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Fortescue Metals Group said it would pay out $8bn in dividends as the Australian miner posted record annual iron ore shipments and net profits after tax on the back of the economic rebound in China.
The bumper results on Monday followed those of rivals BHP and Rio Tinto, which have also reported record profits and flagged multibillion-dollar dividend payouts.
Fortescue shipped 182.2m tonnes of iron ore in the 2020-2021 fiscal year, boosted by demand from China’s investment-powered economic recovery from the Covid-19 crisis and global supply chain snags.
Shares in Fortescue jumped more than 6 per cent on Monday after it unveiled net profits of $10.3bn, an increase of 117 per cent, and total dividends of A$11bn (US$8bn).
“Guided by our unique culture and values, the Fortescue family has delivered a second consecutive year of record performance, with shipments, earnings and operating cash flow surpassing any year in Fortescue’s history,” said chief executive Elizabeth Gaines.
Prices for steelmaking ingredient iron ore have soared over the past year, reaching a peak of more than $230 per tonne in May.
Analysts have said that years of under-investment had reduced supply of iron ore just as the pandemic throttled commodity supply chains. Fortescue reported $3.6bn in capital investment for the past year, adding that its balance sheet was structured to fund future growth.
“Fortescue maintained a very strong balance sheet as reflected by its low leverage. While the company declared a record dividend, its strong cash generation and conservative financial position provide good capacity to absorb increased shareholder returns,” said David Xu, an analyst at rating agency Moody’s.
“The company can fund potentially higher capital spending as it progresses its Iron Bridge project, and possible investment opportunities in renewable energy and green hydrogen projects,” Xu added.
Fortescue spent $2.1bn on three big growth projects in the past year, including Iron Bridge, which the company hopes will produce 22m tonnes of iron ore a year by mid-2022.
The group also established Fortescue Future Industries, its green energy and renewables branch. It allocated $1bn in capital expenditure to FFI in the 2021 year, $122m of which has been spent. It projected expenditure to rise to $400m-600m for the 2021-22 fiscal year.
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