Twiggy's big pay day
Mining magnate Andrew "Twiggy" Forrest will be paid a dividend of more than $102 million after his flagship company exceeded expectations for both profit and dividend flows in the 2013 financial year.
Fortescue Metals Group's net profit of $US1.74 billion ($1.93 billion) enabled the iron ore miner to pay out a 10¢ fully franked dividend to its army of shareholders on Thursday.
That dividend was more than double the 4¢ dividend that Credit Suisse was expecting, and will ensure a lucrative pay day for Mr Forrest, who founded Fortescue and remains its chairman and biggest shareholder with almost 33 per cent of the company.
Fortescue has more than $US10 billion of debt to pay down over the next decade, but chief executive Nev Power said the financial result was good enough to allow the company to pay down debt and reward shareholders.
"The dividend reflects a couple of things, predominantly the strong underlying financial performance that we've got in the company and the confidence we have got in that continuing," he said, adding that the board found the dividend decision an easy one to make.
Such a strong result seemed unlikely 11 months ago, when a sharp slump in iron ore prices sent Fortescue into a short-lived debt crisis.
Fortescue emerged from that crisis with fewer staff, higher levels of debt spread over a longer time-frame and serious doubts over its ability to service the debt.
But in 2013 at least, the company's growth successfully outpaced the weakening of the iron ore price.
The average price Fortescue received for its iron ore fell by 13 per cent compared with the previous year, yet exports increased by just over 40 per cent and overall revenues rose 21 per cent.
The equation was further helped by cutting about $US400 million in costs out of the business.
This time last year Fortescue needed the iron ore price to stay above $US90 a tonne to break even, but on Thursday Mr Power said Fortescue could break even with an iron ore price between $US70 and $US75 a tonne.
A tonne of iron ore was fetching $US137.80 on Thursday and Mr Power said he expected it to continue trading between $US110 and $US130 a tonne in the near term.
Fortescue expects to increase iron ore exports by a further 65 per cent in the 2014 financial year.
The company will begin paying down debt before Christmas 2013, despite its first repayment not being due until about Christmas 2015.
For close to a year now Fortescue has been seeking to sell a stake in its port and rail assets as a central plank in its efforts to pay down debt.
But a sale has looked increasingly unlikely in recent weeks, as Fortescue's improving position removed the urgency for a sale.
Mr Power stressed the sell-down remained a live option, but would not happen unless a fair price was forthcoming.
Investors responded warmly to the result, pushing Fortescue shares 17¢ higher to $4.26.
Fortescue also confirmed that it had recently set up a small subsidiary company in Mozambique.
The company - known as "African Fortescue" - is not yet producing anything, and Mr Power would not say which type of commodity it would pursue.
"There is no significant activity there at all, but we see Africa as highly prospective in the longer term," he said.