POWER!!!! Fortescue Future Industries, page-3737

Hello Tony

The breakeven point is calculated as annual Fixed Costs / Gross Margin %. Right now GM% is very low and I suspect COGS includes a tonne of costs that are not variable in nature. For me there are too many unknown variables to try and figure that out for now. Although we could have a guess by splitting the obviously too high COGS figure into fixed and variable components but that would be guessing. Another other option is to assume a GM% of x and divide forecast fixed costs $ into that. Then based on a % of known deferred revenues + ongoing revenues + new contracts we can assess the likelihood of FZ being profitable or not. However, I am guessing they have a 'goldilocks' or 'honeymoon' period where they can write their own cheques, within reason, to support new research initiatives. That will be ok for Mgmt for a while but at some point it will need to pay its own way. I reckon they have 2 years to be profitable but that is 100% speculation by me.