Fortescue Metals Group has welcomed an upgrade from ratings agency Moody’s, after the ASX-listed iron ore miner announced a net profit of AUD$1.3 billion on August 22.
FMG announced to the stock exchange on Monday it had boosted its earnings before interest, tax, depreciation and amortisation (EBITDA) by 27%, despite a 17% drop in revenue.
Revenue slid from US$8.57 billion in FY15 to US$7.08 billion in FY16.
But a successful cost cutting program from the miner resulted in an EBITDA of US$3.20 billion in FY16, up from US$2.51 billion the year prior.
Net profit after tax was up 212% to US$985 million, from just US$316 million in FY15.
FMG shareholders were surprised with a 12c a share dividend, up from just 2c a share last year.
“The entire Fortescue team has delivered on safety, production and cost targets resulting in outstanding FY16 results,” chief executive Nev Power said.
“Successful cost improvement measures and lower capital expenditure have more than offset the impact of falling iron ore prices to generate strong free cash flow.”
The company repaid US$2.9 billion in debt in FY16, reducing its net debt to US$5.2 billion.
As a result, Moody’s upgraded Fortescue’s credit rating to Ba1 for its senior secured notes, and B1 for unsecured notes.
Moody’s noted the upgrade “reflects the considerable progress that the company has made in reducing its debt levels,” adding, “the company’s ongoing cost and debt reduction initiatives will allow it to maintain conservative financial metrics over the next 12-24 months”.
FMG chief financial officer Stephen Pearce said the upgrade reflected the company’s “excellent operational performance”.
“Fortescue has continued to generate significant free cash flows, reducing debt and strengthening our balance sheet,” Pearce added.
“It is pleasing that Moody’s have formally acknowledged Fortescue’s cost performance and the continued execution of our debt reduction strategies which have improved Fortescue’s credit metrics.”
Source from here