Fortescue Metals Group FMG Report-1 PDF

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I received a HD for this assignment and it is analysing the Fortescue metals group ...

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Account for Decision Making BAO1102 Shayna Johnson: s4639125 Chosen Company: Fortescue Metals Group Ltd FMG

Victoria University BAO 1101

Table of Contents Part 2 A

Company Description/ Graphs/ Investor Information

Page no. Pg2

B

Tracking Period Graph of Share Prices (9th of June -8th of July) Excel Graphing for FMG & All Ordinaries

Pg3

C

Share Price Performance

Pg 4

D E

Gain/Loss Made on Portfolio During Tracking Period Recommendations to Buy/Sell/Hold for Shares

Pg 4 Pg4

Part 3

Identification of Key Financial Data & Ratio Analysis

A B

Identification of Key Financial Data Ratio Analysis with Formulas and Interpretation

Pg5 Pg6-7

References

References List

Pg8

Appendix 1 Datasets for Graphs

Pg 9

Appendix 2 Newspaper Articles Appendix 3 Annotated Income Statement & Financial Position (Balance Sheet)

Pg 10 Pg 11-12

Appendixes

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Part 2 [A] Company Description as of 2019 Annual Report for some figures below: Reference

1. Products And Services

The products and Fortescue Annual services interlink Report FY19, pg2 as the largest global iron ore producers that are considered innovative and ethical.

2. Name Of Chief Executive Officer [or Managing Director]

Elizabeth Gaines

Fortescue Annual Report FY19, pg6

3. Salary of Chief Executive Officer [or Managing Director]*

A$5,003,888 in total statutory remuneration

Fortescue Annual Report FY19, pg138

4. Profit / Loss After Tax from 2019 Annual Report – consolidated figures

Profit/loss after tax: USm$3,187

Fortescue Annual Report FY19, pg70

5. Latest Dividend Paid – Dividend Per Share and Date Paid

US$ 2,220 Million/A$ 1.14cents/ paid in Oct 2019

Fortescue Annual Report FY19, pg,72 pg61, pg37

6. Size By Total Assets – 2019 Annual Report – consolidated figures

US$19,694 Million

Fortescue Annual Report FY19, pg71

7. Number Of Employees *

6,418 in 2019

www.macrotrends.net

8. Share Price 52 week High / Low

High 15.25/ Low 14.83 (June 9th, 2020)

Retrieved from Factiva ASX Database, 2020

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[B] Graphs Tracking Period All Of Share Prices Australia All Ordinaries Index via Factiva Database tracking period of 9th July 2020- June 8th, 2020

Fortescue FMG ASX Via Factiva Database from 9th of June 2020 to the 8t h of July 2020

jxFMG Points

**See Appendix 1 for Graph Data via Factiva for Fortescue Metals Group Ltd & Australian All Ordinaries

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[C] Share Price Performance Fortescue Metals Group Itd during the Tracking Period The graph which records the 9th of June 2020 of 8th July 2020 which details the high and falls of the Fortescue company considered to be a ‘trusted blue-chip’ company bas suffered as the ‘shifted focus from the US- China trade’ as the primary investors are America and China as presented in the Annual Report in 2019 this presents that this unprecedented pandemic presented that ‘chief executive Elizabeth Gaines has also been a star over the past 12 months, generously rewarding its shareholders through its dividend payments [and] aid out more than $3 billion to investors, thanks to soaring iron ore prices.’ (William McInnes, 2020) Henceforth, this current climate shows the possible decrease in the Fortescue’s shares during this time especially on June the 12th 2020 which saw the fall of the American stock market which has directly damaged the Australian economy. But the ‘sturdy demand in China has also allowed the major miners to keep selling’ (William McInnes, 2020) which has caused the iron ore output to rise to ‘almost 20 per cent so far this year’ (William McInnes, 2020). This dramatic surge can also be attributed to the post COVID19 in China while the rest of the world is still suffering from the aftermath of COVID-19. The ability for Fortescue to continue to trade during this global pandemic has cause the rise and fall of these shares so dramatically and sharply over the course of the year despite many economic journals to depict that ‘Fortescue climbed a whopping 45 per cent [in shares and] are set to pay bumper dividends’ (Brad Thompson, 2020). Yet, the graph of shares provides a very different picture which shows the rise and falls of Fortescue during the pandemic.

Australian All Ordinaries and Fortescue Metals Group Itd during the Tracking Period Comparison By the release of the release of the All Ordinaries Index and the position of Fortescue Metals Group from the 9th of June 202 to 8th July 2020 presented the spike of the Corona Virus Globally and the most fatal country hit in the Western world was America and thus, this dramatic this presented in the biggest loss and has ‘masked a weak financial year for Australian shares [and] investors’ (The Australian 2020). The benchmark has fallen in previous years the ‘first decline was in 2015 to 2016’ which saw the crude oil failing globally at the time (David Rogers, 2020). However, the largest decline was in 2012 which saw the Australian share market fall by ’11 percent’ (David Rogers, 2020). Yet, the stock market during this global pandemic for Australia the decline is by ‘10.9 percent in 2019-20’ (David Rogers, 2020) and despite the fact that this pandemic is crippling the economy for the worst as for the plus side the real and ‘big winners were healthcare information technology, and consumer staples sectors’ (David Rogers, 2020) and companies such as Jb-Hi-Fi or Harvey Norman and take away companies such as Domino’s or McDonald’s as well as ‘Fortescue up 54 per cent’. However, both Graphs present the steadily decline on the 12th of June which was considered ‘the worst single day loss since May 1st’ which had dropped by ‘3 per cent’ due the fall of Wallstreet (Robert Guy, 2020). Yet, the steep increase did occur, and the market became steady once again reaching economic recovery.

[D] Gain/Loss Made on Portfolio During Tracking Period Selling Price – Buying Price * #Shares ($14.87-$14.67) *336.24= $67.24

[E] Recommendations to Buy/Sell/Hold for Shares Due to the Corona Virus or COVID-19 the stock market has been extremely unstable during the past tracking period. Yet, the purchasing of shares would be a suffice investment as the research conducted presents that Fortescue Metals Group Itd is successful within the overseas market especially in China during this Pandemic and other mining companies alike have also soared and reaching new heights with upwards of more than 20%. The best recommendation would be in my opinion is to buy more shares and possibly receive higher dividends in the future or hold the remaining shares already purchased rather than sell.

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Part 3 Identification of Key Financial Data & Ratio Analysis [A] Identification of Key Financial Data Fortescue Metals Group of Key Financial Data (FMG) Revenue Sales

US$9,965 Millions

Finance Cost

US$279 Millions

EBIT

US$4,882 Millions

Net Profit Before Tax

US$4,569 Millions

Net Profit After Tax

US$3,187 Millions

Current Assets

US$3,612 Millions

Total Assets

US$19,694 Millions

Current Liabilities

US$2,646 Millions

Total Liabilities

US$9,093 Millions

(Fortescue Annual Report FY19, pg70) (Fortescue Annual Report FY19, pg33) (Fortescue Annual Report FY19, pg70) (Fortescue Annual Report FY19, pg70) (Fortescue Annual Report FY19, pg70) (Fortescue Annual Report FY19 pg71) (Fortescue Annual Report FY19 pg71) (Fortescue Annual Report , FY19, pg 71) (Fortescue Annual Report FY19, pg71)

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[B] Ratio Analysis Liquidity Ratio Current Ratio Current Assets Current Liabiltes

Quick Asset Ratio Quick Assets Current Libailties

Formula 3,612,000,000 2,646,000,000

= 1.36

3,612,000,000 −772,000,000 =1.07 2,646,000,000

Stability Ratio Debt Ratio Total Libailties Total Assets

Equity Ratio Total Equity Total Assets

Profitability Ratios Return on Total NPAT

Assets Total Assets Return on Equity

9,093,000,000 19,694,000,000

=

10,601,000,000 19,694,000,000

= 0.53

4,882,000,000 19,674,000,000

= 0.24

3,187,000,000 10,601,000,000

= 0.30

NPAT Equity

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Analysis of Fortescue Metals Group Fortescue Metals Group has become the most favourable during the year of 2019 as stated in the Annual Report as the Current Ratio at $1.36 and this stands as a ration of 1.36:1 which means that the assets are overly excessive beyond the $1 of liabilities which shows the positive growth for the company. To continue the Quick asset Ratio is beyond the threshold of the general accepted benchmark at $1 and has a liquidity rate of $1.07 which presents the current assets can cover both the current liabilities and inventory at a higher greater rate of liquidity during the 60 to 90 day period to convert the assets to cash and to cover the current liabilities. Furthermore, The Stability Ratios presents that the equity and debt generated by the company is stable, the Equity Ratio is for every $1 in total there is 0.53c of the total assets whom the shareholders or owners invest to the company which means that there us a greater equity to finance that shows lesser financial risk is undertaken and the result is Fortescue is borrowing less money to support the profits and business. In addition, the Debt Ratio Fortescue has used for every $1 of total assets of 0.46c has been used is financed by 0.46c of debt and this is a good withstanding use of debt for the Fortescue Group as the assets are paid via the contribution of funds provided by the owners and less debt has accumulated. To continue further, the next ratios presents the company’s profitability as the Return on Total Assets presents that every $1 that Fortescue invests in assets this generates .24c in profit before interests on loans and tax is paid which is considered a high return. Lastly, the Return on Equity Ratio which is used to show the profit that is readily available to the shareholders after the interest and taxation period and Fortescue has generated a significantly high return for its shareholders of for every $1 of equity that Fortescue earns there is a 0.30c profit after tax and the shareholders’ equity is protected at a high rate which presents security for new and upcoming shareholders who wish to invest in the future of Fortescue and in addition, the Net Profit After Tax is high but the equity base of investing 0.53c per every $1 is high and thus enhancing the Return on Equity. To conclude, the positioning of Fortescue is considered to be quite health in the financial year of 2019 as the barries of the generally considered $1 pinpoint has been overrun by the assets being generated and the turnover of liquidity is also very high surpassing the threshold generally of $1 and the low debts being borrowed the return on assets and Equity is also a positive for the shareholders that have been investing in Fortescue Metals Group Itd.

7

References List https://www.macrotrends.net/stocks/charts/FSUGY/fortescue-metals-group/number-ofemployees [Accessed 14 Jul. 2020]. David Rogers, Stocks’ biggest loss in eight years 2020,The Australian, Canberra, ACT, published on 01 June 2020 Fortescue Annual Report FY19 Guy, R. 2020, Australian Financial Review ASX down 2.5pc for the week; $90b wiped in two day sell-off, Melbourne. McInnes, W. 2020, 'Gushing cash': iron or miners a yield hunter favourite: Resources, Melbourne. McInnes, W. 2020, CSL, Fortescue, Afterpay dominate in bad year for banks, Melbourne. Thompson, B. 2020, Iron ore surge a $100b elixir for coronavirus, Melbourne.

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Appendix A Datasets for Graphs

ppendix B Newspaper Articles

9

Appendix B Newspaper Articles

Appendix

C Income Statement and Financial Position

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