: Cyclical price realisations
Cyclical H1 FY22 average revenue of $96/dmt, 70 per cent of the Platts 62 CFR Index price realisations 250 Platts 62 CFR Index (US$/dmt) 200 150 100 50 0 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Jan 21 Jul 21 Dec 21 92% 91% 89% 86% 86% 86% 86% 83% 84% 82% 73% 67% 67% 68% Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1
Slide 37: Growth and development
Growth and development
Slide 38: Iron Bridge
Iron Bridge Strategic investment providing enhanced product range US$3.3 – US$3.5 bn Capital estimate 67% Fe High grade magnetite concentrate 22 mtpa First production by December 2022 US$33 – US$38 /wmt Competitive life of mine C1 cost 38
Slide 39: Iron Bridge progress
Iron Bridge progress Ore Processing Facility (OPF) June 2021 January 2022 39
Slide 40: Iron Bridge progress
Iron Bridge progress Primary crusher through to secondary crusher June 2021 January 2022 40
Slide 41: Exploration - Australia
Exploration - Australia Focus on iron ore and commodities Pilbara that support decarbonisation Extensive iron ore tenement footprint Western Australia Copper, gold and lithium exploration >15,000km² of tenure New South Wales Copper exploration 3,900km² of tenure South Australia Copper exploration >1
Slide 42: Exploration - International
Exploration - International Gabon Exclusivity period to study the development of the Belinga Iron Ore Project South America Copper exploration Argentina: >3,000km² of tenements Ecuador: 1,350km² of tenements Peru, Chile, Brazil Kazakhstan Copper exploration Three project areas across >18,000km² Port
Slide 43: H1 FY22 Results
H1 FY22 Results 43
Slide 44: Revenue and earnings
Revenue and earnings Half year revenue and earnings profile Revenue (US$m) Underlying EBITDA (US$m) NPAT (US$m) 9,736 12,949 6,211 9,335 6,639 8,125 4,084 6,485 6,335 4,762 4,228 4,147 2,777 2,453 2,282 H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 H1 FY20 H2 FY20 H
Slide 45: Underlying EBITDA
Underlying EBITDA Earnings reconciliation Underlying EBITDA and NPAT reconciliation (US$m) Underlying EBITDA margin (%) 73 163 4,084 65 61 59 (695) 609 2,777 46 160 105 101 12 (44) (1,877) (152) (1) (50) (1,515) H1 FY21 EBITDA Volume Costs Realised Royalty Other FFI Financing Exploration, H1 FY22 FY
Slide 46: Price and margins
Price and margins Track record of strong margins through the cycle Prices and Underlying EBITDA margin (US$/dmt) Underlying EBITDA 62 Platts CFR Index Realised price Average Underlying EBITDA Average realised price 160 140 120 100 99 80 60 58 40 52 39 20 30 20 0 FY17 FY18 FY19 FY20 FY21 H1 FY22 Unde
Slide 47: Cash generation
Cash generation Strong operating performance and disciplined capital investment Net cash from operations (US$m) Capital expenditure (US$m) Free cash flow (US$m) 1,891 8,184 6,442 1,742 1,488 1,109 4,410 857 3,301 2,519 3,114 2,257 2,192 2,136 648 H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 H1 FY20 H2 FY
Slide 48: Capital expenditure
Capital expenditure Reinvesting in the business and growth H1 FY22 capital expenditure (ex-FFI) (US$m) FY22 capital expenditure guidance (ex-FFI) (US$m) 589 1,100- 1,400 US$3,000m - US$1,426m 743 US$3,400m 1,550- 1,600 220 94 180 Sustaining and development capital Sustaining and development capital
Slide 49: Robust balance sheet
Robust balance sheet Credit metrics below target range, with future capacity Gross debt (US$m) Debt maturity profile excluding leases (US$m) Syndicated Term Loan Senior Unsecured Notes 1,500 5,113 4,623 4,252 3,975 3,952 1,000 750 600 FY18 FY19 FY20 FY21 H1 FY22 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY
Slide 50: Disciplined capital management
Disciplined capital management Aggregate earnings and cashflows FY14 – H1 FY22 1 Includes share buyback 50
Slide 51: Return on capital
Return on capital Profitable and efficient Return on equity (%) Return on capital employed (%) 66 66 58 58 40 37 31 29 11 9 FY18 FY19 FY20 FY21 H1 FY22 FY18 FY19 FY20 FY21 H1 FY22 H1 FY22 is based on the last 12 months; ROCE is calculated as earnings before interest and tax divided by average capita
Slide 52: Delivering dividends
Delivering dividends Fully franked dividend of A$0.86 per share, representing a 70 per cent payout of H1 FY22 NPAT Dividends (A$/share) and payout ratio (%) 4.50 90% 78% 80% 77% 4.00 80% 3.58 70% 3.50 70% 62% 3.00 60% 52% 2.50 50% 38% 36% 2.00 1.76 40% 1.50 30% 21% 1.14 1.00 0.86 20% 0.50 0.45 10% 0
Slide 53: Safety, Integrity and company values
Safety Integrity Family Enthusiasm Empowerment Courage and determination Frugality Generating ideas Stretch targets Humility Thriving Communities | Global force
Slide 54: NEW END SLIDE
NEW END SLIDE 54