©Reuters

Australian iron ore miner Fortescue has shrugged off low commodity prices to more than double its full-year net profit, rewarding investors with a sixfold dividend increase.

The company, which had previously flirted with breaching its borrowing covenants, on Monday said that it had cut its net debt from $7.2bn to $5.2bn during the financial year to June 30. The miner said it would continue to pay off its debt from operating cashflow.

“They’ve done a good job of cutting their debt burden,” said Angus Nicholson, a market analyst at IG Markets in Melbourne. “They certainly will survive as a continuing entity.”

Lower prices for the steelmaking raw material have piled pressure on the Australian iron ore industry. The price of ore with 62 per cent iron content fell 12.9 per cent in the 12 months to June 30, and had been down as much as 39 per cent at multi-year lows in December.

But Fortescue was likely to be a beneficiary of a “steadily improving commodities environment globally”, said Mr Nicholson at IG. Last week BHP Billiton suggested that commodities prices were no longer in freefall, offering investors some reason for optimism even as the world’s most valuable miner reported a record $6.4bn annual loss and cut its dividend 75 per cent.

BlueScope Steel, the Australian steel producer, also reported full year earnings on Monday, with net profit for the 12 months to June 30 up from A$136.3m to A$353.8m year-on-year. Revenue was A$9.2bn, up from A$8.5bn the year before.

BlueScope offered a bullish forecast for its performance next year, saying first-half underlying earnings before interest and tax would be some 50 per cent higher than the A$340.4m it reported in the second half of its financial year through June 2016. Analysts at JPMorgan said BlueScope’s performance was “particularly strong”.

Fortescue’s Sydney-listed shares fell 1 per cent to A$4.88 in early afternoon trading with the company’s strong performance already factored into the price. BlueScope’s shares were up 4 per cent at A$8.59.

In the past year Fortescue and BlueScope have been among the strongest performers in the Australian market. Fortescue’s shares are up 155 per cent over the past 12 months — having touched a low of A$1.50 in early 2016 — while BlueScope’s have climbed 144 per cent.

Fortescue attributed its improved results to better productivity and efficiency. Nev Power, chief executive, said: “Successful cost improvement measures and lower capital expenditure have more than offset the impact of falling iron ore prices to generate strong free cash flow”.

Net post-tax profit was up 212 per cent to $985m year-on-year, overshooting analysts’ consensus forecasts for $906m. However, that was significantly lower than the $2.74bn profit it posted for 2013-14 financial year.

Revenue for 2015-16 slipped 17 per cent year-on-year to $7.08bn, but this also beat analysts’ predictions of $7.03bn.

Fortescue said it would pay a final dividend of A$0.12 per share — six times the A$0.02 paid out a year ago. Andrew Forrest, Fortescue chairman and owner of one-third of the miner’s shares, is poised to earn A$124.5m from the final dividend, according to Bloomberg.

“We expect the market to focus on sustainability of the higher dividend, which ultimately comes down to price,” analysts at UBS said.