Fortescue Metals Net Profit Falls 81%

By Rhiannon Hoyle 

SYDNEY-- Fortescue Metals Group Ltd. said first-half profit tumbled more than 80% and that it would considerably reduce its midyear dividend amid the downturn in iron-ore prices.

The Australian producer, the world's No. 4 exporter of iron ore, reported a net profit of US$331 million in the six months through December. That compared with a net profit of US$1.72 billion in the same period a year earlier, and came during a period when iron-ore prices shed one-quarter of their value because of a surge in mine supply.

Its first-half profit was broadly in line with a US$335 million median of six analyst forecasts compiled by The Wall Street Journal.

On Tuesday, Fortescue said it substantially cut shareholder payouts given the deterioration in global iron-ore markets. It declared an interim dividend of three Australian cents, compared with a payout of 10 Australian cents a share a year ago.

Iron-ore prices halved over the course of 2014 and have continued to fall this year as major companies such as Fortescue and Rio Tinto PLC dig up rising volumes of ore.

Still, that sharply higher production helped cushion the fall in prices, said Fortescue, which shipped 53% more iron ore compared with the year earlier from its operations in the remote Pilbara mining region of northwestern Australia.

Fortescue has aggressively expanded its iron-ore operations in recent years to help feed China's appetite for materials in industries ranging from construction to auto production. Iron ore is the key ingredient in steelmaking.

To remain profitable, Fortescue has taken a knife to its costs as well. Last month, it was able to lower its full-year guidance for costs, saying it was benefiting from lower oil prices, a weaker Australian dollar, and from working its operations harder.

Write to Rhiannon Hoyle at [e-mail]

Access Investor Kit for Fortescue Metals Group Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=AU000000FMG4

Access Investor Kit for Rio Tinto Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=AU000000RIO1

Access Investor Kit for Fortescue Metals Group Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US34959A2069

Subscribe to WSJ: http://online.wsj.com?mod=djnwires