Biggest Success Stories of The Pandemic: ASX Stars Fortescue Metals Group and Afterpay

Summary

• Fortescue Metals and Afterpay have emerged as winners in an otherwise gloomy environment where most ASX companies have experienced numerous challenges.
• Fortescue Metals Group has posted robust results with a 49% growth in NPAT to US$4,746 million, benefiting from rising iron ore prices.
• The iron ore producer expects iron ore shipment in the range 175mt - 180mt in FY2021.
• Afterpay’s subsidiary, Clearpay, signed a Share Purchase Agreement with NBQ Corporate SLU to acquire 100% of the shares outstanding in Pagantis. Afterpay share price hit a record-high following the EU expansion announcement on 24 August.
• APT would have exposure to addressable e-commerce market across four EU nations, valued at more than €150 billion.

Amid the coronavirus pandemic when companies are experiencing headwinds, it is interesting to know about some that have succeeded during this period. In this article, we would be discussing two such ASX 200 listed companies which have proved themselves in the turbulent market situation. These are Fortescue Metals Group Ltd and Afterpay Limited.

Fortescue Metals Group has posted strong FY2020 results while Afterpay has taken a massive step forward in the direction of its EU expansion plan.

Let us check their stories.

Fortescue Metals Group Ltd (ASX:FMG)

Fortescue Metals Group Ltd, a company engaged in the mining, processing, and transporting of iron ore, reported significant growth of 49% in its underlying NPAT to US$4,746 million. Earnings per share for FY2020 was US$1.54, up 49% as compared to the previous corresponding period. Total dividend announced for FY2020 was A$1.76, up 54% on pcp.

The record operating and financial performance supported the dividend to increase by 54%. Let us quickly take a look at FY2020 highlights.

• Continuing improvement in safety as the Total Recordable Injury Frequency Rate declined to 2.4 in the 12 months to 30 June 2020.
• FMG successfully integrated operations and marketing strategy, which helped the Company to achieve record shipments, revenue, earnings, and operating cash flow.
• Underlying EBITDA increased by 38% to US$8.4 billion as compared to FY2019. EBITDA margin increased to 65% of the ore shipped.
• Net cash flow from operating activities was US$6.4 billion. The free cash flow during the period was US$4.4 billion after capital expenditure of US$2 billion.
• The net debt as at 30 June 2020 stood at US$258 million.
• The total global economic contribution was A$17.2 billion in FY2020, comprising A$4.3 billion in taxes and royalties.

DO READ: Fortescue Metals Breaking All Records!! Here’s Why?

FY2020 Sustainability Report:

During the period, the Company also released its sustainability report, which highlighted performance against the three sustainability pillars of setting high standards, safeguarding the environment, and creating positive social change. FMG also released a standalone Climate Change Report and a Modern Slavery Statement.

In June 2020, Fortescue Metals announced about an industry-leading emissions reduction goal to attain net-zero operational emissions by 2040. The process would be supported by a path to decarbonisation, which comprises of decrease of Scope 1 and 2 emissions from current operations by 26% from 2020 levels, by 2030.

FY2021 Guidance:

• During FY2021, FMG expects iron ore shipment to range in between 175mt to 180mt.
• C1 (Unit operating costs of mining, processing, rail, and port, comprising allocation of direct administration charges & production overheads) costs would range from US$13.00 - US$13.50/wmt, assuming the exchange rate of AUD:USD 0.70.
• Capital expenditure would lie in between US$3.0 - US$3.4 billion.

Stock Information:

By the end of the day’s trade on 25 August 2020, FMG share price settled at A$18.450, down 0.593% (at 4:18 PM AEST) from the previous close. FMG has a market cap of A$57.15 billion and 3.08 billion outstanding shares.

ALSO READ: Fortescue Metals Surpasses All Expectations, Stock Hits Another Record High

Afterpay Limited (ASX:APT)

On 24 August 2020, the leading BNPL player Afterpay Limited announced that its wholly-owned subsidiary, Clearpay (Europe) Limited entered into a Share Purchase Agreement with NBQ Corporate SLU to acquire 100% of the shares outstanding in Pagantis SAU and PMT Technology SLU, collectively known as Pagantis.

Afterpay is accelerating its expansion into new markets to capitalise on strong consumer and merchant demand and to expand its global presence. To expand its presence in the new market, the Company had recently completed A$800 million capital raising through placement and SPP.

APT has now identified the EU as its next logical step towards its international expansion. The region has large millennial population, huge fashion and beauty retail markets, and substantial debit card usage.

Also, the addressable e-commerce market in the EU exceeds €300 billion. APT has entered an agreement to acquire Pagantis, which presently offers a range of buy now, pay later and traditional credit services across Spain, France, and Italy. Pagantis also has approval to even function in Portugal. The addressable e-commerce market in these four nations is more than €150 billion.

This acquisition speeds up and de-risks the roll-out of Afterpay’s Clearpay branded platform throughout the European Union market with launch aimed for Q3 FY2021. Further, the acquisition would provide a fully staffed and experienced team. These team members are the existing technology stack and intellectual property plus an immediate regulatory right to work across the entire EU member states. However, it is subjected to regulatory approval.

After the acquisition of Pagantis, the existing technology will be re-designed to offer the Afterpay core product, and the business will be rebranded to Clearpay, allowing an accelerated launch into Spain, France, Italy and Portugal which will have regional language compatibility. The exiting consumer fee instalment and credit card offerings of Pagantis will be discontinued, and the existing loan book will be kept by NBQ and is eliminated from the transaction.

As a part of the deal, NBQ will obtain a minimum €50 million in consideration which would be subjected to customary adjustments.

The Company expects the acquisition process to occur in or before December 2020. The acquisition would depend on the Bank of Spain regulatory approval to the proposed change of control.

ALSO READ: ASX 200 Corner: Why investors can't get enough of Afterpay share price bump

Stock Information:

By the end of the day’s trade on 25 August 2020, APT share price stood at A$91.700, up 10.842% (at 4:18 PM AEST) from the previous close. APT has a market cap of A$23.17 billion and 280.11 million outstanding shares.