BHP Group Ltd — FY2019 Form 20-F summary
Reporting period: The filing is an annual report for the fiscal year ended 30 June 2019, not a 2018 Q4 filing. It covers BHP Group Limited and BHP Group Plc under their dual-listed company structure. Financial statements are prepared under IFRS in US dollars. Unless noted, financial results below distinguish continuing operations from discontinued Onshore US operations.
Business context and financial performance
BHP is a diversified resources group focused on petroleum, copper, iron ore and coal, with potash and nickel activities also reported. FY2019 included completion of the Onshore US divestment; its results are classified as discontinued operations in the financial statements.
| Metric | FY2019 | FY2018 | Change / context |
|---|---|---|---|
| Revenue, continuing operations | US$44.288bn | US$43.129bn | Up 3%; higher iron ore, petroleum and metallurgical coal prices and WAIO sales volumes were partly offset by weaker copper and thermal coal prices and operational interruptions. |
| Profit from operations, continuing operations | US$16.113bn | US$15.996bn | Up modestly. |
| Profit after tax, continuing operations | US$9.520bn | US$7.744bn | Up 23%; FY2018 included a large US tax reform charge. |
| Attributable profit, continuing and discontinued operations | US$8.306bn | US$3.705bn | Includes exceptional losses of US$0.818bn and US$5.228bn, respectively. |
| Underlying EBITDA, continuing operations | US$23.158bn | US$23.183bn | Essentially flat; margin was 53%, versus 55%. |
| Underlying attributable profit, continuing and discontinued operations | US$9.124bn | US$8.933bn | Up about 2%; BHP also reports continuing-operations underlying attributable profit of US$9.466bn. |
| Net operating cash flow, continuing operations | US$17.397bn | US$17.561bn | Lower, reflecting higher taxes and operating impacts. |
| Capital and exploration expenditure, total operations | US$7.566bn | US$6.753bn | Up 12%; investment in growth and latent-capacity projects increased. |
| Net debt at year-end | US$9.215bn | US$10.934bn | Down US$1.719bn; gearing was 15.1%, versus 15.3%. |
| Cash and interest-bearing liabilities | US$15.613bn cash; US$24.828bn liabilities | US$15.871bn cash; US$26.805bn liabilities | US$6bn committed revolving credit facility undrawn at year-end. |
Free cash flow for continuing operations, defined by BHP as net operating cash flow less net investing cash flow, was US$10.020bn, compared with US$12.501bn. Total Group free cash flow was US$20.478bn, including US$10.427bn of net proceeds from the Onshore US sale; it should not be confused with recurring operating cash generation. BHP reported working capital was sufficient for present requirements and stated that no Group-level debt issuance was required in its three-year viability assessment.
Material changes versus FY2018
- Onshore US assets were sold: the Fayetteville assets for gross consideration of US$0.3bn and the Eagle Ford, Haynesville and Permian assets for US$10.3bn, subject to completion adjustments. Total net proceeds were approximately US$10.4bn. The financial statements treat the business as discontinued.
- BHP returned sale proceeds through a US$5.2bn off-market buy-back of about 265.8m BHP Group Limited shares and a US$5.2bn special dividend. FY2019 shareholder returns determined totalled US$17.1bn, including dividends of US$11.9bn.
- The Board declared a record final dividend of 78 US cents per share. Total dividends determined for FY2019 were 235 US cents per share, versus 118 cents in FY2018.
- Underlying EBITDA was flat despite higher average iron ore, petroleum and metallurgical coal prices. Productivity gains and favourable currency movements were offset by outages, grade decline, weather, inflation and higher strip ratios.
- Copper segment underlying EBITDA fell to US$4.550bn from US$6.522bn, while iron ore rose to US$11.129bn from US$8.930bn. Coal declined to US$4.067bn from US$4.397bn; petroleum increased to US$3.801bn from US$3.341bn.
Outlook, commentary and risks
- FY2020 guidance: Capital and exploration expenditure was guided at below US$8bn, subject to exchange rates. Production guidance included copper of 1.705–1.820Mt, WAIO of 242–253Mt (BHP share), metallurgical coal of 41–45Mt (BHP share), energy coal of about 24–26Mt, and conventional petroleum of 110–116MMboe. Management cited planned maintenance, grade declines and natural field decline in several outlooks.
- Projects: Five major projects were under development at FY2019 year-end with a combined budget of US$11.1bn; management said they were on schedule and budget. Ruby was approved in August 2019, bringing the number to six. Major projects include South Flank, Spence Growth Option, Mad Dog Phase 2, Atlantis Phase 3 and Jansen potash. FY2020 petroleum exploration and appraisal guidance was about US$0.7bn.
- Commodity and macro risks: Results are highly exposed to commodity prices, especially iron ore, copper, coal and petroleum, as well as currency and interest-rate movements. China accounted for US$24.3bn, or 54.8% of continuing-operations revenue. Management highlighted trade-policy uncertainty and expected elevated market volatility.
- Samarco: The 2015 Fundão tailings dam failure remains a material financial, legal and operational contingency. BHP’s provision for its share of Framework Agreement programs was US$1.7bn before discounting at 30 June 2019; the separate Germano upstream-dam decommissioning provision was US$263m. BHP states it cannot reliably estimate potential exposure from multiple legal proceedings, including a suspended R$155bn Brazilian public claim. Samarco restart remains conditional on safety, economic viability and community support.
- Other operational and safety matters: One employee fatality occurred at Saraji. Total recordable injury frequency rose to 4.7 per million hours from 4.4; high-potential injury events fell 7% to 50. Tailings-dam failure, asset integrity, contractor and joint-venture performance, climate change, community and human-rights impacts, cybersecurity, and regulatory or tax disputes are identified risks. The group reported five Australian environmental fines totalling US$45,529.
- Climate: Continuing-operations Scope 1 and 2 emissions were 14.7Mt CO2-e, 3% below the adjusted FY2017 baseline. BHP announced a US$400m, five-year Climate Investment Program in July 2019 and stated it intended to develop a medium-term operational-emissions target and public Scope 3 goals.
- Accounting and unusual items: FY2019 Samarco exceptional loss was US$1.060bn before tax, partly offset by a US$242m tax benefit from resolved global taxation matters. IFRS 15 was adopted retrospectively, reducing reported revenue and expenses for presentation of treatment and refining charges without changing profit. IFRS 16 lease accounting took effect after year-end; BHP estimated transition would add about US$2.3bn of lease liabilities and US$2.2bn of right-of-use assets.
Important facts for investors to verify
- Reconcile continuing-operations, discontinued-operations and Group-wide measures, especially attributable profit, underlying attributable profit and cash flow.
- Review the assumptions, timing, funding responsibilities and potential revisions underlying Samarco provisions, dam decommissioning costs and unresolved litigation.
- Track delivery, remaining capital requirements and returns from South Flank, Spence Growth Option, Mad Dog Phase 2, Atlantis Phase 3, Jansen and the subsequently approved Ruby project.
- Test FY2020 production and unit-cost guidance against maintenance schedules, copper grade decline, weather exposure and petroleum field decline.
- Assess the sustainability of shareholder distributions after the one-off Onshore US proceeds, alongside ongoing capital expenditure, net debt and the dividend policy.
- Monitor IFRS 16 adoption, lease liabilities, and the reported-versus-underlying treatment of exceptional items and other alternative performance measures.
This summary is based on the supplied filing text. Underlying performance measures are company-defined and should be read alongside audited IFRS results.