BHP Group Ltd. — FY2018 Form 20-F Summary
Reporting period: Annual report for the fiscal year ended June 30, 2018—not 2017 Q4 as indicated in the request metadata. BHP is a dual-listed group reporting under IFRS in U.S. dollars. Unless noted, financial results below distinguish continuing operations from Onshore U.S. discontinued operations; FY2017 comparatives were restated for the announced Onshore U.S. sale.
Key financial metrics
| Metric | FY2018 | FY2017 |
|---|---|---|
| Continuing-operations revenue | US$43.6 billion | US$36.1 billion |
| Profit from operations | US$16.0 billion | US$12.6 billion |
| Profit after tax, continuing operations | US$7.7 billion | US$6.7 billion |
| Attributable profit, continuing and discontinued operations | US$3.7 billion | US$5.9 billion |
| Underlying attributable profit | US$8.9 billion | US$6.7 billion |
| Underlying EBITDA | US$23.2 billion | US$19.4 billion |
| Net operating cash flow | US$18.5 billion | US$16.8 billion |
| Free cash flow | US$12.5 billion | US$12.6 billion |
| Capital and exploration expenditure | US$6.8 billion | US$5.2 billion |
| Net debt at year-end | US$10.9 billion | US$16.3 billion |
| Gearing | 15.3% | 20.6% |
Revenue rose 21%, primarily on higher realised commodity prices and stronger volumes. Underlying EBITDA increased 20%, while attributable profit fell because of exceptional charges. The Group reported a 55% underlying EBITDA margin on production. Cash and cash equivalents were US$15.9 billion; interest-bearing liabilities were US$26.8 billion. BHP had a fully undrawn US$6.0 billion revolving credit facility, expiring in May 2021. S&P rated BHP A with a stable outlook and Moody’s rated it A3 with a positive outlook.
Material changes and operating performance
- Attributable profit included US$5.2 billion of exceptional losses after tax, principally associated with Onshore U.S. impairment, U.S. tax reform and Samarco. Continuing-operations profit and underlying measures therefore give different views of performance.
- Net debt declined by US$5.4 billion in FY2018 and by more than US$15 billion over two years. The Group repurchased US$2.9 billion of bonds and did not refinance A$1.0 billion of maturing Group debt.
- Dividends determined for FY2018 totaled 118 U.S. cents per share, up 42% from FY2017. This included a final dividend of 63 cents per share, scheduled for payment September 25, 2018; 98 cents per share was paid during FY2018.
- Production increased 8%. BHP reported records at Western Australia Iron Ore, Queensland Coal and Spence. Copper production rose 32%, led by Escondida’s recovery from prior-year industrial action; conventional petroleum production fell 6% due to hurricanes and natural field decline.
- Commodity performance was mixed: Iron Ore underlying EBITDA fell to US$8.9 billion from US$9.1 billion; Copper rose to US$6.5 billion from US$3.5 billion; Coal rose to US$4.4 billion from US$3.8 billion; Petroleum rose to US$3.3 billion from US$3.1 billion.
Outlook, management commentary and risks
- Management described the short-term market outlook as uncertain but maintained a positive long-term view. It cited commodity-price volatility, geopolitical and trade-policy uncertainty, and China’s importance; China generated 52.6% of continuing-operations revenue.
- FY2019 and FY2020 capital and exploration expenditure guidance was below US$8 billion annually, subject to exchange rates. BHP expected approximately US$1 billion of productivity gains in FY2019, with momentum into FY2020.
- FY2019 production guidance included WAIO of 241–250 million tonnes; total copper of 1.675–1.770 million tonnes; conventional petroleum of 113–118 MMboe; metallurgical coal of 43–46 million tonnes; and energy coal of approximately 28–29 million tonnes. These are management forecasts, not guarantees.
- Post year-end, BHP agreed to sell all Onshore U.S. assets for base consideration of US$10.8 billion in cash, subject to approvals and customary conditions, with completion expected by end-October 2018. Management expected to return net proceeds to shareholders. Onshore U.S. was classified as discontinued operations and held for sale.
- The Board approved the South Flank iron ore project, with stated capital expenditure of approximately US$3.06 billion and first production targeted for 2021. The Spence Growth Option was also in development, with first production expected in FY2021.
- Samarco operations remained suspended after the 2015 dam failure. BHP Billiton Brasil’s provision for its Framework Agreement obligations was US$1.3 billion before tax and after discounting. The US$155 billion Brazilian public-prosecution claim was suspended for two years under an agreement ratified in August 2018; future liabilities remain uncertain and potentially material.
- Other material risks include commodity prices, costs and productivity, exchange rates, regulation, climate and water impacts, operational and cyber incidents, and legal and tax disputes. Two work-related fatalities occurred in FY2018; total recordable injury frequency increased to 4.4 per million hours from 4.2.
Important facts for investors to verify
- Reconcile statutory attributable profit of US$3.7 billion with underlying attributable profit of US$8.9 billion, including the exceptional-item treatment and Onshore U.S. discontinued-operations accounting.
- Track completion, final proceeds and adjustments for the US$10.8 billion Onshore U.S. sale, and the amount and timing of any shareholder return.
- Review the assumptions, funding obligations and potential exposure for Samarco, including the provision, ongoing remediation, suspended claims and restart conditions.
- Compare FY2019 production, capital expenditure and productivity guidance with actual results, particularly at WAIO, copper and Queensland Coal.
- Assess the sustainability of cash generation, dividend coverage, net-debt reduction and the effect of changing commodity prices and Chinese demand.
The filing also reports an unqualified audit opinion on the financial statements and effective internal control over financial reporting as of June 30, 2018. Management’s non-IFRS measures are supplemental and should not be treated as substitutes for statutory results or cash flow.