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HY21 profit: Is the Fortescue (ASX:FMG) share price a buy?

The Fortescue Metals Group Limited (ASX: FMG) share price is an interesting consideration after the inadvertent release of its profit numbers.

Fortescue is one of the biggest iron ore miners in Australia and Andrew Forrest is the chairman and founder.

What happened?

Fortescue announced that Mr Forrest gave a speech at the Boyer Lecture for 2021. Within the speech, he said that Fortescue made a net profit after tax (NPAT) of over US$940 million for the month of December 2020, which is based on preliminary unaudited management accounts.

The miner said that it’s scheduled to lodge its FY21 half year financial results.

Fortescue also said that its preliminary net profit after tax (NPAT) for the six months to 31 December 2020 on an unaudited basis in the range of US$4 billion to US$4.1 billion. In the FY20 half year result, for the six months to 31 December 2019, net profit after tax (NPAT) was US$2.5 billion.

That means that half year net profit may grow as much as 60%.

Anything else?

The speech itself was interesting. You should give it a read. Mr Forrest spoke about the actions that he and Fortescue are taking to explore the prospect of hydrogen. He said that the Fortescue leadership recently decided to “have a crack” at becoming one of the world’s largest green energy and product businesses.

He said that Australia has everything it needs to be a world leader of hydrogen as well as discussing ways to make steel in Australia without needing coal.

Mr Forrest said that Fortescue is trialling two methods using ‘green hydrogen’ which can be made just from sending electricity through water.

The first way is replacing the coal in the furnace with green hydrogen. This apparently still creates steel, but it only produces water vapour rather than lots of carbon. To strengthen the steel you add the carbon separately, bonding it into the metal rather than dispersing into the atmosphere.

The other way is to not use a blast furnace at all and just zap the ore with renewable electricity.

He said that the company aims to start building Australia’s first green steel pilot plant this year, with a commercial plant in the Pilbara, powered entirely by wind and solar, in the next few years.

Summary thoughts

If Fortescue can become a leader in hydrogen and steel then it would be a very interesting change. There are some businesses that manage to just keep winning and winning – Fortescue could be one of them. Mr Forrest seems like a bit of a (realistic) visionary with his various ideas to change the world.

However, the current Fortescue share price and profit has shot higher on the back of very strong iron ore prices. Who knows how long China will keep buying? The hydrogen play may not turn into anything. Either way, Fortescue has been a solid dividend idea for the past few years though.

I’ll be following along Fortescue’s journey with hydrogen with interest over the coming months and years. But other ASX dividend shares may make more sense to buy today, such as Magellan Financial Group Ltd (ASX: MFG).

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Afterpay, Zip Co, Sezzle…

Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW.

Note: the report is 100% free.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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