July was a shaky month for the S&P/ASX 200 (ASX: XJO). Rising coronavirus infections in Victoria put a cap on previous gains with the index ending the month 29.9 points down. Despite the disappointing performance of the index overall, as always, there were some outperformers. Here we take a look at the top performing ASX 200 shares in July.
ALS Ltd (ASX: ALQ)
The ALS share price gained more than 29% in July to finish the month at $8.49. The share price gained ground throughout the month as the company reported a creditable FY20 result. ALS operates in the industrials sector providing diagnostic and testing services across the life sciences, commodities, engineering and infrastructure sectors. Revenue from continuing operations increased 10% in FY20 to $1.8 billion, and underlying net profit after tax increased 4.3% to $189 million. This was within guidance despite the impact of the coronavirus in the final quarter.
ALS says the resilience of its business leaves it well positioned to withstand the impact of the current economic environment. The company has a strong capital position and diverse business interests. The long term strategy of organic and disciplined acquisition growth remains on track. Bolt on acquisition opportunities that arise in the current climate will be assessed in accordance with this strategy. The strength of the balance sheet gave ALS the confidence to declare a final dividend of 6.1 cents per share, franked to 70%. Added to the half year dividend of 11.5 cents, this gives a full year payout ratio of 45%.
Netwealth Group Ltd (ASX: NWL)
The Netwealth Group share price gained 33.89% over the month to finish July at $12.01. Netwealth is a wealth management business with investment platforms for wealth professionals and personal investors. In FY20 Netwealth saw record annual net inflows of $9.1 billion. Funds under administration increased 35% to $31.5 billion after a negative market movement of $0.9 billion for the year. In the March quarter, funds under administration saw net inflows of $3.2 billion, more than double its nearest competitor.
Netwealth has advised it expects performance for FY20 to slightly exceed previous guidance of $116 – $120 million revenue and $58 – $62 million earnings before interest, tax, depreciation and amortisation (EBITDA). It reports that the current pipeline of new business continues to be positive although subject to market disruption. The company has a positive outlook given its strong cash flows, no debt, and growing market share.
Orocobre Limited (ASX: ORE)
The Orocobre share price rose 28.57% in July to close the month at $2.97. Orocobre is a lithium and borax miner with operations in Argentina. COVID-19 resulted in the closure of Orocobre’s Olaroz lithium facility for several weeks with production levels lower upon reopening thanks to biosecurity measures. Production for the June quarter of 2,511 tonnes was a reduction of 27% compared to the prior corresponding period. Sales volumes and revenue were also down as lithium prices remained at record lows with demand from China subdued.
Widespread delays to lithium expansion projects were announced during the June quarter. Over the longer term, these delays may put pressure on pricing, lifting it from current lows. Demand for lithium, which is a key component in batteries used in electric vehicles (EVs), is also likely to increase thanks to government support. In Germany and France, sales of EVs grew 100% year on year in May due to increased government subsidies. While the lithium market experienced a setback as a result of COVID-19, Orocobre thinks the long term outlook is positive, buoyed by regulatory incentives and the broader shift to environmentally friendly alternatives.
Fortescue Metals Group Limited (ASX: FMG)
The Fortescue Metals share price gained 25.7% last month to finish July at $17.41. One of the largest iron ore companies in the world, Fortescue reported record shipments for FY20. Iron ore shipments were 47.3 million tonnes for the June quarter and 178.2 million tonnes for the full year. This exceeded top end guidance of 177 million tonnes and was 6% higher than FY19. Lower costs increased revenue realisation, with average revenue of US$79 per dry metric tonne in FY20.
Fortescue ended FY20 with cash on hand of $4.9 billion at 30 June 2020 and net debt of $0.3 billion. $2 billion was spent on capital expenditure during FY20 as major projects achieved key milestones. CEO Elizabeth Gaines said, “The entire Fortescue team has delivered strong results for the June quarter…(having) delivered record annual shipments of 178.2mt, while maintaining our industry leading cost position of US$12.94/wmt”. Fortescue has provided FY21 guidance for shipments of 175 – 180 million tonnes.
Mineral Resources Limited (ASX: MIN)
The Mineral Resources share price gained 21.59% in July to close the month at $25.74. Mineral Resources is a mining services company with a portfolio of operations across multiple commodities. Services are provided to clients in Western Australia and the Northern Territory, with the company operating mine sites in the Pilbara and Goldfields, and shipping through Utah Point and Esperance. Mineral Resources was not materially impacted by COVID-19, and reported a record breaking June quarter for the iron ore business.
Total iron ore production of 4.2 million wet metric tonnes (wmt) was 22% higher than Q3 FY20. Iron ore shipments for the quarter were 4.4 wmt, up 53% from Q3 FY20. Over the full year, shipments of 6.7 million wmt were in line with guidance. Mineral Resources’ Mt Marion Lithium Project achieved record production of 146,000 wmt during the June quarter. The company also sold its non-core manganese assets to Resources Development Group Ltd (ASX: RDG) during the June quarter and in return received equity equivalent to a 75% shareholding in RDG.
These five ASX shares were the top performing ASX 200 shares in July 2020. Miners feature heavily in the list with the iron ore price soaring in July. Iron ore reached levels not seen since August 2019 due to concerns around supply disruptions in Brazil and rising demand from China. The price rise has supported the share price of ASX iron ore miners, including some of July’s top performers.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Netwealth. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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