FMG –2.15%: The iron ore producer came out with a solid quarterly on a tough day for commodity stocks.
Key highlights:
- Iron ore shipments 49.4 million tons, +3.6% q/q
- Maintained full-year guidance of 190-200 million tons, costs and capex remained unchanged.
- Cash balance $3.4 billion vs. $3.4 billion q/q
- Net debt $2.0 billion, -4.8% q/q
FMG has stuck with its guns as essentially a single-commodity producer, the exceptions being its critical minerals exploration in Argentina, Peru and Kazakhstan, after it canned its hydrogen-related aspirations last year. We saw that move as a positive as it alleviated some of the unknowns, particularly costs, from the business. Nonetheless, operational execution remains key moving forward as we start to see pressure on Chinese steel demand and volatility in the iron ore price.
- We like the company’s dirt-cheap cost of production (C1 costs at $18.24/mt) and current gross dividend yield of ~15% (i.e. incl franking) – we continue to hold it in the Active Income portfolio.
MM remains long and bullish FMG
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