31 December 2013 Half year results February 2014

Transcription

1 31 December 2013 Half year results February 2014

2 Disclaimer Important Notice The purpose of this presentation is to provide general information about Fortescue Metals Group Limited ("Fortescue"). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation. This presentation contains certain statements which may constitute "forward-looking statements". Such statements are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward-looking statements. No representation or warranty, express or implied, is made by Fortescue that the material contained in this presentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded, each of Fortescue, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission therefrom. Fortescue accepts no responsibility to update any person regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a person nor any obligation to furnish the person with any further information. Additional Information This presentation should be read in conjunction with the Annual Financial Report as at 30 June 2013, the half year financial statements as at 31 December 2013 and together with any announcements made by Fortescue in accordance with its continuous disclosure obligations arising under the Corporations Act All amounts within this presentation are stated in United States Dollars consistent with the Functional Currency of Fortescue Metals Group Limited. Tables contained within this presentation may contain immaterial rounding differences. 2

3 Building a World Class Company Unprecedented ramp up Founded 2003 First ore mt expansion Over 300mt shipped to date Ramping up to 155mtpa in

4 Our Highest Priority is Safety Safety is at the heart of Fortescue s family values Increased engagement with all employees and contractors Stepped up visible leadership Driving a step change in safety Reinforcement of our Life Saving Choices External review of safety leadership and performance Empowerment for everyone to work safely and look after their mates my brother s keeper Mini Miners Calendar Colouring Competition

5 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 For personal use only Million tonnes Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Million tonnes Million tonnes Record production and costs reduction Continued growth in all operational areas aspects Ore mined (wmt) Ore processed (wmt) Third party ore Ore shipped (wmt) C1 (US$/wmt) Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 5

6 1H14: record financials and cashflows World s fourth largest seaborne exporter 100mt 54mt 1H14 shipped in CY13 $US3.1bn debt reduction 155mtpa end March 2014 Infrastructure complete Ramp up across mines and processing facilities Strong operating cashflows Realised price US$124/dmt A$0.10 interim fully franked dividend declared Costs 34% efficiency focus 6

7 A differentiated model Delivering results China Leveraging China s growth and manufacturing capability Speed Speed of delivery time is money Planning Planning for scale today and efficiency into the future Relationships Direct relationships with sub contractors and local suppliers Culture Fortescue s unique culture is the key 7

8 Financials

9 Highlights 1H14 Record financial results Record revenue US$5.9bn 77% EBITDA of US$3.2bn 184% NPAT US$1.7bn 260% Debt paid/called US$3.1bn interest savings of US$300m Interim dividend of A$0.10 per share 9

10 EBITDA analysis Record financial performance 4,000 3,500 EBITDA US$m ,220 3,000 2, , ,500 1,000 1, HY13 Volume Price Costs Royalty Other 1HY14 Increased shipments 51% - record production Realised price $124/dmt 18% Continued focus on production costs C1 $33/wmt 34% 10

11 Operating margins support Fortescue s average realised selling price and C1 costs US$/wmt % Platts US$/dmt $ $73 $110 $115 $114 $42 $40 $49 $89 $21 $102 $33 $119 $58 $111 $103 $48 $60 $115 $ $23 $21 $23 $19 $18 $18 $18 $19 $18 $ $50 $46 $53 $46 $49 $50 $44 $36 $33 $ Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 C1 cost Other operating costs CFR Operating margin 62% Platts index (RHS) 0 C1 guidance of US$34/wmt in FY14 at USD/AUD

12 Sustained operating cost reduction C1 trending lower as steady state operations commence C1 Cash Cost (US$/wmt shipped) Strip Ratio Estimate for Q3 and Q Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 (est) Q4 FY14 (est) FY12 FY13 FY14 (est) 0.0 C1 cash cost (US$/wmt shipped) Strip ratio (RHS) Breakeven cash price in low US$70/t, 62% CFR basis Q3 Q4 increase in C1 through ramp up of Kings and wet season 12

13 Capital Expenditure FY14 guidance US$bn FY14 guidance 155mtpa expansion 0.7 Operational capital 0.8 Other capital projects 0.2 Exploration 0.1 Fleet 0.3 Total 2.1 T155 expansion complete in FY14 D&A ~$8.50/t at 155mtpa 13

14 ,040 1, ,000 1,500 US$m 4,950 Debt repayment well advanced Staged debt reduction focused on short term bond maturities 5,000 4,500 4,000 3,500 3,000 Callable at Fortescue's option 2,500 2,000 1, and 2016 Notes called 2018 Notes are now callable 1, CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 Senior Secured Credit Facility Senior Unsecured Notes Called Senior Unsecured Notes payable Mar 14, 2014 Current ratings Corporate Term Loan Notes Moody s Ba1/Stable Baa3 Ba2 S&P BB/Positive BBB- BB- Fitch BB+/Stable BBB- BB+ 14

15 Cashflow 1H14 Record cash generation from operations Operating cashflows US$3.6bn reflect: Increased production volumes, prices and lower C1 Iron ore prepayments US$712m Formosa port access fees US$500m Tax and royalty payments US$404m est. FY14 total payments ~US$950m* *Tax instalments of US$750m in Dec 14 for FY14 15

16 Return on capital metrics Increasing returns on capital as production ramps up 80% 60% Return on equity % 40% 20% 0% 20% 15% 61% 50% 55% 34% 39% 16% 8% 6% 10% 1HFY12 2HFY12 1HFY13 2HFY13 1HFY14 BHP (Au) RIO (AU) Vale (SA) Peer group Fortescue average Source: Bloomberg at February 14, 2014 Return on assets employed % 10% 5% 0% 17% 13% 14% 8% 10% 8% 3% 3% 5% 1HFY12 2HFY12 1HFY13 2HFY13 1HFY14 BHP (Au) RIO (AU) Vale (SA) Peer group average Fortescue Source: Bloomberg at February 14,

17 Key credit metrics Improving credit profile 5.0 Debt / EBITDA 80% Gearing % % 40% 20% 67% 69% 76% 71% 63% 59% Dec Jun Dec Jun Dec-13 0% 31-Dec Jun Dec Jun Dec-13 Pro-forma 6.0 Interest coverage 14.0 Cash and debt (US$bn) HFY12 2HFY12 1HFY13 2HFY13 1HFY Dec Jun Dec Jun Dec-13 Pro-forma Debt (incl finance leases) Cash on hand 17

18 Earnings analysis Compelling valuation metrics 19.2x FY14 forecast PE ratio 14.4x 12.5x 11.9x 11.8x 9.7x 8.5x 6.3x 6.1x 4.9x 10.5x Newcrest Cliffs BHP (AU) Mount Gibson Kumba Iron Ore RIO (AU) Atlas Iron BC Iron Vale SA Fortescue Average 8.7x FY14 EV/EBITDA 7.5x 6.2x 6.1x 5.7x 4.7x 4.6x 4.2x 3.5x 2.7x 5.4x Newcrest Cliffs BHP (AU) Kumba Iron Ore RIO (AU) Vale SA Mount Gibson Fortescue BC Iron Atlas Iron Average Source: Bloomberg as at February 14, 2014 Fortescue share price $5.70 per share 18

19 Market

20 Long term confidence in China Strong underlying economy Leadership committed to growth 7.7% GDP growth 2013 Steel demand growth ~8% 2013 Imported iron ore +10% to 820mt +200m people to urbanise by % steel coastal and Yangtze River 20

21 China GDP Volume GDP doubled in 6 years GDP Trillion RMB 70 % GDP Growth % GROWTH FORECAST* GDP GDP Forecast % Growth (RHS) 0 * Based on IMF forecasts 21

22 Steel consumption per capita China has only just reached levels of consumption of a developed country Kg per capita Forecast GDP China US Source: Macquarie Research 22

23 Demand for seaborne supply New coastal steel capacity moving away from domestic iron ore Iron Ore Reserves New/proposed steel capacity Seaborne iron ore Source: ANZ Research Seaborne iron ore imports (Ex. Australia, Brazil etc.) 23

24 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 For personal use only History shows price volatility Strong rebounds follow price drops $200 Iron Ore Price (62% Fe CFR - Platts IODEX China) $190 $180 $170 $160 $150 $140 $130 $120 $110 GDP $100 $90 $80 24

25 Clear Strategy

26 Port flexible design for future growth Fourth berth commissioned with fifth berth approved AP3 AP2 AP1 AP4 AP

27 Product Strategy Revised product strategy at 155mtpa - average grade 58% Bonnie Fines 6mtpa Super Special Fines 30mtpa Rocket 10mtpa Fortescue Blend 70mtpa Kings CID 40mtpa Focused on maximising resource recovery Optimising revenue by an integrated product 27

28 Fortescue US$/dry tonne Moving down the global cost curve Targeting bottom quartile October 2013 CFR Cost of China's Iron Ore Supply (including royalties & freight) Domestic Chinese Ore Australia Brazil India South Africa Other ,000 1,100 Cumulative Mt (wet, as delivered) 28

29 Mineral Resources (Mt) Resource portfolio sets expansion platform Leverage existing assets for low cost growth 18,000 16,000 14,000 12,000 5,205 5,205 10,000 2,465 3,236 2,463 2,463 8,000 6,000 4,000 2,000 1,032 2, ,230 1,230 3,070 3,070 1,715 2,224 2, ,266 2,227 2,143 2,550 2, ,247 3, ,379 3, Chichester Hub Chichester Other Solomon Hub Western Hub Nyidinghu Magnetite 29

30 Making a difference Jobs and opportunities replacing welfare ~ % ~ 450 US$1.5bn+ Direct Aboriginal employees Aboriginal people in Fortescue workforce Aboriginal people employed by contractors Contracts to Aboriginal companies and JV s 30

31 Beyond 155mtpa Increasing shareholder returns 1. Incremental production from optimising existing assets 2. Continue debt reduction ~40% gearing 3. Moving to investment grade metrics 4. Dividend payout ratio to 30-40% once gearing achieved 5. Continued exploration of our extensive Pilbara tenements 6. Early work to secure strategic options in high value opportunities 31

32 Delivering on targets 10 years strong Strong financial results Expansion to 155mtpa Debt reduction underway Increasing dividends Flexible incremental growth Unique culture drives performance 32

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34 Glossary Definition of non-ifrs items EBITDA = profit before income tax adjusted for depreciation and amortisation, impairment expense, other write-offs, net finance costs and gain on refinancing Return on equity = profit for the year after income tax divided by total equity Return on assets employed = total assets divided by total equity Earnings per share (EPS) = profit for the year after income tax divided by undiluted weighted average ordinary shares Cash flow per share (CFPS) = net cash inflows from operating activities divided by undiluted weighted average ordinary shares Debt = Current and non-current borrowings and financial liabilities Net debt = Debt less cash and cash equivalents R12 = Rolling 12-month period 34