It's incredible to think how far Fortescue Metals Group Limited (ASX: FMG) has fallen in such a short period of time. As recently as February 2014 Fortescue's share price surged beyond $6 as investors anticipated massive dividends and incredible profitability for years to come as the iron ore price sat comfortably above US$120 per tonne.
Difficult times
As fellow iron ore miners have found, running iron ore mines when the iron ore price sits at around US$60 per tonne is much harder than when it's at US$120 per tonne. Atlas Iron Limited (ASX: AGO) last week reported a "massive $1.38 billion statutory loss that is partially driven by huge writedowns in asset values and restructuring costs that are associated with the recapitalisation of the business to stave off bankruptcy."
Some are expecting Fortescue to do the same on Thursday, when it reports its full-year accounts.
A HUGE Thursday for Investors
Investors in Fortescue are in for either a great or terrible Thursday. I just can't imagine that Fortescue's numbers will simply come 'in-line' with expectations. Consensus estimates (from 20 analysts) are expecting Fortescue to report:
- Revenue of $8,495 million
- EBITDA of $2,375 million
- EBIT of $1,080 million
- Net profit (excluding one-off items) of $387 million
- Earnings per share (excluding one-off items) of 12.3 cents
- Dividend per share of 4.1 cents (full-year) implying 1 cent per share final dividend.
The thing with these numbers is that while they are 'average' numbers, the range of expectations is massive. Take net profit for example, the most pessimistic analyst is expecting a loss of 35 million, while the most optimistic thinks that a $587 million profit is possible.
The Real Numbers
For me, the interesting numbers will be the average realised sale price of ore in Australian dollars, the averaged released cost price to deliver said ore, and the impact of the company's US-dollar denominated debt load on that delivered price.
Analysts will also look for evidence that the company is considering partial or full asset sales to lower debt and the outlook statement on volumes will be critical.
BHP Billiton Limited (ASX: BHP) announced a further increase in volumes in its recent earnings release, while Gina Rineheart's Roy Hill mine is scheduled to start exporting soon.
