Fortescue Metals Group, Australia' s iron ore giant, reported a 12 percent increase in full-year profit on Thursday due to increased production and cost cuts.

The Perth-based company made a net profit of 1.75 billion U.S. dollars in the year to June 30, up from 1.56 billion U.S. dollars in the previous corresponding period.

The company said continued strong performance across the integrated mine, rail and port supply chain during the year had resulted in its record shipment of 80.9 million tonnes, up 41 percent from the previous year.

Fortescue Chief Executive Officer Nev Power said the strong result highlighted the company's strategy to grow production and lower costs through enhanced processing capability and production efficiency.

"We are already realizing the benefits of our new production assets and our position will be further enhanced as we complete our expansion to 155 million tonnes per annum," Power said in a statement.

The majority of Fortescue's revenue is generated from customers in China, and the company expects China's steel demand to remain high for several years.

"China has only just reached an urbanization rate of 50 percent and with the commitment of the government to continue increasing the standard of living and providing services and employment to all of its population, we expect to see elevated steel demand in China for several years," he said.