FMG -5.67%: delivered a solid March quarter, with the core Pilbara hematite business again doing the heavy lifting, while weather disruptions weighed on Iron Bridge and prompted a downgrade to FY shipment guidance for that higher-grade product.
- Shipments: 48.4Mt for the quarter, down 4.2% QoQ
- Shipments for the nine months to March reached a record 148.7Mt, up 4% YoY.
- Full-year group shipment guidance was maintained at 195-205Mt.
Costs were also better, with Pilbara hematite C1 costs falling 4.2% QoQ to US$18.29/wmt, sitting within FY guidance of US$17.50-18.50/wmt. That remains a key part of the FMG investment case: despite its lower-grade product relative to peers, the company remains a very low-cost, highly cash-generative iron ore producer.
The main blemish was Iron Bridge, where shipments of concentrate were 2.0Mt in the quarter, impacted by Tropical Cyclones Mitchell and Narelle. FY Iron Bridge shipment guidance was cut to 9-10Mt, from 10-12Mt, which will disappoint given this asset is central to improving FMG’s product quality and narrowing the valuation discount to peers over time. Management also flagged a broader portfolio optimisation review across hematite and Iron Bridge, with an update expected in three months.
The balance sheet remains in good shape, though it did soften during the quarter. Cash declined 11% QoQ to US$4.2bn, while net debt increased 60% QoQ to US$1.6bn. Capex and investments were US$915m in the quarter, with FY Metals capex guidance unchanged at US$3.3-4.0bn.
A key development was FMG approving the US$680m Pilbara Green Energy Project, a 200MW renewable energy development expected to be completed by 2028, with a pathway to multi-gigawatt expansion beyond 2030.
We like the strategic push to reduce diesel exposure through Pilbara renewables, particularly in the current energy backdrop, though investors will want to see returns rather than just ambition – which has been their archils heal. We own FMG in the Active Income Portfolio.
MM remains long & bullish FMG for Income
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