fortescue reports 2.5bn loss

Fortescue reports $2.5bn loss
19-September-08 by AAP




LATEST NEWS


Iron ore miner Fortescue Metals Group Ltd has reported an annual bottom line net loss and said it will not provide a forecast for the current year because this may prejudice "the interests of the company".

Fortescue also said it does not expect to pay any dividends in the current year.

The company made a net loss of $2.52 billion for the 2008 financial year ended June 30, compared to a loss of $192.36 million in the previous year.

In line with accounting standards, Fortescue made adjustments to its books to reflect the total expected interest payable on a 13-year subordinated loan note supplied by major shareholder Leucadia National Corp Inc, a US investment group that has a 10 per cent stake in the company.

"Given improved variables since the last report [at the half year], Fortescue has adjusted the note to reflect higher iron ore prices, a lower Australian dollar/US dollar exchange rate and higher forecast sales tonnages building to 160 million tonnes per annum over the note period out to 2019," company secretary Rod Campbell said in a statement.

"The effect of the revaluation is a $3.46 billion adjustment to the profit and loss account which, after a tax adjustment, results in a net loss for the year of $2.8 billion."

"This `paper loss' reflects the total expected interest payable to Leucadia out to 2019, but noting that the actual interest will only be paid at six monthly intervals after the tonnes have been shipped and revenue determined," Mr Campbell said.

Fortescue said the fair value adjustment to the subordinated loan note was the primary cause of its full year loss.

The company raised $3.2 billion in equity and debt through Leucadia in August 2006 to complete construction of its first mine, Cloudbreak, in Western Australia's Pilbara region, which commenced production in May this year.

Fortescue also said it had made a trading profit of $72 million in 2007/08, after generating revenue of $201.06 million.

The results reflect eight weeks of operations covering the early commissioning stages of the business and its first export shipment of iron ore in May.

Fortescue shipped 1.66 million tonnes of ore to the end of June. Since July 1, a further 5.90 million tonnes have been shipped.

Fortescue did not declare a final dividend or recommend the payment of a dividend in 2008/09.

It also did not disclose earnings before interest tax depreciation and amortisation (EBITDA) or offer forecasts for the company in the new year.

"In the opinion of directors, it may prejudice the interests of the company to provide additional information (except as provided in this director's report) in relation to likely developments and business strategies of the business of Fortescue and the expected results of those operations in subsequent financial years," Fortescue said.

In July, chief financial office Chris Catlow told AAP the company expected to achieve EBITDA of $3.4 billion for the 2008/09 year.



More to come...