Why has the Fortescue (FMG) share price dropped today?
Shares in the iron ore miner are nearly flat over the last 6 months.
Shares in iron ore miner Fortescue Metals Group (ASX: FMG) are among the worst performers on the ASX on Wednesday.
What is weighing on the FMG stock price?
It posted an underlying net profit of US$2.78 billion, down from US$4.08 billion a year earlier.
The iron ore major booked revenue of US$8.13 billion for the 6 months to 31 December, down 13% from a year ago despite shipping a record 93.1 million tonnes of ore in the half-year, mainly due to discounting on its lower grade iron ore.
But investors were particularly disappointed by a sharp cut in the company's interim dividend. Fortescue will pay an 86-cents-a-share dividend, down nearly 42% on last year's $1.47 interim payout.
CEO Elizabeth Gaines said the dividend still represented 70% of Fortescue's net profit, near the top end of its policy of paying out 50–80% of net profits.
Fortescue received an average of US$96 a tonne, or about 70% of the benchmark price, for its iron ore in the first half of the financial year. By comparison, it had received US$114 a tonne in the 6 months prior.
The company attributed the lower price realisation to lower crude steel production in biggest consumer China, where authorities placed restrictions on production growth to manage pollution and emissions concerns.
Fortescue's costs were also higher in the first half, cash production costs rising to US$15.28 a tonne from US$12.78 a year ago. There was also a sharp jump in shipping costs thanks to affected supply chains across the globe. Shipping costs surged 44% from a year ago to US$1.1 billion.
"We remain focused on managing industry cost pressures and challenges posed by Western Australia's ongoing border restrictions," Gaines said.
The company reiterated its full-year forecasts for shipments, costs and capital expenditure.
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