Business Context and Reporting Period
Company: BHP Group Ltd
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Full year ended 30 June 2024 (FY24)
Filing Date: 27 August 2024
BHP reported strong operational performance in FY24, delivering record volumes at Western Australia Iron Ore (WAIO) and a 9% increase in global copper production for the second consecutive year. The company maintained its position as the world's lowest-cost major iron ore producer. Strategic developments included the temporary suspension of Western Australia Nickel operations due to global oversupply, the acquisition of a 50% interest in the Filo del Sol and Josemaria copper projects in Argentina, and the advancement of the Jansen potash project in Canada.
Key Financial Metrics
| Metric | FY24 (US$) | FY23 (US$) | Change |
|---|---|---|---|
| Revenue | 55.7 bn | 53.8 bn | +3% |
| Underlying EBITDA | 29.0 bn | 28.0 bn | +4% |
| Underlying EBITDA Margin | 54% | 54% | - |
| Underlying Attributable Profit | 13.7 bn | 13.4 bn | +2% |
| Attributable Profit (Reported) | 7.9 bn | 12.9 bn | -39% |
| Net Operating Cash Flow | 20.7 bn | 18.7 bn | +11% |
| Free Cash Flow | 11.9 bn | 5.6 bn | +111% |
| Capital & Exploration Expenditure | 9.3 bn | 7.1 bn | +31% |
| Net Debt | 9.1 bn | 11.2 bn | -18% |
| Gearing Ratio | 15.7% | 18.7% | -3.0 pts |
| Dividend (Full Year) | US$1.46 per share | US$1.70 per share | -14% |
Adjusted Effective Tax Rate: 32.5% (FY23: 30.9%). Including royalties, the effective rate was 41.7%.
Material Changes vs. Prior Period
- Profitability Divergence: While Underlying Attributable Profit increased 2% to US$13.7 bn, Reported Attributable Profit fell 39% to US$7.9 bn. This discrepancy is primarily due to exceptional items totaling US$5.8 bn (post-tax), including a US$2.7 bn impairment of Western Australia Nickel and a US$3.8 bn charge related to the Samarco dam failure. These were partially offset by a US$0.7 bn gain on the disposal of Blackwater and Daunia mines.
- Revenue Growth: Revenue rose 3% driven by higher realized prices for iron ore (+9%) and copper (+9%), and increased sales volumes. This was partially offset by lower energy coal and nickel prices and reduced steelmaking coal volumes following the divestment of Blackwater and Daunia.
- Cash Flow Surge: Free cash flow more than doubled to US$11.9 bn, driven by strong operating cash flow and disciplined capital allocation, despite a 31% increase in capital expenditure.
- Balance Sheet Strengthening: Net debt decreased by US$2.0 bn to US$9.1 bn, supported by operating cash flow and proceeds from asset divestments.
Guidance, Outlook, and Risks
Operational Guidance (FY25)
- Copper: Production expected to increase a further 4% to 1,845–2,045 kt.
- Iron Ore: WAIO production guidance of 282–294 Mt (100% basis); medium-term target >305 Mtpa.
- Coal: Steelmaking coal (BMA) production expected to decline to 16.5–19 Mt due to divestments and elevated strip ratios. Energy coal (NSWEC) expected at 13–15 Mt.
- Nickel: Operations temporarily suspended from October 2024; review scheduled for February 2027.
- Potash: Jansen Stage 1 on track for first production in late CY26; Stage 2 approved with first production expected in FY29.
Management Commentary & Risks
- Market Outlook: BHP expects steady global growth slightly above 3% for CY24 and CY25. China's recovery remains uneven, particularly in the property sector, while India is expected to remain a growth driver. Developed economies face lingering effects of higher interest rates.
- Cost Inflation: Global inflation rate was ~4% in FY24. Wage growth has peaked in Australia and normalized in Chile, but lagged inflation impacts are expected to flow into FY25.
- Safety: One fatality occurred at BMA in January. High Potential Injury (HPI) frequency declined 36% in FY24.
- Climate: Operational GHG emissions were 1% higher than FY23 due to increased activity but remain 32% below the FY20 baseline. BHP committed up to US$4 bn in spend through 2030 for decarbonization.
Investor Verification Checklist
- Exceptional Items Impact: Verify the specific accounting treatment and future cash implications of the US$3.8 bn Samarco dam failure charge and the US$2.7 bn Nickel impairment.
- Nickel Suspension: Assess the timeline and capital requirements for the potential restart of Western Australia Nickel operations, currently suspended until at least February 2027.
- Chilean Tax Regime: Monitor the impact of the new Chilean mining tax regime on the adjusted effective tax rate, which is expected to rise to 33–38% in FY25.
- Capital Allocation: Review the execution of the US$1.5 bn increase in capital investment for copper and potash, specifically the Jansen project progress and the Filo del Sol/Josemaria acquisition.
- Dividend Sustainability: Confirm the payout ratio of 54% remains sustainable given the volatility in commodity prices and the planned suspension of nickel operations.