BHP Group, a global mining giant, reported solid financial results for fiscal 2024 (ended June 30, 2024), with underlying attributable profit from continuing operations reaching $13.7 billion, a 2% increase from the previous year. This growth was primarily driven by robust performance in the company’s iron ore and copper operations, fueled by higher prices and sales volumes.
BHP’s success was further bolstered by a range of strategic initiatives, including productivity improvements, cost management, and favorable raw material costs. These factors helped offset the impact of lower energy coal and nickel prices, along with increased labor expenses.
The company’s underlying earnings per share stood at $2.70, slightly higher than $2.65 in fiscal 2023. Earnings per American Depositary Share (ADS) amounted to $5.39, exceeding the previous year’s figure of $5.30, though slightly lower than the Zacks Consensus Estimate of $5.52.
Revenues for fiscal 2024 reached $55.7 billion, exceeding the Zacks Consensus Estimate of $54 billion and representing a 3.4% increase from the prior year. This improvement was largely attributed to higher prices and sales volumes for iron ore and copper. However, lower energy coal and nickel prices, coupled with reduced steelmaking coal volumes following the divestment of Blackwater and Daunia in April 2024, partially offset these gains.
BHP’s Iron ore segment recorded a 13% year-over-year surge in revenues, reaching approximately $28 billion, while the Copper segment saw a 16% increase to $18.6 billion. Both segments benefited from higher volumes and prices. In contrast, the Coal segment experienced a significant decline in revenues, plunging 30% to $7.7 billion.
In terms of production, BHP achieved record iron ore production of 260 Mt for fiscal 2024, a 1% increase from the previous year. Western Australia Iron Ore (WAIO) delivered a record production of 255 Mt (287 Mt on a 100% basis), reflecting strong supply-chain performance and increased capacity unlocked by the record production at South Flank. Copper production also saw notable growth, rising 9% year over year to 1,865 kt, marking the highest output in 15 years. Nickel production increased by 2% to 81.6 kt.
BHP’s underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 4% year-over-year to $29 billion. Higher revenues and lower diesel and acid prices contributed to this growth, partially offset by higher labor costs. The company’s productivity initiatives and cost control efforts successfully mitigated the impact of these elevated labor costs. The underlying EBITDA margin remained stable at 54%.
The Iron ore segment experienced a 13% increase in underlying EBITDA to $18.9 billion, while the Copper segment’s underlying EBITDA surged by 29% to $8.6 billion. However, the Coal segment’s underlying EBITDA plummeted by 54% year over year to $2.3 billion.
Profit from operations, including exceptional items of $6.1 billion, decreased by 24% year-over-year to $17.5 billion. Attributable profit for total operations declined by 39% year-over-year to $7.9 billion, which included an exceptional loss of $5.8 billion. This loss comprised a $2.7 billion impairment of Western Australia Nickel and a $3.8 billion charge related to the Samarco dam failure, partially offset by a gain of $0.7 billion from the disposal of the Blackwater and Daunia mines.
BHP’s cash flow performance was positive. Net operating cash flow for fiscal 2024 amounted to $20.7 billion, compared to $18.7 billion in fiscal 2023. This improvement was attributed to lower tax and royalty-related taxation finalization payments. Free cash flow surged to $11.9 billion, a significant improvement from $5.6 billion in the previous year.
Capital and exploration expenditures totaled $9.3 billion, a 31% increase from the prior year. BHP’s strong cash flow enabled the company to continue repaying debt. Net debt at the end of fiscal 2024 stood at $9.1 billion, down from $11.2 billion at the end of fiscal 2023. BHP has budgeted capital and exploration expenditures of $10 billion and $11 billion for fiscal 2025 and 2026, respectively.
The company’s board declared a dividend of 74 cents per share, totaling $3.8 billion, reflecting a payout ratio of 53%.
BHP provided production and unit cost guidance for fiscal 2025. Iron ore production is expected to be between 255 Mt and 265.5 Mt, with WAIO production projected between 250 Mt and 260 Mt (282 Mt and 294 Mt on a 100% basis). Copper production is anticipated to be in the range of 1,845 kt to 2,045 kt. Metallurgical coal production is guided between 16.5 Mt and 19 Mt, while energy coal production is expected to be between 13 Mt and 15 Mt.
Unit cost guidance for WAIO is estimated to be between $18.00 and $19.50 per ton. Escondida unit cost is projected to be between $1.30 and $1.60 per pound, Spence unit costs are anticipated to be between $2.00 and $2.30 per pound, Copper South Australia unit cost is expected to be between $1.30 and $1.80 per pound, and BMA unit cost is projected to be between $112 and $124 per ton.
BHP Group’s shares have declined by 18.4% year-to-date, outperforming the industry’s 10.1% decline.
BHP currently holds a Zacks Rank #2 (Buy). Other top-ranked stocks in the basic materials sector include Carpenter Technology Corporation (CRS), IAMGOLD Corporation (IAG), and Eldorado Gold Corporation (EGO). CRS, IAG, and EGO all sport a Zacks Rank #1 (Strong Buy) at present.
