Aussie iron ore

Hey Superheroes,

Imagine your boss says “no work from home, no leaving the building during work hours, no going out for coffee.” How would you feel? But then what if your boss adds “in exchange, you’ll have an in-office restaurant, a gym, healthcare and a daycare centre?”

Apparently, that’s how it’s like working for Mineral Resources, one of the ASX miners that reported this week. More on that below.

Apart from Nvidia’s quarterly earnings, which we already briefly reported on, many of this week’s most interesting news is on the ASX’s FY 2024 earnings season. Let’s jump in.

Iron ore: Australia’s superpower

Here’s a fun fact: iron ore is, most of the time, Australia’s largest export. In FY23, it made up one-fifth of Australia’s overall exports, pushing ahead of coal, natural gas and – you guessed it – beef.

Knowing that, you’d understand why analysts keep a close eye on the performance of BHP, Rio Tinto, Fortescue Metals and Mineral Resources and why these companies are constantly some of Superhero’s top traded stocks.

Three of those four names reported full-year earnings this week. Let’s take a look.

👀 BHP earnings

BHP (ASX:BHP) operates a diversified mining portfolio, producing iron ore, copper, coal, potash and nickel, however the majority of its revenue comes from iron ore.

BHP produced the most iron ore (260 Mt) out of the three companies that reported this week.

Here’s how BHP did in FY24 compared to FY23:

• Revenue: US$55.65B vs US$53.82B (+5.1%)
• Gross profit margin: 35.5% vs 79.8% (-55.5%)
• Underlying earnings per share: US$1.56 vs US$2.55 (-63%)
• Full-year dividend per share: US$1.46 vs US$1.70 (-16.4%)
• Dividend yield at yesterday’s closing share price: 5.3%*

*calculated using today’s AUD/USD rate of 1.47.

👀 Fortescue Metals Group earnings

Fortescue Metals (ASX:FMG) is a pure-play iron ore miner, focusing its entire operations on the production of the mineral. It mined 217 Mt last financial year. 

Here’s how FMG did in FY24 compared to FY23:

• Revenue: US$18.22B vs US$16.87B (+8.00%)
• Gross profit margin: 52.4% vs 53.7% (-2.5%)
• Underlying earnings per share: US$2.82 vs US$2.67 (+5.6%)
• Full-year dividend per share: A$1.97 vs A$1.75 (+12.6%)
• Dividend yield at yesterday’s closing share price: 10.6%

👀 Mineral Resources earnings

Mineral Resources (ASX:MIN) only began production of iron in May 2024, exporting a total of 18 Mt. In FY24, the majority of its revenue came from Lithium and Energy.

Here’s how MIN did in FY24 compared to FY23:

• Revenue: A$5.28B vs A$4.78B (+10%)
• Gross profit margin: 80.6% vs 92.1% (-14.3%)
• Underlying earnings per share: A$0.81 vs A$4.02 (-80%)
• Full-year dividend per share: A$0.20 vs A$1.90 (-89%)
• Dividend yield at yesterday’s closing share price: 0.5%

⛏️ The future of iron ore

Despite FMG’s strong performance, its shares are currently down 38% year-to-date. Similarly BHP is down 19.5%, MIN is down 43% and RIO is down 18%. 

The lagging share price performance comes amidst concerns about iron ore prices in the near future. Analyst forecasts are divided, with some expecting iron ore prices to remain elevated while others believe that the commodity’s bull run will soon end.

Do you consider the current share prices an opportunity or a warning sign?

🔦  Some other things we’re shining the Spotlight on:

• HOT STAR: The Star Entertainment Group is still in the hot seat with regulators stating the company’s management is “dysfunctional,” and that it didn’t have “appropriate leadership” in the last 10 months. The Star was due to release its full-year earnings earlier today but failed to do so, instead seeing its shares enter into a trading halt.
• KMART LOVE: Wesfarmers, the parent company of Bunnings, Officeworks, Catch and Kmart, announced over 3% higher revenues and earnings in FY24, leading to an increased full-year fully franked dividend of A$1.98 per share. The conglomerate saw the best performance from Kmart, which recorded a 24.6% increase in earnings.
• OPENAI’S HIGH PROFILE INVESTORS: OpenAI is apparently gearing up for a massive round of funding that would see its valuation cross above US$100 billion. Its likely list of investors? Apple, Nvidia and Microsoft. 

Keep up to date on the markets by following us on Instagram, @superheroau!