Fortescue H1 Earnings Call Highlights
by Danessa Lincoln · The Markets DailyFortescue (ASX:FMG) executives said the miner delivered record first-half shipments, maintained an industry-leading cost position, and increased cash generation, while accelerating a multi-year decarbonization program aimed at lowering structural operating costs and supporting longer-term growth options in metals and energy.
Record shipments, low costs, and shareholder returns
In opening remarks, Growth and Energy CEO Dino Otranto cited Fortescue’s recently reported quarterly production update, highlighting record first-half shipments of 100.2 million tonnes. He said hematite C1 unit costs were $18.64 per tonne for the half, which he described as reinforcing the company’s cost leadership.
Otranto also pointed to profitability and distributions, noting $5 billion in underlying EBITDA and $1.9 billion in net profit after tax (NPAT). He said the board declared a dividend of AUD 0.62 per share, describing it as returning AUD 1.9 billion to shareholders.
Financial performance and capital allocation
CFO Apple Paget said first-half revenue was $8.4 billion, up 10% from the prior corresponding period, and cited a 7% increase in hematite realized price to $91. She said the hematite C1 unit cost was 3% lower than the prior-year first half despite inflationary pressures, and reiterated a pathway to the company’s cost guidance of $17.50 to $18.50 per tonne at an assumed AUD/USD exchange rate of 0.65. Paget added that a one-cent movement in the Australian dollar impacts costs by about $0.16.
Paget said underlying EBITDA increased 23% to $4.5 billion, with an expanded EBITDA margin, and that NPAT also rose 23%. She cited return on capital employed of 20%. Below EBITDA, she attributed movements to higher depreciation and amortization and increased exploration, development, and other expenses, noting depreciation rose 19% versus the prior-year half due to a growing asset base.
On cash flow, Paget said net cash flow from operating activities rose 32% to $3.2 billion and free cash flow more than doubled to $1.5 billion, after $1.7 billion of capital expenditure. That CapEx included $1 billion in sustaining and hub development and $426 million on decarbonization. She said the balance sheet remained strong, with $4.7 billion of cash at 31 December and net debt of $1 billion.
Paget also described actions to enhance the debt structure, including the syndication of a low-cost U.S. dollar term loan facility and repurchases of some senior unsecured notes. She said the company’s gross debt to EBITDA was 0.7x and gross gearing was 22%, which she said provided significant headroom.
On shareholder returns, Paget said Fortescue declared a fully franked interim dividend that was 24% higher than the FY2025 interim dividend and represented a payout of first-half NPAT, consistent with its policy to pay out 50% to 80% of full-year underlying NPAT.
Decarbonization push: wind, solar, batteries, and electrified mining equipment
Management repeatedly tied decarbonization investment to cost reduction, emphasizing reduced diesel consumption and lower exposure to fuel price volatility. Otranto said construction is underway on the 133 MW Nullagine Wind Project, and that energy storage systems had been delivered at North Star Junction and Eliwana and were complete.
He said Fortescue is ramping solar installations, stating the company is installing more than 3,600 solar panels per day. He also cited progress in replacing diesel equipment, including 12 drills that are now operating, and said the company’s first XCMG electric wheel loader and wheel dozer had been built, with trucks expected to roll off the production line this year. He added that the company is commissioning two new battery electric locomotives.
Executives cited partnerships with equipment and technology providers, including XCMG, Liebherr, Envision, LONGi, and BYD. In Q&A, management said electrified equipment performance was “well above” expectations, while noting typical commissioning “teething issues.” Otranto also said battery storage systems had already helped manage blackout-type events on the company’s network due to faster response than traditional generators.
Asked about decarbonization capital expenditure, management said the next couple of years would likely be the peak period. Paget reiterated that Fortescue was maintaining its decarbonization guidance of $900 million to $1.2 billion, describing spending as “lumpy.”
In response to a cost question, Otranto said Fortescue had “already flagged” a $2 to $4 impact (as described on the call) before 2030 tied to diesel offset, and also referenced early benefits from AI, saying the company has agents operating across the network that are yielding volume upside and that some cost savings have been “banked.”
Operations and product strategy: Iron Bridge, hematite plan, and market commentary
On Iron Bridge, Otranto said the operation continues to ramp steadily. Since operations began, he said Fortescue has shipped 14 million tonnes at an average grade of 67% iron. He said the business is seeing record operating time and throughput, with throughput and recovery improving month-on-month, and referenced continued work including on the secondary grinding circuit.
Management also discussed an updated hematite plan, which Otranto said adds value and provides more long-term certainty. He said the plan includes Blacksmith, refines product mix, and is designed to reduce total material movement. He also cited exploration at Mindy South, Nyidinghu, and Wyloo North as efforts to expand the resource base and keep options open.
On lower-grade hematite strategy, sales and marketing director Ben Cookell said the lower-grade product would go into production later and that the company would engage customers in the coming months to place the product for maximum value, while cautioning it was too early to discuss average realizations.
Asked about China market conditions, Cookell said it was too early to get detailed post-holiday data, but said seasonality typically supports stronger conditions into March through May. He added that the outlook for the year “should be a stronger year for crude steel production similar to last year.”
Growth pipeline: copper, Gabon, and technology development
Growth and Energy CEO Gus (identified on the call as “Gus”) said Fortescue is exploring global opportunities across metals, critical minerals, energy, and technology, with a focus on “real zero.” He said the company expects to finalize the acquisition of Alta Copper, describing it as strengthening Fortescue’s copper portfolio in Latin America. Once completed, he said the immediate focus will be technical reviews, community engagement, and advancing studies to inform future development decisions.
On Gabon, management said work continues at the Belinga iron ore project, including drilling planned over coming months to test additional targets. An executive identified as Nick said the team is focusing on areas with the most high grade and lump potential.
Nick also outlined broader copper exploration efforts, including tenements in British Columbia that Fortescue aims to fast-track to drilling this year and a drilling program in Kazakhstan targeting both porphyry and sedimentary copper targets, with an expected 15,000 meters of drilling.
On technology, management described Fortescue Zero as a driver of innovation. Gus said the company has progressed a power system for its T 264 trucks and is advancing battery intelligence software, noting that Elysia has acquired Zitara to support and monitor battery energy storage systems. Fortescue also discussed development work on molten oxide electrolysis, saying the critical path includes balance-of-plant design and reducing the cost of electricity, with the company looking at a larger pilot plant in the Pilbara when ready.
In Q&A, management said it was too early to provide CapEx updates for growth projects such as Gabon and Alta Copper, and emphasized a disciplined, commercial approach, with updates to come as markets develop and project economics “stack up.”
About Fortescue (ASX:FMG)
Fortescue Ltd engages in the exploration, development, production, processing, and sale of iron ore in Australia, China, and internationally. It explores for copper, gold, and lithium deposits; and rare earth elements. The company provides port towage services; owns and operates rail and port facilities; and focuses on producing green energy and green hydrogen, including derivatives comprising green ammonia. The company was formerly known as Fortescue Metals Group Limited and changed its name to Fortescue Ltd in November 2023.