BHP
(ASX:BHP) shareholders can thank the great global coal price boom – especially thermal coal – for the largesse of record dividends for the year to June.
The company said on Tuesday that shareholders will receive a total of $US16.3 billion ($A23.2 billion) in dividends for the year to June.
That was after BHP reported a 26% rise in underlying profit from continuing operations to $US21.3 billion, up from $US16.99 billion a year earlier.
Even though the final of $US1.75 a share was down from the record $US2 a share a year ago, the total for the year of $US3.25 a share was a record and it and the underlying profit were better than the market had been forecasting. The interim in February was a record $US1.50 a share.
The result was lapped up by investors who sent the shares up 4% at the close to $40.51, helping drag the wider market 0.58% higher on the day.
The surge in cash in the year saw BHP slash net debt to just $US400 million from a low $US4.1 billion a year earlier. Watch for all the analysts now call out BHP for having an “under-geared’ balance sheet and urging the company to make a big acquisition.
That’s despite the company pitching a $A8.3 billion bid at $A25 a share for copper gold miner, OZ Minerals.
BHP CEO Mike Henry played a straight bat yesterday when asked if BHP would lift its bid for OZ Minerals, but on the company’s performance he was effusive.
“These strong results were due to safe and reliable operations, project delivery and capital discipline, which allowed us to capture the value of strong commodity prices.”
On an earnings before interest tax depreciation and amortisation from continuing operations BHP delivered a 16% increase in underlying EBITDA from continuing operations to $US40,634 million. These results exclude its demerged petroleum assets now owned by Woodside Energy.
This was driven almost entirely by BHP’s thermal or energy coal operations, which boosted underlying EBITDA to $US9.504 billion while total coal revenues more than trebled to $US15.5 billion from $US5.1 billion.
Thermal coal prices for the year to June averaged a record $US216.78 a tonne ($US302.60 a tonne for the June half year) from just $US58.42 a tonne for all of 2020-21.
Metallurgical coal (Hard or premium as well as soft coking coal) rose to average $US347.10 a tonne for the year to June ($US423 a tonne average in the June half for both types) from $US106.64 a tonne for the year to June, 2021.
This was up from just $US288 million a year earlier thanks to the surge in thermal prices in the wake of the Russian invasion of Ukraine in late February.
BHP’s copper operations did well which delivered a modest increase in underlying EBITDA to $US8.565 billion even as copper prices surged to record highs after the Russian invasion, then slid sharply through June.
Copper revenues edged up to $US16.8 billion from $US15.7 billion and the price averaged 4US4.16 a pound, up from $US3.81 a pound the year before.
Iron ore saw an 18% slide in EBITDA to a still huge $US21.707 billion due to softer prices for the year compared with the final months of 2020-21. Iron ore revenue flipped to just over $US30 billion from more than $US34 billion the year before.
Iron ore prices averaged $US113.10 a tonne down from $US130.56 a tonne in 2020-21.
Covid took a toll on the results with the cost doubling over the year from 2020-21.
BHP said the total impact from COVID-19 on its operations was $US1.5 billion (pre-tax) (2021: $US729 million).
“This represents the following impacts: lower volumes at our operated assets of $US1.2 billion (2021: $US230 million) due to labour and supply constraints and direct costs of $US277 million incurred (2021: $US499 million, reported as an exceptional item), from continued application of our COVID-19 controls and demurrage charges caused by COVID-19 due to delays.”
“The most recent wave of COVID-19 infection has peaked in Australia and is now declining. In Chile, while the infection wave has not yet peaked, it is unlikely to be as impactful as previous waves,” BHP said.
The Queensland government’s royalties grab saw BHP announce earlier this year that it is reviewing expansion plans at its central Queensland coking coal export mines owned by BMA (with Mitsubishi of Japan).
BHP said Tuesday “In light of the Queensland royalty announcement, BMA is reassessing future investment decisions and is unable to provide annual sustaining capital expenditure guidance at this time.”
The company only has one project underway – its a biggie – the Jansen potash mine and processing operation in Canada. The $US2.9 billion spend on production shafts was completed, now the company will spend billions more on making the mine ready to produce, hopefully by 2026 under a new timetable instead of a year later.
BHP plans to spend $US740 million on the first production stage of Jansen this year.
All up BHP spent $US6.1 billion on capital investment (projects and expansion work) and exploration in 2021-22, down $US400 millioin because of the strength of the uS dollar against other currencies, especially the Aussie dollar and the Chilean peso. This included maintenance expenditure of $US2.8 billion and exploration of $US256 million.
BHP plans to spend $US7.6 billion on capital and exploration this year, rising to $US9.0 billion in 2023-24 including $US400 million on exploration this financial year.
“In the medium term, capital and exploration expenditure of approximately US$10 billion per annum on average is expected,” BHP said in something of a surprise (analysts hate resource companies spending money on finding things).
