Credit Suisse AIC Conference 2017 Forward looking statements - - PowerPoint PPT Presentation

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Credit Suisse AIC Conference 2017 Forward looking statements - - PowerPoint PPT Presentation

Credit Suisse AIC Conference 2017 Forward looking statements Important Notice Additional Information The purpose of this presentation is to provide general information about This presentation should be read in conjunction with the Annual Report


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Credit Suisse AIC Conference 2017

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Important Notice

The purpose of this presentation is to provide general information about Fortescue Metals Group Limited ("Fortescue"). It is not recommended that any person makes any investment decision in relation to Fortescue based

  • n this presentation. This presentation contains certain statements which may

constitute "forward-looking statements". Such statements are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward-looking statements. No representation or warranty, express or implied, is made by Fortescue that the material contained in this presentation will be achieved or prove to be

  • correct. Except for statutory liability which cannot be excluded, each of

Fortescue, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or

  • mission therefrom.

Fortescue accepts no responsibility to update any person regarding any inaccuracy, omission or change in information in this presentation or any

  • ther information made available to a person nor any obligation to furnish

the person with any further information.

Additional Information

This presentation should be read in conjunction with the Annual Report at 30 June 2016 together with any announcements made by Fortescue in accordance with its continuous disclosure obligations arising under the Corporations Act 2001. Any references to reserve and resources estimations should be read in conjunction with Fortescue’s Ore Reserves and Mineral Resources statement for its Hematite and Magnetite projects at 30 June 2016 as released to the Australian Securities Exchange on 19 August 2016. Fortescue confirms in the subsequent public report that it is not aware of any new information or data that materially affects the information included in the relevant market announcement and, in the case of estimates of mineral resources or ore reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. All amounts within this presentation are stated in United States Dollars consistent with the functional currency of Fortescue Metals Group Limited, unless otherwise stated. Tables contained within this presentation may contain immaterial rounding differences.

Forward looking statements

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Building a world class company

Core supplier to China’s growth

Safety focus

Shipped over

800mt

First ore

in 2008

Unique culture

165-170mt

Production rate

Low cost producer

Engagement Empowerment Leadership

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Delivering on targets

Focus on safety, productivity and efficiency

 Safety TRIFR reduced 33%  165-170mt shipped  Productivity + efficiency  Low cost global producer

 Debt repayments

 Consistent dividend policy

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  • PLACEHOLDER – NEW CORPORATE VIDEO

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HY 17 snapshot

Productivity initiatives delivering sustainable cost reductions and financial results

US$2.6bn

Underlying EBITDA

US$4.5bn

Revenue 36%

Refer to attached glossary for definition of non-IFRS terms

86.1mt

Shipped

US$4.0bn

Net debt

C1 Cost $13.06/wmt

20% reduction

A$0.20

Interim dividend 38% payout

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Focus on productivity and efficiency delivering cost savings

Continuous + sustainable cost improvements

Solomon operations Blending strategy 58% Fe Processing, wet plants + de-sands

Operational efficiencies Fx and fuel decreases 1 2 3 4 5

US$/wmt

48 44 34 27 15

10 20 30 40 50 60

FY12 FY13 FY14 FY15 FY16 FY17 Guidance

$12 - $13

12-13

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China's Iron Ore Supply CFR Costs (including royalties & ocean freight)

Moving down the global cost curve

Source: Metalytics – November 2016

2012 2016

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Tonnes millions

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Financial performance

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HY17 financial outcomes

Operational performance delivering financial results

US$1.7bn

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Debt repaid

Refer to attached glossary for definition of non-IFRS terms

US$1.2bn

Cash on hand

US$1.5bn

Free cashflows

US$0.39

Earnings per share

282%

30% Net gearing US$1.2bn

NPAT

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US$2.7bn repaid in FY17 with flexibility to continue voluntary early repayments

Debt maturity proforma at 31 March 2017

Refer to attached glossary for definition of non-IFRS terms

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976 478 2,160 1,000

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

CY2017 CY2018 CY2019 CY2020 CY2021 CY2022

US$m

Term Loan Senior Unsecured Notes Senior Secured Notes Debt Repayments

$1.0bn term loan repayment

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Free cash prioritised to debt with cash funding of ore carriers

Capital expenditure

  • Sustaining capex US$2/wmt
  • Development of Firetail replacement
  • Ore carriers 85% cash funded via CDB
  • D&A US$7.10/wmt

FY17 Guidance

12 225 340 31 40 48 270 40 90

  • 200

400 600 800

FY16 FY17 Guidance

US$m

Sustaining capital Exploration Ore carriers Development Tugs

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Market

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Well established 17% market share of imported iron ore to China

Core supplier to Asia

  • Low impurity 58% Fe average
  • Competitive value in use
  • Large diverse customer base
  • Responsive to market needs
  • Proximity to high growth region

Source: World Steel Association Crude Steel Production 2015

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808 105 96 79 541

Total 2016 global steel production 1,629mt

China Japan India United States Rest of the World

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Asian economies generating two thirds of global growth

Developing and emerging Asia

Source: IMF World Economic Database Oct 2016

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Continued growth in steel consumption throughout China, ASEAN and India

Steel stock tonnes per capita

Source: NBS, worldsteel, Macquarie, February 2017

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4 6 8 10 12 14 16

1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018f 2020f 2022f 2024f 2026f 2028f 2030f 2032f 2034f 2036f 2038f 2040f 2042f 2044f 2046f 2048f 2050f

Steel capital stock tonnes/capita

USA Japan China ASEAN India

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Construction and manufacturing projects support iron ore inventory levels

Iron ore inventory levels

Source: Bloomberg and Umetal

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$30 $50 $70 $90 $110 $130 $150 $170 $190 $210 20 40 60 80 100 120 140 160 180 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 US$ Mt IO Inventory Levels (mt) 62% Fe CFR (RHS)

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87% realisation in HY17 after timing adjustments

Price realisations consistent

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75% 80% 85% 90% 95% 100% $0 $20 $40 $60 $80 $100 7/29/2014 8/29/2014 9/29/2014 10/29/2014 11/29/2014 12/29/2014 1/29/2015 2/28/2015 3/31/2015 4/30/2015 5/31/2015 6/30/2015 7/31/2015 8/31/2015 9/30/2015 10/31/2015 11/30/2015 12/31/2015 1/31/2016 2/29/2016 3/31/2016 4/30/2016 5/31/2016 6/30/2016 7/31/2016 8/31/2016 9/30/2016 10/31/2016 11/30/2016 12/31/2016 1/31/2017 2/28/2017 Platts 62 CFR MBIO58 [P] CFR 62% v 58% [P] price realisation (RHS)

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Supporting our community

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Creating opportunities through training, employment and business development

Building strong communities

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Diversity is fundamental to driving innovation and business success

Championing diversity

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Focussed strategy

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Key strategic focus

Disciplined value creation

 Debt repayment and capital flexibility  Long term sustainability of iron ore  Create low cost growth options

  • Leverage skills and culture
  • Exploration and early stage development

 Returns to shareholders

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The new force in iron ore

Continuous improvement

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Customer focus Reliable Competitive

Sustainable low cost producer

World class

assets & people

Unique culture

drives performance

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www.fmgl.com.au

@FortescueNews

Proudly supporting:

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Glossary

C1: Operating costs of mining, processing, rail and port on a per tonne basis, including allocation of direct administration charges and production overheads. Debt coverage ratio: Debt / Underlying EBITDA. dmt: Dry metric tonnes. Free cash flow: Net cash inflows from operations less capital expenditure. FY: Full year. HY: Half year. Interest coverage ratio: Underlying EBITDA / Interest mtpa: million tonnes per annum. Net debt: Borrowings and finance lease liabilities less cash and cash equivalents NPAT: Net profit after tax. Underlying EBITDA: Earnings before interest, tax, depreciation and amortisation, exploration, development and other expenses. The reconciliation of Underlying EBITDA to the financial metrics disclosed in the financial statements prepared under Australian accounting standards is presented below: Reconciliation of Underlying EBITDA to IFRS measures: VLOC: Very large ore carrier. wmt: wet metric tonnes.

US$m 31 December 2016 31 December 2015 Profit before income tax 1,732 428 Finance income (8) (200) Finance expenses 256 340 Depreciation amortisation 622 627 Exploration, development and other 43 106 Underlying EBITDA 2,645 1,301