Fortescue Metals Group SWOT & PESTLE Analysis

ID : 52835153| Jan 2022| 15 pages

COMPANY PROFILE -Fortesque Metals Group

Business Sector :Metals and Mining

Operating Geography :Australia, Global

About Fortesque Metals Group :

Fortescue Metals Group is a leading Australian iron ore mining company with its headquarters in Perth. Founded by Dr. Andrew Forrest in 2003, the company has constructed some major mines, discovered major iron ore deposits and became one of the largest iron ore producers in the world. It was founded on the belief that communities should benefit from the company’s success. The company’s strategic goals are ensuring balance sheet flexibility and strength, investment in long term sustainability of core business while pursuing growth options, and delivering high returns to shareholders. The company exports 175 to 180 million tons of iron ore annually and is known as one of the lowest cost iron ore producers in the world. The company’s vision is to become the safest, lowest cost and most profitable mining company in the world. The company operates on the core values of safety, family, empowerment, frugality, stretch targets, integrity, enthusiasm, courage and determination, generating ideas and humility. Fortescue’s USP or unique selling point centers in the development of iron ore deposits. Fortescue’s Mission Statement reads, “Realizing our vision of being the safest, lowest cost and most profitable iron ore producer.”

Fortesque Metals Group Revenue :

USD 12,820 million - FY 30 June 2020 (YoY growth 28.6%)
USD 9,965 million - FY 30 June 2019 (YoY growth 44.7%)
USD 6,887 million - FY 30 June 2018

Competitive Analysis of Fortesque Metals Group

SWOT

PESTLE

Fortescue have discovered and developed major iron ore deposits, constructed some of the most globally significant mines and have grown to be one of the world’s largest producers of iron ore. Delivering consistent operational excellence, the company integrated mining, rail, shipping and marketing teams work together to export 175 to 180 million tonnes of iron ore annually and the company’s commitment to technology and innovation ensures that it remains as one of the world’s lowest cost iron ore producers. Through their world class exploration capability together with their business development and projects focus, they are driving future growth, targeting the early stage exploration of commodities that support decarbonisation and the electrification of the transport sector.
Hence, the SWOT tool helps to benchmark Fortescue’s business and performance along with identifying its competitive stance in the industry. The SWOT report depicts all micro and macro factors and influencers that have a tremendous impact on Fortescue’s business model, business and marketing strategies. This tool helps the company to identify its internal strengths and weaknesses and external opportunities and threats.
The company’s financial results of FY21 demonstrate the continued ability to generate strong cash flows through successful execution of integrated operations and marketing strategy. The company’s balance sheet is structured on low cost, investment grade terms with optimal gearing and liquidity levels for supporting on-going operations. The company’s top priority is health and safety of employees, and strives to become a global leader in safety. Fortescue continues to improve safety performance through initiatives like annual Safety Excellence and Culture Survey, engaging the workforce in risk reduction activities, and ensuring safety compliance by contracting partners. A drawback for the company is its high dependence on China for business. In spite of this drawback the company has an opportunity through enhancement of product portfolio in the Iron Bridge Magnetite project. The entity has also planned diversification into copper, nickel, lithium and graphene. Credit risk is the risk of a counterparty defaulting on its contractual obligations which could lead to financial loss for Fortescue. Fortescue Metals Group is exposed to commodity price risk because its iron ore sales are dependent on prevailing market prices, on which the company has limited control. To manage exposure to market risk, Fortescue entered into commodity swap contracts that fixed the price of a portion of the sales and diesel purchases. The pandemic also poses an increased risk of default. Fortescue manages the risk by focusing on improving cash margins and strengthening the balance sheet through early debt repayments and refinancing.
The SWOT analysis of Fortesque Metals Group is presented below:

Strengths	Weaknesses
1. Sustained high operational performance through productivity and innovation 2. Strong balance sheet through successful execution of integrated operations and marketing strategy 3. Good track record of safety	1. High dependence on China for business
Opportunities	Threats
1. Enhancement of product portfolio through the Iron Bridge Magnetite project 2. High potential for mining in Latin America 3. Rising demand for iron ore in China during the pandemic 4. High export potential of green hydrogen for Australia 5. Exploration of commodities that support decarburization and the electrification of the transport sector	1. Counterparties defaulting on contractual obligations 2. Impact of prevailing market prices on iron ore sales 3. Increased exposure to bribery and corrupt practices 4. Increase in Australia- China political tensions may impact mining industry

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Detailed SWOT Analysis of Fortesque Metals Group

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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Fortescue is a values-based business, committed to their strategic goals of ensuring balance sheet strength and flexibility, investing in the long-term sustainability of their core business while pursuing growth and development options and delivering enhanced returns to the shareholders. As a proud West Australian company, Fortescue values their relationship with key stakeholders by working together to positively manage and create opportunities for native people, contribute to the success of local communities, protect the environment and strengthen the broader Australian economy.
Here is a review of external influencers like political, economic, social, technological, legal and environmental and their impression on mining industry and largely on Fortescue. The PESTLE/STEEPL/ PESTEL/ PEST analysis report is a structure to examine the impact of external factors on the macro-environment that influences the business of Fortescue’s. the PESTLE analysis is a useful technique to study the impact of influencers on Fortescue’s business model, growth trajectory, its business case and market strategy.
Political factors reflect how government policy and actions arbitrate in the economy. In the last few years there has been growing anti-China sentiments around the world, especially with the pandemic supposedly having flared up due to Chinese negligence. Australia in general and Fortescue in particular had good relations with China, with the Chinese being major consumers of iron ore from Australia. There are incidents that have put to the fore the steadily worsening Australia-China ties. Chinese media alleged that Australian authorities had violated the rights of many Chinese journalists in June. Such growing anti-China sentiments could prove to be detrimental to Fortescue, considering a large volume of revenue that comes from China. A significant portion of Fortescue’s operating costs and capital expenditure is in Australian dollars, which exposes it to movements in AUD exchange rate also the company’s interest rate risk arises from variable rates on lease liabilities of ore carriers and changes in rates of short-term deposits, making it prone to economic risk. Social factors represent important set of influences on consumer behavior. Fortescue strives to create economic opportunities for Aboriginal businesses through local procurement, business development, mentorship and capacity building programs. The increasing usage of autonomous technology is making mining safer and cheaper. Today, remote operations centers are the central hubs for mining companies. Fortescue became the first company in the world to have an iron ore operation with a fully autonomous haulage fleet. Fortescue partnered with 3D printing company Aurora Labs to develop 3D printing in the mining industry, achieving technological advancements. Regulatory and legal risk remains a key risk for Australian mining companies. The Australian government has been under pressure from domestic and international sources for initiating regulatory reform. This challenge is an opportunity for mining companies like Fortescue to leverage technology like integrated governance, risk and compliance systems to understand priority areas of focus. Environmental factors need to be accounted in strategic input. 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. Fortescue’s mining operations have a high potential to negatively impact water resources. The mining magnet’s, attempts to minimize the impact through regulatory compliance and implementation of sustainable water management practices at all sites.
The PESTLE/PESTEL analysis of Fortesque Metals Group is presented below:

Political	Economical
1. Growing anti-China sentiment around the world	1. Impact of foreign exchange rate fluctuation 2. Impact of variable interest rates
Social	Technological
1. Initiatives for bushfire relief 2. Creation of economic opportunities for Aborigines	1. Autonomous technology in mining operations 2. 3D printing technology in mining industry
Legal	Environmental
1. Court battles with financial data companies over publication of iron ore prices 2. Intensifying regulations and regulatory pressures in mining	1. Initiatives to combat climate change 2. Sustainable water management practices

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Detailed Pestle Analysis of Fortesque Metals Group

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.

Major Competitors :

BHP
Vale
Lincoln Minerals
Rio Tinto
Deepgreen
Kogi Iron

Sample Complete Report

This is the sample complete report which will give you a glimpse of what your complete report will cover after purchase.

Free Summary Report

This report contains the table contents only. In case you need the complete report please purchase using the buy options displayed.

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SWOT & PESTLE (combined)
Complete Report
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WHY BUY THIS REPORT?

DELIVERY AND FORMAT

WHY CHOOSE US?

Fortescue’s SWOT and PESTLE analysis reports offers the following:

Employing strategic tools, SWOT and PESTLE, to study the major internal and external factors affecting Fortescue.
The SWOT report covers a comprehensive analysis of Fortescue internal strategic factors like Strengths and Weaknesses, external strategic factors like Opportunities and Threats.
Mark strategic initiatives that were taken by Fortescue to stay ahead of its competitors and attain competitive advantage.
The PESTLE analysis highlights the macro factors and its influences on the mining industry and largely on the Fortescue’s company.
The analysis report helps in identifying the impact on Fortescue’s business model by the influencers like political, economic, social, technological, legal and environmental factors.
Outline of Fortescue’s mergers, acquisitions, capital raising, equity transactions, alliances, partnership ventures.
Abstract information on Fortescue’s business diversification, deriving its key business segments and highlighting its major competitors.
A comprehensive company analysis to gain insight about company information, company profile, business model, business plans and market strategy.
Review of Fortescue’s USP or unique selling proposition, mission statement and vision statement.
Identifying Fortescue’s key performance indicators, success factors, value proposition, and core competencies.

You may also be interested in other analyses of Fortesque Metals Group:

Fortesque Metals Group Porter's Five Forces Analysis
Fortesque Metals Group VRIO Analysis
Fortesque Metals Group Value Chain Analysis
Fortesque Metals Group Covid-19 Impact Analysis
Fortesque Metals Group BCG Analysis
Fortesque Metals Group Segmentation, Targeting and Positioning (STP) Analysis
Fortesque Metals Group Ansoff Matrix Analysis

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Fortesque Metals Group

Comprehensive SWOT & PESTLE Research Reports

Fortescue Metals Group SWOT & PESTLE Analysis

COMPANY PROFILE -Fortesque Metals Group

Business Sector :Metals and Mining

Operating Geography :Australia, Global

About Fortesque Metals Group :

Fortesque Metals Group Revenue :

Competitive Analysis of Fortesque Metals Group

Detailed SWOT Analysis of Fortesque Metals Group

Strength

Weakness

Opportunity

Threat

Detailed Pestle Analysis of Fortesque Metals Group

Political

Economic

Social

Technological

Legal

Environmental

Major Competitors :

WHY BUY THIS REPORT?

TABLE OF CONTENTS

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