Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — FY2017 Earnings Presentation
41 slides from Fortescue's earnings presentation, Aug 21, 2017
Slide 1: FY17 Results
For personal use only FY17 Results
Slide 2: Forward looking statements Disclaimer
Forward looking statements Disclaimer 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 i
Slide 3: Building a world class company
Building a world class company MG ce Safety focus: engagement, empowerment, leadership — i — to China
Slide 4: Generating shareholder value
Generating shareholder value Focus on safety, productivity and efficiency For personal use only Market strategy Operational performance Long life resources Capital discipline Shareholder returns 4
Slide 5: Our Vision: The safest, lowest cost, most profitable iron ore producer
Our Vision: The safest, lowest cost, most profitable iron ore producer Safety Empowerment Family Frugality Stretch targets Ww Fortescue tam couageand Ps Integrity Enthusiasm determination | Senerating ideas Humility The New Force in Iron Ore
Slide 6: Delivering on our targets in FY17
Delivering on our targets in FY17 Sustainable cost reduction and consistent production performance For personal use only TRIFR 2.9 170.4mt C1 cost 33% reduction Shipped $12.82/wmt 17% reduction A$0.25 21% US$2.7bn Final dividend Net gearing Debt repaid 6
Slide 7: Sustainable cost improvements
Sustainable cost improvements Initiatives delivering long term low cost outcomes For personal use only US$/wmt Structural improvements 48 44 Solomon + Blending + Processing 34 Productivity and Efficiency 27 Utilisation, Recoveries, Maintenance 15 12.82 11-12 Innovation and Technology Autonomy, Gas,
Slide 8: Maintaining position on the cost curve
Maintaining position on the cost curve China's Iron Ore Supply CFR Costs (including royalties & ocean freight) For personal use only 2012 2017 Source: Metalytics – March 2017 8
Slide 9: Financial performance
For personal use only Financial performance
Slide 10: Financial Drivers
Financial Drivers Focussed on delivering shareholder value For personal use only Price Cash Debt margins repayments Balance Shareholder Cost sheet return and improvements strength Free Capital value cash flow management Capex 10
Slide 11: FY17 financial outcomes
FY17 financial outcomes Operational performance delivering financial results For personal use only US$2.1bn US$1.8bn US$3.5bn NPAT Cash on hand Free cashflows US$0.67 US$525m A$0.45 113% increase in Revolving credit Total FY17 dividends earnings per share facility 52% pay-out 11
Slide 12: Underlying EBITDA
Underlying EBITDA 48% increase driven by iron ore price and efficiency initiatives lowering costs For personal use only US$m Underlying EBITDA Margin 5,000 1,262 (99) 15 (20) 60% 4,744 56% 4,000 45% 445 (131) 77 40% 3,195 3,000 2,000 20% 1,000 - 0% FY16 Volume C1 costs Shipping Price Royalty Fx Othe
Slide 13: FY17 Highlights
FY17 Highlights Significant increases across all key measures For personal use only Revenue Underlying EBITDA NPAT US$m US$m US$m 9,000 8,447 6,000 3,000 7,083 4,744 2,093 6,000 4,000 2,000 3,195 985 3,000 2,000 1,000 0 0 0 FY16 FY17 FY16 FY17 FY16 FY17 19% 48% 112% Refer to attached glossary for de
Slide 14: Cost savings delivered
Cost savings delivered US$3.9bn in operating cost savings delivered since achieving full operational capacity For personal use only US$bn 4.0 0.4 3.0 1.9 2.0 3.9 0.8 1.0 0.8 - FY14 FY15 FY16 FY17 FY14 - FY17 delivered Refer to attached glossary for definition of non-IFRS terms 14
Slide 15: Returns to shareholders
Returns to shareholders Increasing returns through operational performance For personal use only Earnings per share Free cash flows per share Dividends per share US US A$ cents cents cents 80 120 113.8 60 45 67.3 60 80 40 68.8 40 31.6 40 20 15 20 - - - FY16 FY17 FY16 FY17 FY16 FY17 113% 65% 200% Ref
Slide 16: Balance sheet
For personal use only Balance sheet
Slide 17: Cash flows
Cash flows Strong positive cash margins generated by operations For personal use only Net cash from operations Capital expenditure Free cash flows US$m US$m US$m 5,000 5,000 5,000 4,256 4,000 4,000 4,000 3,540 3,000 3,000 3,000 2,446 2,142 2,000 2,000 2,000 1,000 1,000 716 1,000 304 - - - FY16 FY17
Slide 18: Debt reduction
Debt reduction Cash flows applied to reduce debt + gearing levels For personal use only US$m Debt US$m Cash US$m Net debt 6,771 6,000 6,000 6,000 5,188 4,471 4,000 4,000 4,000 2,633 1,838 2,000 2,000 1,583 2,000 - - - FY16 FY17 FY16 FY17 FY16 FY17 Gross gearing 31% Maintaining strong liquidity Net g
Slide 19: Debt repayments
Debt repayments Free cash flows lowering debt and gearing For personal use only US$m % 14,000 70 12,000 12,691 60 10,000 10,533 50 9,557 9,569 8,000 40 7,159 7,188 6,000 6,771 30 5,188 4,000 4,471 20 2,000 2,633 10 - - FY13 FY14 FY15 FY16 FY17 Debt Net debt Gross gearing (RHS) Net gearing (RHS) Refe
Slide 20: Debt maturity
Debt maturity First maturity in 2022 and a US$525 million revolver facility For personal use only US$m 3,000 2,500 2,000 1,500 2,160 1,000 500 750 750 0 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 CY2023 CY2024 Senior Secured Note Senior Unsecured Notes Refer to attached glossary for definition of non
Slide 21: Capital expenditure
Capital expenditure Sustaining capital expenditure of US$3/wmt for FY18 For personal use only FY17 Actual FY18 Guidance 90 30 33 39 68 50 354 260 510 190 US$716m (pre ore carrier funding) US$908m (pre ore carrier funding) Sustaining Ore carriers Exploration Development Tugs 21
Slide 22: Fortescue: The New Force in Iron Ore
Fortescue The New Force in Iron Ore
Slide 23: Core supplier to Asia
Core supplier to Asia Well established market share of imported iron ore to China For personal use only Total 2016 global steel production 1,629mt Low impurity 58% Fe average Competitive Large diverse value in use customer base 541 808 Responsive Proximity 79 96 to market needs to high growth 105 re
Slide 24: China's 13th Five Year Plan (2016-2020)
China’s 13th Five Year Plan (2016-2020) RMB12.5 trillion for ~ 11,000 listed projects For personal use only 3,000km +480,000 New urban 152,000km MW Roads in rural areas rail lines New power projects 80% cities Over 50 Pipelines with high speed rail civilian airports Gas storage Source: China Daily 2
Slide 25: Developing and emerging Asia
Developing and emerging Asia Asian economies generating two thirds of global growth For personal use only Source: IMFWorld Source: IMF WorldEconomic Economic Database Database April Oct 20162017 25
Slide 26: Iron ore inventory levels
For personal use only Mt 0 20 40 60 80 100 120 140 160 180 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Iron ore inventory levels May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-1
Slide 27: Innovation
For personal use only Innovation
Slide 28: Generating ideas for future innovation
Generating ideas for future innovation People, processes and techniques are all catalysts for innovation For personal use only • Exploration techniques • Integrated Operations Centre • Mine planning and optimisation • Harnessing automation • Low cost, relocatable conveyor • Fortescue Ore Carriers 28
Slide 29: World class autonomous haulage operation
World class autonomous haulage operation Building on our success and expanding to the Chichester Hub For personal use only Improved safety + 56 Operating at Solomon productivity +12 to be converted Chichester Expansion 100 trucks 390mt Material moved at over 3 years Solomon 29
Slide 30: Reserves and resources
For personal use only Reserves and resources
Slide 31: Resource portfolio supports asset base
Resource portfolio supports asset base 20.9bn tonnes in mineral resources, including 7.9bn tonnes of magnetite For personal use only 14,000 12,000 2,463 Mineral Resources dry in situ (Mt) 2,463 2,463 2,463 10,000 2,463 2,125 740 740 740 8,000 2,013 624 1,032 624 624 4,793 6,000 3,504 4,877 4,755 4,7
Slide 32: Focus on core iron ore business
Focus on core iron ore business Largest Pilbara tenement footprint For personal use only 32
Slide 33: Active exploration
Active exploration Developing low growth options For personal use only Targeting cv copper and gold New South Wales ~2,000km2 tenure South Australia ~6,000km2 tenure Ecuador 32 concessions 33
Slide 34: Building strong communities
For personal use only Building strong communities
Slide 35: Diverse workforce representing our communities
Diverse workforce representing our communities Creating opportunities through training, employment and business development For personal use only 35
Slide 36: Focussed strategy
For personal use only Focussed strategy
Slide 37: FY18 guidance
FY18 guidance Sustainable performance driven by innovation For personal use only 170mt US$11-12/wmt 75-80% shipped C1 cost Revenue realisation US$3/wmt Depreciation Dividend policy Sustaining capital US$7.40/wmt 50-80% pay-out of NPAT 37
Slide 38: Key strategic focus
Key strategic focus Ensuring our communities benefit from the growth and development of Fortescue For personal use only Debt repayment and capital flexibility Long term sustainability Returns to shareholders Low cost growth options 38
Slide 39: Sustainable low cost producer
For personal use only Sustainable World class Low cost producer Assets and people Customer focus Unique culture Reliable and competitive Drives performance 39
Slide 40: For personal use only
For personal use only www.fmgl.com.au @FortescueNews Proudly supporting:
Slide 41: Glossary
Glossary For personal use only C1: Operating costs of mining, processing, rail and Underlying EBITDA: Earnings before interest, tax, depreciation and port on a per tonne basis, including allocation of amortisation, exploration, development and other direct administration charges and production expen
Fortescue Metals Group — FY2017 Earnings Presentation on 6ix