Fortescue Earnings: Elevated Iron Ore Prices and Lower Discounts Are Tailwinds, but for How Long?

No-moat Fortescue’s fiscal 2024 adjusted EBITDA of roughly USD 10.7 billion rose 7% on last year. Higher iron ore prices (8%) of USD 103 per metric ton more than offset a 4% rise in unit cash costs due to inflation, with EBITDA margin of USD 65 per metric ton also up 8%. Adjusted net profit after tax of USD 5.7 billion, or USD 1.85 (AUD 2.72) per share, was up 3% from a year ago, affected by higher depreciation. Fortescue will pay an AUD 0.89 final dividend in September for a fiscal 2024 total of AUD 1.97 per share fully franked. This represents a 70% payout ratio for the year, in line with Fortescue’s 50%-80% target, and means total dividends are 13% higher than last year. Free cash flow of USD 5.1 billion rose 18%, and its balance sheet remains very strong, with minimal net debt of USD 0.5 billion at the end of June 2024.