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Fortescue Metals Group reports record profit and dividend

written by Bella Palmer

Fortescue posted an underlying net profit of $10.35 billion, up from $4.75 billion a year ago

Fortescue Metals Group Ltd reported its highest ever annual profit and dividend on Monday due to surging iron ore prices but senior management received a surprise cut to bonus payments.

Top executives will receive just 28% of what they could have gained in a long-term incentive plan, the world's fourth-largest iron ore miner said. It cited community expectations around executive pay and noted its results were in part due to robust market pricing that was outside the control of management.

The much lower-than-expected bonus payments, which analysts described as unusual, will affect some 30 people. For some executives, it comes on top of cuts to a separate bonus scheme after a cost blowout and delays at Fortescue's Iron Bridge magnetite project.

Fortescue posted an underlying net profit of $10.35 billion, up from $4.75 billion a year ago, and not far off a forecast compiled by Vuma of $10.41 billion. Its shares finished 6.6% higher.

It also declared it would become the first major supplier of green iron ore and would unveil new targets for reducing emissions from its customers next month.

Asked about the bonus cuts, Chief Executive Elizabeth Gaines said top management were all shareholders and would also benefit that way.

Fortescue will pay a final dividend of A$2.11 (US$1.54) per share, up from A$1 (US$0.73) a share last year, taking its total dividend for the year to A$11 billion ($8 billion).

That will add about $1.6 billion to chairman and founder Andrew Forrest's wealth. The company's biggest shareholder with a stake of 36.6% is also Australia's richest man with a net wealth of more than $17 billion, according to Forbes.

Analysts said while some executives might feel shocked about the last minute change to the payout, Fortescue appeared to be attempting to strike a balance between paying too much which could make staff independently wealthy and prompt them to leave and paying too little which could also cause them to leave.

If the amounts debated are not material to the company, staff retention and morale is my main concern on issues like this, said Brenton Saunders, an analyst with Pendal Group.


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