December half-year net profit after tax dropped 32% to US$2.77 billion, in line with consensus estimates.
Underlying EBITDA fell 28% to $4.76 billion, while the EBITDA margin was down 18% to 59%.
Revenue was down 13% to $8.1 billion with record half-year shipments of 93.1 million tonnes not enough to offset higher costs and weaker iron ore price realisation.
CEO Elizabeth Gaines said it had been an outstanding operational half for the company.
The company declared a fully franked interim dividend of 86c per share, down from $1.47 year-on-year.
The dividend was in line with market estimates and represents a payout ratio of 70%.
The company closed December with cash of $2.9 billion and net debt of $1.7 billion.
FMG maintained full-year guidance of 180-185Mt at C1 costs of $15-15.50 per wet metric tonne.
Full-year capital expenditure is expected to be $3-3.4 billion, with capex for the Iron Bridge magnetite project unchanged.
First production remains on track for December 2022.
"We remain focused on managing industry cost pressures and challenges posed by Western Australia's ongoing border restrictions, and we are working closely with the Western Australian government and relevant authorities to ensure we have access to the specialist skills required," Gaines said.
She said pipeline installers were the main critical skills required from a Queensland-based contractor but welcomed the relaxation of quarantine rules in WA.
Iron ore plunged overnight on reports of a fresh crackdown on prices in China, but Gaines said there had been similar actions in the past.
She expects ongoing volatility in the iron ore price, but expects activity to pick up after the end of the Winter Olympics.
Gaines noted inventories remained low and there was no new supply coming into the market.
RBC Capital Markets expects iron ore to fall to below $130/t and for discounts to remain elevated.
Analyst Kaan Peker said discounts, plus high freight costs and increased capex would result in minimal free cashflow for FMG this financial year.
He also expects uncertainty over the company's Fortescue Future Industries subsidiary to weigh on the stock.
Peker has an underperform rating and A$16 price target for FMG.
FMG shares were down 3.3% to $20.87.
