FMG -0.61%: delivered a broadly solid FY26 result, with revenue, free cash flow and the balance sheet all coming in well, although EBITDA and NPAT were a little light versus some broker expectations. The main blemish remains Iron Bridge, where higher costs and a further impairment continue to weigh on the investment case.
Key FY26 numbers:
- Underlying EBITDA of US$8.64 billion, up 8.7%, but a little below some broker forecasts.
- Revenue of US$16.97 billion, up 9.2% and slightly ahead of consensus.
- Underlying NPAT of US$3.47 billion, up 2.8%.
- Statutory NPAT of US$2.87 billion, down 15%, including a US$525 million non-cash impairment relating to Iron Bridge.
- Free cash flow of US$3.20 billion, up 25%.
- Net debt of US$857 million, comfortably below the US$973 million expected.
- Final dividend of A46c, taking the full-year dividend to A$1.08, slightly below expectations.
Margins remained resilient, with underlying EBITDA margin holding at 51%, while FY27 guidance was unchanged. Fortescue still expects shipments of 197–207mt, Pilbara Hematite C1 costs of US$20.50–21.75/wmt, and Metals capex of US$3.7–4.7 billion.
The key issue is still Iron Bridge. Higher-than-expected costs contributed to the earnings miss, while the latest impairment reinforces that the asset has not delivered to initial expectations. That said, the core Pilbara business continues to generate strong cash flow, and the balance sheet remains in good shape.
There are also some longer-term positives, including the new Hematite life-of-mine plan incorporating Blacksmith, which management expects to improve unit costs and capital efficiency, while the Green Grid investment should help lower the Pilbara cost base over time.
MM’s view: This was a reasonable result, but not one that changes our view materially. The core iron ore business remains highly cash generative, the balance sheet is strong and FY27 guidance was maintained, but Iron Bridge continues to be a drag and the dividend was a little softer than expected.
- At current levels, FMG remains a leveraged exposure to iron ore and China. We think the stock looks fair rather than compelling here.
MM is positive on FMG for income, but we can’t see a lot of growth unless China improves
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