The third biggest iron ore miner in Australia has seen profits for the half-year surge on the back of cost reductions and higher output levels.
The company’s profits for the half year were USD$1.71 billion (AUD$1.9 billion), for a staggering 259 per cent gain compared to the previous corresponding period.
The remarkable surge in profits coincided with a 51 per cent increase in shipments of iron ore, following the the delivery of the first shipments of product from Fortescue’s new Kings mine in Western Australia.
Fortescue’s revenues gained 77 per cent during the half year period, bolstered by both the increase in shipments as well as a overall firming up of global iron ore prices.
Gains in output were not solely responsible for Fortescue’s profit increase, with cost reductions also playing a pivotal role. The company’s production costs fell by 34 per cent on cost cutting initiatives, which were further abetted by a decline in the value of the Australian dollar.
Despite the staggering profit increase the results remain moderately short of many analysts’ expectations, with the consensus forecast pegged at USD$1.77 billion. Shares in Fortescue declined 2.34 per cent to $5.84 on the day of the release of its results.
Fortescue also announced a 10 cent per share dividend, commensurate with that awarded by the company following the announcement of its full year profits in 2013.
The dividend payout means that nearly $103 million with enter the pockets of the company’s biggest shareholder, Andrew “Twiggy Forrest,” who was formerly Fortescue’s CEO and is currently a non-executive chairman.
Nev Power, Fortescue’s chief executive, said that the stellar results attested to the soundness of the company’s ambitious expansion plans.
“This record result underlines the continued success of Fortescue’s strategy to rapidly construct new capacity, ramp up production and drive down costs,” he said in the company report.
“The ongoing strong demand for our products has allowed us to accelerate debt repayment, de-risk the balance sheet and increase returns to our shareholders.”
In January this year Fortescue announced a USD$1.6 billion debt repayment, lending further momentum to a voluntary debt reduction program which has seen the redemption of $140 million in preference shares as well as the discharge of another USD$1 billion in debt.