Fortesque Metals Group SWOT & PESTLE Analysis

Strength

1. Sustained high operational performance through productivity and innovation: The company’s outstanding operational performance of FY19 was sustained in FY 20 too. Mining, rail, processing and shipping have delivered a record combined shipment of 178.2 million during this period, 6% higher than FY19. The company has successfully maintained its industry leading cost position with C1 cost of $12.94/wet metric ton during the year, which is 1% lower than FY19. This was due to continued focus on productivity and innovation activities. In June 2020 the company opened Fortescue Hive, which is an expanded integrated operations center. This center houses planning, operations and mine control teams, along with rail, shipping, port and marketing teams for delivering improved reliability, safety, efficiency and commercial outcomes.

2. Strong balance sheet through successful execution of integrated operations and marketing strategy: The company’s financial results of FY20 demonstrate the continued ability to generate strong cash flows through successful execution of integrated operations and marketing strategy. Record shipments, sustained low cost performance and strong operating margins were made possible by leveraging the capability in the value chain. This has contributed to a record net profit after tax of US$4.7 billion. Cash on hand at 30 June 2020 was US$4.9 billion, while net debt was US$0.3 billion, compared with net debt at 30 June 2019 of US$2.1 billion. Total capital expenditure for FY20 was US$2.0 billion. The company’s balance sheet is structured on low cost, investment grade terms with optimal gearing and liquidity levels for supporting on-going operations.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Initiatives to combat climate change: Fortescue aims for leadership position on climate change and believes this is a major driver of long term shareholder value. The company’s climate change strategy focuses on implementation of innovative initiatives for emission reduction with the aim of achieving net zero operational emissions by 2040. The evaluation of opportunities and risks of transition to low carbon economy is integrated into the company’s risk management process. Since FY15, the company’s emission intensity in electricity generation has reduced by 16%. The FY20 scope 1 emissions were 1.93 million tons of carbon dioxide and scope 2 emissions were 0.16 million tons of carbon dioxide. The scope 3 emissions from crude steel manufacturing and shipping are 244.5 million tons.

2. Sustainable water management practices: Fortescue’s mining operations have a high potential to negatively impact water resources. The company attempts to minimize the impact through regulatory compliance and implementation of sustainable water management practices at all sites. A dedicated water management team provides advice and support on water supply, flood management and dewatering. The evaluation of water related risks and opportunities are integrated into the risk management process. The impact on water resources is minimized by adaptive response to water management. The company assesses the overall water risk of its operations against risk measures like BETA Aqueduct Water Risk Atlas, which provides water stress risk ratings.