Fortescue (ASX:FMG) Metals Group Ltd (ASX: FMG) is set to release its FY24 results later this month, with the announcement scheduled for August 28. This will be a crucial moment for the mining company, which has faced a challenging period recently.
The past few weeks have been particularly tough for Fortescue and the broader iron ore market. The company's share price has fallen by nearly 20% in the last month, reflecting broader struggles within the sector. This decline coincides with a significant drop in the iron ore price, which recently fell below US$100 per tonne—the lowest level in 20 months. As an ASX mining stock, Fortescue's performance is closely tied to these industry trends.
This downturn is partly due to decreased demand for steel in China. Reports indicate that Chinese steel mills have reduced their iron ore purchases, leading to a 9% decline in steel production month-over-month in July. Contributing factors include an oversupply of housing in China and insufficient government stimulus for struggling property developers. Additionally, the Chinese National Bureau of Statistics (NBS) Construction PMI hit a one-year low in July, while house prices have fallen sharply, the most significant drop since 2015.
Iron ore inventories at Chinese ports have been increasing, further signaling a slowdown in demand.
Despite these headwinds, Fortescue is expected to report its annual results for the year ending June 30, 2024, on August 28. Preliminary figures from recent updates suggest that Fortescue generated approximately US$18.5 billion in revenue for FY24, despite the volatility in iron ore prices which fluctuated between over US$140 per tonne and around US$100 per tonne.
The company is projected to report earnings before interest and tax (EBIT) of US$8.6 billion, with net profit after tax (NPAT) estimated at US$5.88 billion. This equates to earnings per share (EPS) of US$1.91.
For the annual dividend, Fortescue is anticipated to declare A$1.41 per share, translating into a fully franked dividend yield of 8.2% and a grossed-up yield of 11.7% for FY24. This follows a half-year dividend of A$1.08 per share paid earlier in the year. The final dividend is expected to be smaller compared to the interim dividend.
Fortescue’s share price has experienced a steep decline of over 40% since the beginning of 2024. In contrast, the S&P/ASX 200 Index (ASX: XJO) has risen by more than 4% during the same period, highlighting Fortescue's significant underperformance relative to the broader market.
As the company prepares to release its FY24 results, all eyes will be on how it navigates the current market conditions and what strategies it will employ to address the ongoing challenges in the iron ore sector.