From Credit Suisse:
FMG announced in-line underlying 1H’14 NPAT of $1.72 vs consensus $1.72bn (CS: $1.65bn). Strong EBITDA at $3.22bn versus $3.11bn consensus (CS: $3.15bn).
■ Consolidation of FMG Iron Bridge: Sale of 31% to Formosa added $108mn income and $123mn cash.
■ Surprise dividend doubling: 10¢ps vs consensus 6.5¢ps (CS: 5¢ps), equal to full-year FY13 dividend.
■ Gearing at 56% as expected: Net debt at $8.6bn. Iron ore prepayments contributed $712mn (operating cashflow and BS liability), and the Formosa port access another $500mn cashflow (and $48mn profit).
■ Capex and exploration in the half was $1.4bn and full year 2014 guidance is $2.1bn (following $200mn contractor overrun announced at DecQ quarterly).
■ Outlook: Maintained FY14 shipments guidance of 127Mt (reduced at decQ quarterly), but says it remains sensitive to weather and ramp-up of OPFs to full production capacity. C1 cash cost guidance estimated at US$34/t for FY14. This implies JunH’14 costs at $35/t given DecH’13 was $33.1/t. We note that FMG has beaten all cash cost guidance in the last four quarters.
■ In the presentation, FMG maintained confidence in steel demand in China. It is targeting lowest cost quartile and on Metalytics cost curve, only Rio and BHP are cheaper.
Shares were up a bit on the result. You know what I think!
