Exit of Fortescue co-CEO sparks governance worries

Melbourne — Australia’s Fortescue said on Monday its metals division head and co-CEO Fiona Hick is leaving after less than six months in the role, marking a near-complete overhaul of senior management in the past two years and raising governance concerns.

The departure came as the iron ore giant — which is building out its green energy business — logged a pretax impairment of $1bn to its flagship Iron Bridge growth project in Western Australia and reported its lowest annual profit since 2020.

The world’s forth-largest iron ore miner, overseen by founder Andrew Forrest as executive chair, has struggled to keep senior management as it sets out to transform itself into a green energy superpower with a global footprint.

Its Iron Bridge project that was built to upgrade the quality of its iron ore has seen multiple delays and cost overruns, resulting in the departure of several senior members of management. In its latest revision, Fortescue raised cost estimates to $4bn, up from $3.9bn last quarter and initial estimates of $2.6bn in April 2019.

“The amount of turnover we have seen in [the executive committee] is unprecedented, bad for the company and raises questions about corporate governance,” portfolio manager Brenton Saunders at Pendal Group said. Fortescue reorganised this year into two divisions under energy and metals, with the CEOs of each unit reporting to Forrest and the board.

“This organisation does not rely on just one or two people to drive direction,” said incoming Fortescue Metals CEO Dino Otranto, who took the helm of the company’s iron ore division two years ago and will replace Hick.

“We have the most amazing team behind this crazy vision that we have got, and we are going to nail it,” Otranto told an earnings call.

The decision by Fortescue’s board and Hick, who took on the co-CEO role in February, to part ways was made on Sunday. Hick was at a party hosted by Forrest in Western Australia at the weekend to celebrate 20 years in operation, CEO Mark Hutchinson of Fortescue Energy confirmed.

Hick said in a statement on Monday she values her experience at Fortescue and will take time to consider her next move.

When pressed for more information on Hick’s departure on the earnings call, Hutchinson declined to provide further details on the reasons for her exit or about the process that elevated Otranto to the co-CEO spot.

“Shareholders deserve a better explanation given that she departed only after five months in the role and considering the C-Suite changes over the past two to three years,” said Goldman Sachs analyst Paul Young on the call.

Ian Wells, Fortescue’s former CFO, left in January, and acting CFO of the energy division, Felicity Gooding, stepped down last month.

Executive chair Andrew Forrest, who has been taking a greater role speaking to stakeholders on results, was absent from the earnings call.

“He was not available today,” Hutchinson said.

Fortescue shares fell as much as 6% on Monday.

Fortescue on Monday reported a 23% drop in annual profit, hurt by declining prices for iron ore and its Iron Bridge impairment.

As part of the evolution of its energy division, Fortescue said it will stop allocating 10% of its net profit to fund its energy business, adding all projects and investments will now compete for capital under Fortescue’s allocation framework.

The co-CEOs will jointly choose which projects will be elevated to the board, Hutchinson said.

Fortescue is targeting final investment decisions on five green energy projects this year, including on Gibson Island in Brisbane, Australia, the Phoenix Hydrogen Hub in the US, and other sites in Norway, Brazil and Kenya.

Those projects will be funded by debt and investment partners, with Fortescue developing and operating them, Hutchinson said.

Reuters