FMG - Fortescue Ltd

[basilio]

FMG released a suite of documents as part of its Full Year results. Profits excellent . Final dividend $1 per share. Full year is thus $1.74 per share. Strong focus on development of multiple iron ore, renewable energy, and green ammonia/hydrogen projects.

The report also incorporated one of the most honest and detailed Climate Change corporate statements I have yet seen. The introduction cited climate research from Nature magazine that highlighted the current probable climate change path. FMG detailed its' contribution to Greenhouse Gases and how it plans to reduce all of its direct contribution to zero by 2030. It's a fully costed program which will reduce operating cots by around $550m per year.

Strong stuff. I suspect Twiggy Forrests drive to make the numerous projects happen is incredibly stressful on all concerned - and in particular the management at the top of the divisions.

FY23 Results Presentation (PDF 6,308.8 KB)

FY23 Climate Change Report (PDF 9,604.3 KB)

FY23 Annual Report (PDF 17,947.3 KB)

 

[basilio]

Twiggy Forests statement Page 15

EXECUTIVE CHAIRMAN’S MESSAGE
In recent months, we have witnessed extreme events on every continent. The hottest global daily temperatures on record, the worst wildfires on record, the largest evacuation in Greece’s history, the longest heatwaves, the lowest sea ice levels in Antarctica, the warmest oceans.
Forty years ago, Professor James Hansen at NASA wrote that policy wouldn’t change “until convincing observations of the global
warming are in hand.”
ANDREW FORREST

July 2023 was the hottest month on record, over 1.5°C warmer on average than in pre-industrial times.⁵ The climate is changing faster than we are. Until we flip that, it means humanity and any business that thinks it’s too big to fail is the loser. We literally cannot act fast enough. The only answer is to step beyond fossil fuels, step beyond offsets and go all in on green energy.

Fortescue knows it’s possible, because we are already right on track to doing it. In FY23, our consumption of renewable energy increased
66% relative to FY22. Renewables already provide up to 100% of Christmas Creek’s and Cloudbreak’s daytime stationary energy needs. Overall, our Chichester Solar Gas Hybrid Project displaces over 100 million litres of diesel every year.

There is an initial cost to decarbonising, however, as this report shows, it’s an investment – unlike the US$560 million we spent on diesel and gas in FY23 or the US$6.2 million we spent in FY23 on voluntary offsets.

Offsets are a fiction: as a result, you get a nice, linear decline in your emissions that is both pleasing on the eye and incredibly deceptive. As you will see in this report, we are doing things differently. We are actually eliminating fossil fuels – and from now on, we are also eliminating voluntary carbon offsets. We will not buy offsets unless legally required to do so. The science is clear: planting trees is great for the environment, but it won’t hold off the planetary scale meltdown we are experiencing.

We are developing zero-emission mining technologies, powered by a vast new renewable grid in the Pilbara. We aredesigning new processes that could help the steel industry decarbonise. We are developing green hydrogen projects all over the world.

The only thing worse than global warming is global inaction. When the world looks back on the 2020s – the last chance
humanity had to prevent warming of 1.5 to 2°C – we will be able to say we did our best to protect our shareholders and
our children from the unacceptable risk posed by climate change.

I hope you are proud of your little Company – now leading the world where it must now go.

FY23 Climate Change Report (PDF 9,604.3 KB)

 

[divs4ever]

Twiggy Forests statement Page 15

EXECUTIVE CHAIRMAN’S MESSAGE
In recent months, we have witnessed extreme events on every continent. The hottest global daily temperatures on record, the worst wildfires on record, the largest evacuation in Greece’s history, the longest heatwaves, the lowest sea ice levels in Antarctica, the warmest oceans.
Forty years ago, Professor James Hansen at NASA wrote that policy wouldn’t change “until convincing observations of the global
warming are in hand.”
ANDREW FORREST

July 2023 was the hottest month on record, over 1.5°C warmer on average than in pre-industrial times.⁵ The climate is changing faster than we are. Until we flip that, it means humanity and any business that thinks it’s too big to fail is the loser. We literally cannot act fast enough. The only answer is to step beyond fossil fuels, step beyond offsets and go all in on green energy.

Fortescue knows it’s possible, because we are already right on track to doing it. In FY23, our consumption of renewable energy increased
66% relative to FY22. Renewables already provide up to 100% of Christmas Creek’s and Cloudbreak’s daytime stationary energy needs. Overall, our Chichester Solar Gas Hybrid Project displaces over 100 million litres of diesel every year.

There is an initial cost to decarbonising, however, as this report shows, it’s an investment – unlike the US$560 million we spent on diesel and gas in FY23 or the US$6.2 million we spent in FY23 on voluntary offsets.

Offsets are a fiction: as a result, you get a nice, linear decline in your emissions that is both pleasing on the eye and incredibly deceptive. As you will see in this report, we are doing things differently. We are actually eliminating fossil fuels – and from now on, we are also eliminating voluntary carbon offsets. We will not buy offsets unless legally required to do so. The science is clear: planting trees is great for the environment, but it won’t hold off the planetary scale meltdown we are experiencing.

We are developing zero-emission mining technologies, powered by a vast new renewable grid in the Pilbara. We aredesigning new processes that could help the steel industry decarbonise. We are developing green hydrogen projects all over the world.

The only thing worse than global warming is global inaction. When the world looks back on the 2020s – the last chance
humanity had to prevent warming of 1.5 to 2°C – we will be able to say we did our best to protect our shareholders and
our children from the unacceptable risk posed by climate change.

I hope you are proud of your little Company – now leading the world where it must now go.

View attachment 161522 FY23 Climate Change Report (PDF 9,604.3 KB)

thank for convincing me to resist buying back in ,

my fruit trees ( some now blooming and fruiting ) are looking forward to solid carbon emissions to help them eat , and eventually becoming more fossil fuels in the distant future

strange how the world works in cycles

 

[Dona Ferentes]

This place is a revolving door of senior executives. It all seems very unusual for a significant major business. I wonder what the issues are?

What a circus. Diminishes the "visionary" brand quite a bit . More like 'impossible princess'.

 

[Sean K]

What a circus. Diminishes the "visionary" brand quite a bit . More like 'impossible princess'.

Fortescue might be a fantastic company too, but investors can be forgiven for struggling to work out who is running its most important division after it was announced mining boss Fiona Hick has left after just six months in the role. She is the 10th senior executive departure in three years.

Was she pushed? Did she jump? Is this a failure of the top-heavy leadership structure that led to her sharing power with Forrest as executive chairman and Mark Hutchinson – as CEO of the company’s green-hydrogen-focused Fortescue Future Industries division – in what was famously dubbed the “Hicksy, Hutch and Twiggy” show?

Who knows! Unfortunately, Forrest didn’t front Monday’s call with analysts and media, which was ostensibly to discuss the group’s 2023 full-year profit. Instead, Hutchinson was left to claim that Hick’s resignation had been mutual and friendly, and sell this shock as a chance to “expedite” the elevation of chief operating officer Dino Otranto to the mining boss role.

The lack of explanation of Hick’s departure and the ludicrous attempt to spin Otranto’s appointment as planned is frankly an insult to investors – as analysts led by Goldman Sachs’ Paul Young rightly told Hutchinson.

 

[dat111]

What about FY 2024?​

Unfortunately, it appears that the good times could soon be coming to an end for the Fortescue dividend due to its decarbonisation plans.

With Fortescue planning to spend billions on its Fortescue Future Industries business, this is expected to eat into its free cash flow and put pressure on its dividend payments.

For example, Goldman Sachs expects the Fortescue dividend to more than halve in FY 2024 to 62 US cents (93 Australian cents) per share. This will mean a more modest fully franked yield of 4.4% for investors if Goldman’s forecast proves accurate.

It is partly because of this that Goldman Sachs currently has a sell rating and $15.50 price target on its shares. This suggests potential downside of 26% over the next 12 months.

 

[divs4ever]

What about FY 2024?​

Unfortunately, it appears that the good times could soon be coming to an end for the Fortescue dividend due to its decarbonisation plans.

With Fortescue planning to spend billions on its Fortescue Future Industries business, this is expected to eat into its free cash flow and put pressure on its dividend payments.

For example, Goldman Sachs expects the Fortescue dividend to more than halve in FY 2024 to 62 US cents (93 Australian cents) per share. This will mean a more modest fully franked yield of 4.4% for investors if Goldman’s forecast proves accurate.

It is partly because of this that Goldman Sachs currently has a sell rating and $15.50 price target on its shares. This suggests potential downside of 26% over the next 12 months.

i didn't interpret the results announcement like that , but it is a realistic worry , given how costs are blowing out , and projects hitting bottle-necks at other companies .

and dividend income is what i would be buying FMG for if i decided to jump back on board ( i don't usually invest for capital growth alone )

 

[mullokintyre]

Another seniorexec has joined the conga line of departures fom FMG.

Surely at some point, ther will have to be some sort of analysis of these departures.
A one man band, particularly if the band leader has a healthy ego is always vfraughtbwith danger.
Mick

 

[divs4ever]

Surely at some point, ther will have to be some sort of analysis of these departures.
A one man band, particularly if the band leader has a healthy ego is always vfraughtbwith danger.
Mick

the other side of 'key person risk ' perhaps ( the key person has very high expectations )

mind you if my suspicions are correct on there being a major global downturn .. the departures might be 'leaving on a high note ' to prepare the family and personal affairs ( aka 'run for the bunker ' )


i guess time will tell , unfortunately the departing employee will need too large a salary package for my 20 cow adventure

 

[Garpal Gumnut]

So it's approx 5% FF Divi if bought on or before Friday 1/09/2023 .

gg

 

[DrBourse]

The following post is a copy from my 21/8/23 DrB General Help for Beginners forum.

=============================================================================================
"IMO companies that suspend or reduce their dividend payments should be 'commended' for realising the state of the economy, and the situations each individual company may find themselves in……
Companies do not suspend or reduce dividend payments without good reasons, it’s just a pity that the Brokers & Analysts cannot understand that point…..

In previous posts over the past few year’s I’ve mentioned that companies should do exactly that, particularly during the Covid years – companies needed every cent to keep their businesses in business….
Again it’s a pity that most people did not appreciate the position that a lot of companies found themselves in…..


I presume that B & A will now penalise those financially prudent CEO’s by issuing Reverse Guesstimates – that should really confuse the sheep……
For years the sheep have been led by the nose up the garden path with regular guesstimates – now the sheep will presumably have to learn to follow a Reverse Guesstimate….

Which again is a shame as the company balance sheets will invariably benefit from those 'reduced or suspended dividend policies'….

I’ve spent the last week, and probably the next month, looking at each EOFY Report as they are issued….
So far, most are a little down on the past few year’s figures – but that situation will change for the better for the CEO’s brave enough to reduce or suspend dividends – Anyhow, "Who really cares what the B & A think"…..


My point is, don’t ignore good companies that employ a reduced or suspended dividend policy….
As usual, the above is my opinion ….. Use your own judgement….. and remember to DYOR…"
=====================================================================================

My view of FMG's Financials....

The FMG TA has been a bit confusing this year...
Cheers....
DrB.

 

[Miner]

The following post is a copy from my 21/8/23 DrB General Help for Beginners forum.


"IMO companies that suspend or reduce their dividend payments should be 'commended' for realising the state of the economy, and the situations each individual company may find themselves in……
Companies do not suspend or reduce dividend payments without good reasons, it’s just a pity that the Brokers & Analysts cannot understand that point…..

In previous posts over the past few year’s I’ve mentioned that companies should do exactly that, particularly during the Covid years – companies needed every cent to keep their businesses in business….
Again it’s a pity that most people did not appreciate the position that a lot of companies found themselves in…..


I presume that B & A will now penalise those financially prudent CEO’s by issuing Reverse Guesstimates – that should really confuse the sheep……
For years the sheep have been led by the nose up the garden path with regular guesstimates – now the sheep will presumably have to learn to follow a Reverse Guesstimate….

Which again is a shame as the company balance sheets will invariably benefit from those 'reduced or suspended dividend policies'….

I’ve spent the last week, and probably the next month, looking at each EOFY Report as they are issued….
So far, most are a little down on the past few year’s figures – but that situation will change for the better for the CEO’s brave enough to reduce or suspend dividends – Anyhow, "Who really cares what the B & A think"…..


My point is, don’t ignore good companies that employ a reduced or suspended dividend policy….
As usual, the above is my opinion ….. Use your own judgement….. and remember to DYOR…"

Cheers....
DrB.

Good share . I believe Amazon does not award any dividend and one of the darlings in stock market

 

[DrBourse]

Good share . I believe Amazon does not award any dividend and one of the darlings in stock market

Hi Miner... Just updated that 'dividends' post by adding my view of the FMG Financials...,
Cheers...

 

[Miner]

Hi Miner... Just updated that 'dividends' post by adding my view of the FMG Financials...,
Cheers...

Thanks @DrBourse - how do you do such an excellent and patient work ? Good one.

 

[Garpal Gumnut]

With China now cutting back on Alternative Clean Energy (Hydrogen) and its housing and property market in the doldrums for the next three years (Iron Ore), what could possibly go wrong for FMG?

gg

 

[sptrawler]

With China now cutting back on Alternative Clean Energy (Hydrogen) and its housing and property market in the doldrums for the next three years (Iron Ore), what could possibly go wrong for FMG?

gg

Spot on and probably the reason Twiggy is trying to diversify, one trick ponies are always very reliant on that specific market, energy is something that gets used through the good and the bad times.
Whether H2 is a goer is yet to be seen, but in the current climate (no pun intended) it has a better chance than coal, oil and gas, they are all on the nose so to speak, therefore if you are going to try and break into a market a new one is safer than playing against the established ones.
As Tesla is proving, starting a company to build EV's when they weren't popular, has proven a much better choice than trying to start a company building ICE cars and then trying to change over, Tesla would be bust if they had gone that route.
Twiggy is trying the same route, no point in building old school blast furnaces and diversifying into making steel, IMO they couldn't compete with China.
So options are limited, H2 seems to me to be a sensible gamble at this point in time ( govt subsidies, every country is screaming for it, the trucking industry in Australia wants it, the railways etc).

 

[Garpal Gumnut]

Spot on and probably the reason Twiggy is trying to diversify, one trick ponies are always very reliant on that specific market, energy is something that gets used through the good and the bad times.
Whether H2 is a goer is yet to be seen, but in the current climate (no pun intended) it has a better chance than coal, oil and gas, they are all on the nose so to speak, therefore if you are going to try and break into a market a new one is safer than playing against the established ones.
As Tesla is proving, starting a company to build EV's when they weren't popular, has proven a much better choice than trying to start a company building ICE cars and then trying to change over, Tesla would be bust if they had gone that route.
Twiggy is trying the same route, no point in building old school blast furnaces and diversifying into making steel, IMO they couldn't compete with China.
So options are limited, H2 seems to me to be a sensible gamble at this point in time ( govt subsidies, every country is screaming for it, the trucking industry in Australia wants it, the railways etc).

From what I could gather the young lady in charge of FMG, Fiona Hicks has quit FMG, because she was Fe ore focussed and Twiggy wants to go full on AE.

Twiggy has had a number of young and talented people leave senior management positions over the last 12 months, and he is not getting any younger and may be fixed in one of those generations (either x, y, z or millenial, I can never work out which) who are change to AE focussed. Many people have moved beyond that to just backing winners whether in AE or not, atm. I certainly have.

Anyway @sptrawler as you say he has been successful as a "change agent" ( just made that term up I think or maybe not) in the past and maybe he could see that success in Fe Ore would not lead to success in AE.

Also, I thought he might have listed FFI on NASDAQ earlier on in the year. He has missed the boat on that money puppy now.

gg

 

[basilio]

thank for convincing me to resist buying back in ,

my fruit trees ( some now blooming and fruiting ) are looking forward to solid carbon emissions to help them eat , and eventually becoming more fossil fuels in the distant future

strange how the world works in cycles

You based your decision not to buy back in solely on Twiggys Chairman's statement ? I suggest that is a very narrow view of the whole picture of FMG.

It seems as if you are dismissing decarbonisation as a fad or unnecessary. On that fundamental view you are then dismissing Twiggys very strong assertion that CC must be tackled and that FMG will do so as a business opportunity in conjunction with their iron or mining operation.

The overall profitability of iron ore is still excellent. The deccarbonisation of the operations will only add to bottomline profits. The development of green ammonia, green hydrogen, green steel will all enhance the value of the iron ore operations. The operational challenge is ensuring that all these balls including iron ore production stay in the air and fall into place as required. I suspect the challenge of incorporating the AE elements into the overall iron ore operations is the sticking point in terms of sheer time. energy and capacity. It is just a very big addition to a job description.

I can understand some people just wanting to focus on the short term picture and ignoring longer term issues and opportunities. It will be very hard to find the leaders who will agree to incorporate all of these elements. Twiggy is demanding and ruthless. If there is a significant problem in his vision this is certainly a key one. I hope Twiggy can add another significant person in the iron ore operations to oversee the various AE initiatives. But FMG will stay profitable far longer selling ore than most competitors. The rest is gravy.

 

[sptrawler]

I agree @Garpal Gumnut , I think being CEO of FMG isn't an easy gig, there will be much more less challenging CEO jobs out there.
I would guess Twiggy says, we need to make this much, to fund the Fe and the H2 development.
Much easier running an established company, that just does what it has been doing for ever and all that is required is working out what you can tweak, to make it look like you are actually doing something.

 

[basilio]

There has been a military coup in Gabon. Certainly a cause for concern for FMG with their big new mine project. Too early to know what teh outcome will be.

A few other points regarding the Full Year financials.

1) With the formal amalgamation of FFI with FMG to form just Fortescue the financing of renewable energy projects now falls inside the whole company structure. Previously FMG had allocated 10% of its net profits to FFI . Now capital allocations will be determined as a whole of company decision.

2) Dividend payouts were 65% of profits. This fall from last years 78% holds more funds internally for capital works, financial conservatism.

3) There was a $1billion impairment change made against the Iron Bridge project. It certainly cost more than they bargained for. Hopefully it at least works well.

Fortescue profit drops on Iron Bridge impairment charge; co-CEO to step down

Australia's Fortescue on Monday reported a $1 billion pre-tax impairment charge associated with its flagship magnetite growth project, while posting its lowest annual profit in three years amid a surprise senior-management overhaul.

www.reuters.com