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Fortescue Metals (FSUGY) FY22 Earnings Lag Estimates, Fall Y/Y

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Fortescue Metals Group (FSUGY - Free Report) reported earnings per share of $2.01 for fiscal 2022 (ended Jun 30, 2022), which fell short of the Zacks Consensus Estimate of $3.89. The bottom line figure marked a 40% plunge from the last fiscal year’s reading. The dismal performance reflected the downtrend in iron ore prices and higher operating costs that offset the impact of record shipments. Notwithstanding the dip, the net profit after tax of $6.2 billion in fiscal 2022 marked the second highest annual profit in FSUGY’s history.

FSUGY’s operating revenues slumped 22% year over year to $17.4 billion in fiscal 2022. The figure, however, beat the Zacks Consensus Estimate of $17.2 billion. The drop in revenues was mainly due to lower iron ore prices as demand remained weak in China, the top consumer, due to COVID-related lockdowns.

Fortescue Metals reported record shipments of 189 million tons (Mt), indicating an improvement from its guidance of 180-185 Mt. FSUGY had reported shipments of 182.2 Mt in fiscal 2021. Average revenues, however, declined 26% year over year to $100/dry metric ton (dmt).

C1 costs (unit operating costs of mining, processing, rail and port, including allocation of direct administration charges and production overheads) of $15.91 per wet metric tonne (wmt) in fiscal 2022 were 14% higher than $13.93 in fiscal 2021. This was primarily due to higher diesel prices, labor rates and other consumables.

Fortescue Metals’ underlying EBITDA in fiscal 2022 came in at $10.6 billion, reflecting a 36% drop from $16.4 billion in the last fiscal year. Underlying EBITDA margin in fiscal 2022 was 61%.

Net cash flow from operating activities was $6.6 billion in fiscal 2022 compared with $12.6 billion in fiscal 2021. Free cash flow declined 60% from the prior fiscal year’s reading to $3.6 billion. FSUGY ended fiscal 2022 with cash on hand of $5.2 billion and net debt of $0.9 billion.

Fortescue Metals declared a final dividend of AUD$1.21 per share (83 cents). Including its interim dividend, the total dividend declared for fiscal 2022 reaches AUD$2.07 ($1.42), representing 75% payout of FSUGY’s net profit after tax in fiscal 2022. This move is consistent with FSUGY’s target of taking the payout to the upper end of the guided range of 50% to80% of net profit after tax.

Fiscal 2023 Guidance

Fortescue Metals projects iron ore shipments in the range of 187-192 mt for fiscal 2023.

A Look at Some Other Miners’ Performances

Rio Tinto (RIO - Free Report) reported revenues of $29.8 billion in the first half of fiscal 2022 (ended Jun 30, 2022), down 10% from the comparable period’s level in the last fiscal year. Underlying earnings per share plunged 29% year over year to $5.32. This reflected lower commodity prices, impact of higher energy prices on FSUGY’s operations and higher rates of inflation on its operating costs and closure liabilities.

RIO maintains its guidance for iron ore shipments for fiscal 2022 at 320-335 Mt. It expects Pilbara iron ore unit cash costs in the range of $19.50-$21.00 per ton for the full fiscal.

BHP Group (BHP - Free Report) reported a record underlying attributable profit of $23.8 billion for fiscal 2022 (ended Jun 30, 2022), up 39% from the last fiscal year’s tally. The upside reflects a strong production performance and savings from BHP’s cost-control efforts as well as higher coal and copper prices that helped offset the impact of low iron ore prices.

BHP’s revenues for fiscal 2022 totaled $65 billion, which missed the Zacks Consensus Estimate of $65.5 billion. The top line, however, indicated an improvement of 14% from the prior fiscal year’s revenues. The Iron ore segment’s revenues dropped 10% year over year to $30.8 billion, mainly dragged down by lower iron ore prices. Revenues in the Copper segment rose 7% to $16.8 billion, reflecting higher average realized prices. The Coal segment’s revenues skyrocketed 202% to $15 billion, aided by a surge in coal prices. BHP Group’s iron ore production guidance for fiscal 2023 is 249-260 Mt.

Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

In the past year, shares of Fortescue Metals have fallen 14.9% compared with the industry’s decline of 30.3%.

Zacks Rank

Fortescue Metals currently has a Zacks Rank #3 (Hold).

A better-ranked stock worth considering in the basic materials space is Daqo New Energy Corp. (DQ - Free Report) , which currently sports a Zacks Rank #1 (Strong Buy). DQ has an expected earnings growth rate of 177.5% for the current year. The Zacks Consensus Estimate for DQ's earnings for the current fiscal year has been revised 20.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing the mark on one occasion, the average beat being 10.8%. DQ has gained around 28% over a year.

 

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