The Positives
+ Higher iron ore prices. 2Q22 revenue was down 23% YoY due to a 49% collapse in production. The 48% YoY improvement in selling prices offset some of the revenue weakness.
+ Operating cash flow increased. Operating cash flow catapulted from US$54k in 2Q21 to US$6.3mn in 2Q22, with the help of lower working capital. FCF turned positive to US$2.2mn, from US$495k, even with capex increasing to US$4.2mn, from US$549k.
The Negatives
– Lower sales volume. Sales volume was negatively impacted by the production disruptions at Bukit Besi Mine. Mining and processing activities have since resumed on 5 July 2021 at 80% capacity. Average unit cost rose due to the fall in production.
– Higher net debt. Bank borrowings increased from US$166k to US$22.9mn for the acquisition of Fortress Mengapur which was completed in April 2021 and purchase of equipment. Net debt increased further to US$14.7mn since 1Q22.
Updates
FML announced on 12 October 2021 that its subsidiary, Fortress Resources Pte Ltd, has entered into a new offtake agreement with a third-party domestic steel mill in Malaysia. Fortress Resources will deliver 375,000 WMT of iron ore to this customer over a 15-month period from 11 October 2021 to 31 December 2022 (3QFY22 to 4QFY23). The total volume of iron ore concentrate delivered in FY21 was 497,369 WMT.
Vivian covers the small and mid cap stocks. Previously with the Credit Analyst team at a bank, she prepared credit reviews through conducting financial analysis and stress tests on local SMEs, and collaborated with Relationship Managers to prepare credit reports. She graduated with a Bachelor of Business from Nanyang Technological University, where she specialized in Banking and Finance.