Fortescue Metals Group Ltd. said it hoped to repay as much as US$1.5 billion of debt within the next year, after a sharp rise in iron-ore output from its Pilbara mines fueled a 56% rise in annual profit.
Fortescue, the world's No. 4 iron-ore exporter by volume, reported a net profit of US$2.73 billion in the year through June as rising production from the Pilbara region of Western Australia state offset a recent steep fall in iron-ore prices. That beat a US$2.71 billion median forecast of five analysts polled by The Wall Street Journal.
The Perth-based company retained a final dividend of 10 cents a share.
Rising sales have helped executives pay down a massive debt pile, even in the face of iron-ore prices falling by around a third since the start of January. Cash flow more than doubled from a year earlier, reaching US$6.25 billion, it said.
Fortescue said it had repaid US$3.1 billion of debt last fiscal year, and announced plans to repay another US$500 million senior notes in October. In addition, the company intends to pay back another US$500 million to US$1 billion depending on the strength of iron-ore prices, it said.
Fortescue has been working to rebuild its balance sheet, after the company borrowed billions of dollars to fund its aggressive expansion plans. Fortescue's net debt totaled US$7.2 billion at June 30, compared with US$8.6 billion six months earlier.
Earlier this year, Fortescue reached a long-targeted annual output rate of 155 million tons after building new mines in the resource-rich Pilbara region of Western Australia state. That expansion ensured Fortescue's profit continued to rise, even while iron-ore prices dropped one-third in its fiscal second half on an emerging glut of the raw material.
Major iron-ore producers including Rio Tinto PLC and BHP Billiton Ltd. have also been reporting record iron-ore output from the Pilbara, where the companies think they can produce the commodity more cheaply than other countries such as China.
Fortescue--which has grown from a tiny explorer to one of the world's biggest miners of iron ore over the past decade--exported 124.2 million tons of iron ore during the year, up 53%. Fortescue expects to ship as much as 29% more iron ore to buyers in countries including China over the coming year after completing a massive expansion of its Australian operations.
China's demand for commodities such as iron ore won't be sated for years to come, Chief Executive Nev Power has said previously.
"China has only just reached levels of [steel] consumption of a developed country," the company said in a slide presentation Wednesday.
The company expects continued migration to the cities from China's still densely populated countryside to fuel demand new infrastructure, factories and housing to accommodate the rural arrivals.
Source The Wall Street Journal
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