Is FMG poised to beat its FY20 guidance?
We examine Fortescue’s recent market update as well as look at why Macquarie thinks the iron ore giant could be set to beat its full-year guidance.
Fortescue Metals Group (FMG) yesterday announced a number of measures that the company would be taking to combat the spread of the coronavirus (Covid-19). Centrally, as part of that market update, FMG’s Chief Executive, Elizabeth Gaines said: 'The health and safety of the entire Fortescue family is our highest priority and we take our responsibility as a large employer seriously.' In line with such thoughts, some of the Covid-19 measures FMG has implemented include: roster changes to reduce unnecessary travel between work sites;
the requirement for office-based roles, non-critical site-based roles and high risk employees to work from home;
and the introduction of various social distancing and hygiene practices. Moreover, although the coronavirus pandemic has forced many companies to rethink how they do business, even with this disruption, Fortescue yesterday indicated that it remains on track to meet its previously stated full-year guidance.' While COVID-19 has brought uncertainty and volatility to global markets, including the iron ore market, Fortescue's shipments continue from Port Hedland as scheduled. Our mining, processing and shipping activity remains in line with our guidance for FY20 of shipments towards the upper end of our guided range.’ There will be some disruptions however, with Ms Gaines pointing out that both FMG’s local and international exploration activities have been put on hold; though the mining giant’s Eliwana Mine and Rail and Iron Bridge Magnetite projects continue to progress.
FMG share price: is a guidance beat coming?
In short, according to Macquarie analysts, that is the current expectation. Specifically, Macquarie flagged that their port data currently ‘suggests that FMG could deliver a modest beat to FY20 guidance, after strong shipping over the last month.' Macquarie further elaborated that a weak Aussie dollar and depressed oil prices put FMG in a strong position to beat on cash costs for the full-year.‘ We expect FMG’s C1 cash costs to come in at US$12.27/wmt, 4% below the bottom end of the cost guidance range,’ the investment bank argued. Such an outcome would only bolster Fortescue’s claim to being one of the lowest cost producers in the world.
(story posted around 2pm today.)
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