Fortescue Metals Group reported a decline in first-half profits and announced a reassessment of its timelines for green energy projects, citing uncertainty due to a pause in U.S. grant funding.
Key Highlights:
Profit Decline:
The company reported an underlying attributable net profit after tax of $1.55 billion for the six months ending December 31, a 53% decrease from the previous year. This figure fell short of the $1.76 billion consensus estimate from Visible Alpha.
Fortescue declared an interim dividend of A$0.50 per share, which is 7% lower than market expectations.
Green Energy Project Reevaluation:
Fortescue is reconsidering the timeframes for its green energy initiatives due to funding uncertainties stemming from the Trump Administration’s directive to pause grant payments under the Inflation Reduction Act.
The miner has revised its full-year forecast for capital expenditure in its green energy unit from $500 million to $400 million.
In July of the previous year, Fortescue indicated that its green energy unit, Fortescue Energy, would likely not meet its target of producing 15 million metric tons of green hydrogen by 2030.
Market Conditions:
The company highlighted that “market conditions are uncertain,” particularly due to weak demand for iron ore from China’s struggling property sector and high portside inventories, which have contributed to moderated iron ore prices.
Analysts at Citi noted that the market will expect further cuts to both capital and operating expenditures for the energy unit.
Iron Bridge Facility:
Fortescue’s Iron Bridge facility is on track to meet its fiscal 2025 shipment target of between 5 to 9 metric tonnes (Mt), providing some positive outlook amidst the challenges.
Share Price Reaction:
Following the profit announcement and news of the project reassessment, Fortescue’s shares fell 6.7% to A$18.14 in early trading.