Shares in Australian miner Fortescue Metals surged today after the company reported stronger earnings driven by improving iron ore prices and cost cutting.
Profits more than doubled, soaring to US$2.09bn in the year to June versus US$984m in the prior year. The positive results enabled Fortescue to unveil a big increase in the dividend.
Fortescue shares ended the trading session 6.4% higher.
Fortescue cheered shareholders by hiking its final dividend, taking the full-year dividend to 45 Australian cents, a two-fold increase on last year.
The 112% rise in earnings for the year was backed by a 19% increase in revenue to US$8.4bn.
Strong financial results were driven by higher iron ore prices as well as improvements in productivity and efficiency.
Iron ore prices have risen by around 60% over the past year.
Fortescue, which has gained a reputation for having relatively high debt levels, also announced some progress in reducing borrowing.
The miner repaid US$2.7bn in debt during the financial year, while claiming to have refinanced a further US$1.5bn on improved terms and conditions.
Gearing, the ratio of its debt to the value of its ordinary shares, fell by 21% over the period. At the end of June, cash stood at US$1.8bn, with the company having seen net cash flow from operating activities surge by 74% to US$4.3bn.
“Fortescue has continued to generate excellent cashflows allowing further repayment of debt, strengthening of our balance sheet and increasing returns to our shareholders,” said chief executive Nev Power.
Fortescue´s payout ratio, the proportion of earnings paid out as dividends to shareholders, rose to 52% for the 2017 financial year versus 36% in the prior year.
The company expects the payout ratio to be in the range of 50% to 80% for the next year, though stressed this would be very much dependent on iron ore prices and financial performance.
It is forecasting a similar level of production but hopes to achieve a further reduction in costs.
Higher metals prices are helping miners to achieve strong financial results this year. Earlier this month, Glencore announced a near 70% rise in earnings before interest, tax depreciation and amortization over the first half of 2017.
However, unlike Fortescue, the company disappointed investor´s hopes for a dividend boost.