By Robb M. Stewart
MELBOURNE, Australia--Fortescue Metals Group Ltd. (FMG.AU) has flagged a more aggressive dividend payout after annual profit more than doubled on the back of strong iron-ore prices and ongoing efforts to lower production costs.
The world's No. 4 exporter of the steelmaking commodity said its net profit jumped to US$2.09 billion in the 12 months through June from US$984 million the year before, while revenue rose 19% to US$8.45 billion from US$7.08 billion, the Perth, Australia-based company said.
Fortescue, which has worked in recent years to cut a mountain of debt that had underpinned its rapid growth to challenge bigger Australian rivals Rio Tinto PLC (RIO.AU) and BHP Billiton Ltd. (BHP.AU), plans a final dividend of 25 Australian cents (US$0.20) a share to take its full-year payout to 45 cents, a jump from the 15 cents paid last year.
The company said its guided payout ratio would increase to between 50% and 80% of net profit, based on the prevailing iron-ore price and its financial performance. The payout ratio was 52% of profit for the latest financial year, against 36% the year before
Net debt was cut in half, to US$2.63 billion from US$5.19 billion a year earlier.
Fortescue is targeting steady iron-ore shipments in the current financial year of about 170 million metric tons, after exports inched higher in the 2017 fiscal year, while targeting a further reduction in production costs. That is despite the discount the miner receives for its ore widening in the last quarter even as iron ore and steel demand remained strong, as steel mills in China sought out higher-grade iron ore.
Fortescue borrowed heavily to build a vast network of mining pits, rail lines and port infrastructure in Australia's remote Pilbara region in a decadelong quest to break the dominance of its Australian rivals and Brazil's Vale SA (VALE). The company has pushed to repay since 2012, when a slide in iron-ore prices forced it into emergency talks with lenders.
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