MELBOURNE (Reuters) -Fortescue Metals Group Ltd reported its highest ever annual profit and dividend on Monday due to sky-high iron ore prices but senior management received a surprise cut to bonus payments.
Top executives will receive just 28% of what they could have gained in a long-term incentive plan, the world’s fourth-largest iron ore miner said. It cited community expectations around executive pay and noted its results were in part due to robust market pricing that was outside the control of management.
The steep cut in expected bonus payments, which analysts described as unusual, will affect some 30 people. For some executives it comes on top of cuts to a separate bonus scheme after a cost blowout and delays at Fortescue’s Iron Bridge magnetite project.
Fortescue posted an underlying net profit of $10.35 billion, up from $4.75 billion a year ago, and not far off a forecast compiled by Vuma of $10.41 billion.
Asked about the bonus cuts, Chairman Andrew Forrest said everyone was well paid while Chief Executive Elizabeth Gaines said top management were all shareholders and would also benefit that way.
Fortescue will pay a final dividend of A$2.11 per share, up from A$1 a share last year, taking its total dividend for the year to A$3.58, or A$11 billion ($8 billion).
That will add about $1.6 billion to Forrest’s wealth. The company’s biggest shareholder with a stake of 36.6% is also Australia’s richest man with a net wealth of more than $17 billion according to Forbes.
The results sent Fortescue’s shares rallying 6%.
Rivals BHP Group (NYSE:BHP) https://www.reuters.com/business/energy/bhp-sell-oil-gas-business-woodside-2021-08-17 and Rio Tinto (NYSE:RIO) https://www.reuters.com/business/energy/rio-tinto-first-half-earnings-more-than-doubles-2021-07-28/#:~:text=MELBOURNE%2C%20July%2028%20(Reuters),of%20%249.1%20billion%20in%20dividends have also reported record profits and paid bumper dividends on the back of resilient demand from China, the world’s top consumer, and supply issues in Brazil.
Prices peaked above $230 a tonne in May before dropping to $140 a tonne this month on a recovery in output from Brazil and a tougher stand on emissions in China.
“We fear the peak has passed, the iron ore price cycle and by extension the earnings and share price cycles are also … lower over time,” said analyst Peter O’Connor of Shaw and Partners.
“Time to think seriously about recycling some FMG capital into other value opportunities.”
The miner shipped 182.2 million tonnes (Mt) of iron ore in fiscal 2021, and expects as much as 185 Mt to go out in fiscal 2022.
The company is also said it expects to spend up to $600 million in fiscal 2022 on Fortescue Future Industries, which is developing green energy projects around the world.
The unit last year signed a memorandum of understanding with the government of Afghanistan last year to conduct studies for the development of hydropower and geothermal projects as well on mineral resources.
Asked if what would happen now that the Taliban had seized power, Forrest said Fortescue “would meaningfully engage with anybody including the Taliban” if they met four conditions laid out in the company’s contracts.
The conditions are equal education outcomes for girls and boys, the abolishment of all forms of forced slavery, child marriage and modern slavery, which is often defined as severe exploitation of people for personal or commercial gain.
($1 = 1.3680 Australian dollars)