BHP Group Limited and BHP Group Plc — FY2020 Form 20-F
Reporting period: The filing is an annual report for the fiscal year ended June 30, 2020—not a report for 2019 Q4. It presents the dual-listed BHP group’s consolidated financial statements under IFRS, generally on a continuing-operations basis; Onshore US was sold in 2018 and is treated as discontinued operations.
Key financial metrics
| Metric | FY2020 | Prior period |
|---|---|---|
| Revenue | US$42.9 billion | US$44.3 billion in FY2019; down 3% |
| Profit after tax, continuing operations | US$8.7 billion | US$9.5 billion |
| Attributable profit | US$8.0 billion | US$8.3 billion |
| Underlying attributable profit | US$9.1 billion | US$9.1 billion |
| Underlying EBITDA | US$22.1 billion | US$23.2 billion; reported group margin was 53% in both years |
| Net operating cash flow | US$15.7 billion | US$17.4 billion from continuing operations |
| Free cash flow | US$8.1 billion | US$10.0 billion from continuing operations |
| Capital and exploration expenditure | US$7.6 billion | US$7.1 billion from continuing operations |
| Net debt at year-end | US$12.0 billion | US$9.4 billion |
| Gearing | 18.7% | 15.4% |
| Cash and cash equivalents | US$13.4 billion | US$15.6 billion |
Gross interest-bearing liabilities were US$27.0 billion, including lease liabilities following adoption of IFRS 16. The US$5.5 billion revolving credit facility was undrawn at year-end. Credit ratings were A/A-1 from S&P and A2/P-1 from Moody’s, both with stable outlooks. The filing states working capital is sufficient for present requirements.
FY2020 dividends determined were US$1.20 per share, including a final dividend of US$0.55; the stated payout ratio was 67%. FY2019 dividends determined were US$2.35 per share, including a special dividend funded by Onshore US sale proceeds.
Material changes versus FY2019
- Revenue fell US$1.4 billion, primarily from lower realised coal, petroleum and copper prices and lower petroleum and copper volumes; stronger iron ore prices and record WAIO production partly offset the decline.
- Underlying EBITDA declined US$1.1 billion. Lower prices, lower volumes, inflation, higher closure provisions and Escondida stripping depletion weighed on results; improved operations, exchange rates and record production at several assets provided offsets.
- Underlying attributable profit was broadly unchanged, while attributable profit fell to US$8.0 billion. FY2020 included US$1.1 billion of exceptional losses attributable to BHP shareholders, compared with US$0.8 billion in FY2019.
- Operating cash flow and free cash flow declined. Net debt increased US$2.6 billion, reflecting shareholder returns, non-controlling interest dividends and IFRS 16 lease adoption, partly offset by US$8.1 billion of free cash flow.
- Iron Ore revenue rose to US$20.8 billion and Underlying EBITDA to US$14.6 billion, supported by higher realised prices and record WAIO production of 248 million tonnes. Coal revenue fell to US$6.2 billion and segment Underlying EBITDA to US$1.6 billion, mainly due to lower prices.
- Petroleum production fell 10% to 109 MMboe and segment Underlying EBITDA fell to US$2.2 billion. Copper production rose 2% to 1,724 kt, while segment Underlying EBITDA fell to US$4.3 billion.
Outlook, commentary, risks and unusual items
- FY2021 spending: Capital and exploration expenditure guidance was approximately US$7 billion, subject to exchange rates. Six major projects were under development at FY2020 year-end, with a combined life-of-project budget of US$11.4 billion.
- Production guidance: FY2021 ranges included WAIO 244–253 Mt; total Copper 1,480–1,645 kt; conventional Petroleum 95–102 MMboe; metallurgical coal 40–44 Mt; and energy coal 22–24 Mt. Management expected COVID-19 workforce constraints, grade decline, natural field decline and project timing to affect some volumes.
- COVID-19: Management reported operations remained running, with no fatalities and lower injury frequency, but warned that the pandemic’s duration, market disruption and supply-chain effects remained uncertain. The filing cautions against reliance on guidance in this environment.
- Exceptional items: FY2020 included a US$492 million after-tax Cerro Colorado impairment, US$507 million after-tax provision for cancellation of Chilean power contracts, US$130 million after-tax COVID-19 costs and US$176 million Samarco-related loss. The Chile power-contract cancellation related to transition to renewable supply.
- Portfolio actions: After year-end, BHP announced it would pursue options to divest BMC, NSW Energy Coal and its Cerrejón interest, and intended to exit Bass Strait. No financial effect was estimated and the assets were not classified as held for sale at June 30, 2020.
- Material risks and contingencies: Commodity price and geopolitical volatility; COVID-19; operational, safety and tailings-dam risks; climate transition and physical risks; community and regulatory matters; and liquidity risks. Samarco-related litigation and remediation remain significant: BHP’s Samarco provisions were US$2.1 billion at year-end, while several claims and potential exposures could not be reliably estimated. The filing identifies US$2.8 billion of other contingent liabilities, in addition to matters not reliably quantifiable.
- Other: IFRS 16 adoption added lease liabilities and affected comparability. The Board concluded BHP was viable and able to meet liabilities over a three-year assessment period, including under stress scenarios. EY issued unqualified audit opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Check the full audited statements and exceptional-item reconciliation, including the distinction between continuing-operations profit, attributable profit and underlying measures.
- Verify the drivers of higher net debt, particularly IFRS 16 leases, shareholder distributions and the treatment of index-linked freight leases.
- Assess FY2021 guidance against COVID-19 impacts, commodity prices, production constraints and project schedules.
- Review the assumptions, provision movement and legal developments relating to Samarco, including potentially unquantifiable claims.
- Track execution, valuation and timing of announced coal and Bass Strait portfolio options, and progress toward BHP’s emissions commitments.