Fortescue's metals head optimistic about iron ore on China’s infrastructure projects

[Iron Ore reclaimer machine and stockpile ]
Dazman/E+ via Getty Images

China's investments in major steel-intensive infrastructure projects such as a $167B hydropower project on the Yarlung Tsangpo River and the world's largest high-speed rail system provide a key reason to be optimistic [https://www.wsj.com/business/earnings/fortescue-annual-profit-falls-41-on-weaker-iron-ore-prices-cae72b98] about the outlook for the challenged iron ore market, Fortescue's (OTCQX:FSUMF [https://seekingalpha.com/symbol/FSUMF]) metals CEO Dino Otranto told _The Wall Street Journal_ in an interview Tuesday.

"That is a lot of steel," and even more, "they announce these projects and then, within months, you see actual results and execution, and it's phenomenal," Otranto told _WSJ_.

Iron ore prices have been weakened by China's downtrodden property sector, normally the country's top source of steel demand, and Chinese steelmakers have been shipping excess steel abroad at a record pace, but Otranto said Fortescue (OTCQX:FSUMF [https://seekingalpha.com/symbol/FSUMF]) is not concerned: "What I've learned about the Chinese supply chain is it is very fluid and very adaptable and can move very quickly."

In its annual report [https://www.fortescue.com/en], Fortescue (OTCQX:FSUMF [https://seekingalpha.com/symbol/FSUMF]) reported a 41% decline in annual net profit for the year through June 30, as the price it received for its iron ore fell by nearly 20% Y/Y, outweighing higher shipments and slightly lower production costs.

The world's fourth-largest iron ore producer said it earned a net profit of US$3.37B, its smallest full-year profit in six years and down from US$5.68B a year earlier, also slightly below a US$3.49B analyst consensus estimate provided by Visible Alpha.

Fortescue (OTCQX:FSUMF [https://seekingalpha.com/symbol/FSUMF]) declared a final dividend of A$0.60/share (~US$0.39), bringing its full-year dividend to A$1.10 apiece, but its dividend payout ratio at 65% of profits matched FY 2023, which was the lowest payout since 2018.

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