BHP Group Limited
21 August 2023
| Financial results for the year ended 30 June 2023 | 22 August 2023News release 14/23 |
Strong financial performance underpinned by reliable operations and disciplined cost control.
The tragic deaths of two of our colleagues during the year have been deeply felt. Our absolute priority remains eliminating fatalities and serious injuries at BHP.
Our financial results for the year were strong, underpinned by reliable production together with capital and cost discipline as we managed lower commodity prices and inflationary pressures. Our balance sheet is robust and deliberately positioned to support portfolio growth in commodities the world needs for population growth, urbanisation and decarbonisation.
In Canada, our investment in potash is progressing at pace with first production at Jansen on track for the latter half of 2026, and we are creating a new copper province in South Australia following the acquisition of OZ Minerals. We are investing strategically in new ideas, technologies and countries through exploration and early-stage copper and nickel prospects to capture future growth opportunities.
We continue to build an inclusive, high-performance culture and a more sustainable business, which are key to our future competitiveness and ability to deliver sector-leading returns. Today, more than 35% of our employees are female and we have increased Indigenous employee representation globally. We are taking action to reduce our operational GHG emissions through renewable electricity supplies and supporting the development of electric trucks, trains and light vehicles. As of today, BHP has among the lowest absolute operational GHG emissions of the major miners.
Commodity demand has remained relatively robust in China and India even as developed world economies have slowed substantially. In the near term, China’s trajectory is contingent on the effectiveness of recent policy measures. We expect buoyant growth in India with strong construction activity underpinning an expansion in steelmaking capacity. More broadly, there is increased recognition of the importance of critical minerals and strategies across the globe to incentivise investment in supply and demand, which provides opportunities and challenges.
Mike Henry
BHP Chief Executive Officer
| Safety | Operational performance |
| Two fatalities | Iron ore Up 1% Copper Up 9% Nickel Up 4% |
| We continue to improve our systems, processes and engineered controls, and emphasise the safety culture that must be present every day to eliminate fatalities and serious injuries at BHP. | We achieved production records at Western Australia Iron Ore (WAIO), Olympic Dam and Spence. Full year production guidance was achieved for copper, iron ore, metallurgical coal, energy coal and nickel. |
| Financial results | Payments to governments |
| Attributable profit – total operationsUS$12.9 bn Down 58%FY22 US$30.9 bn | Total payments to governmentsUS$13.8 bnFY22 US$17.3i bn |
| Revenue decreased US$11.3 bn due to significantly lower prices in key commodities. We managed the impact of inflation on costs well relative to our competitors. Underlying attributable profitii (which adjusts FY22 for discontinued operations of US$10.7 bn) reduced by 37% to US$13.4 bn. | Tax, royalty and other payments to governmentsi made during FY23 resulted in a global adjusted effective tax rateii of 30.9%, and 41.3% with revenue and production based royalties included. |
| Capital management | |
| Capital and exploration expenditureiiUS$7.1 bn Up 16%FY22 US$6.1 bn | Fully franked final dividendUS$0.80 per shareUp $0.13 per share above the minimum 50% payout (59% payout) |
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BHP | Financial results for the year ended 30 June 2023
| We increased our exposure to future-facing commodities and ~70% of our medium term capital spend is expected to be focused in these commodities. | We have determined a final dividend of US$4.1bn. This brings total cash returns to shareholders announced for the year of US$1.70 per share, fully franked. |
Note: All results are presented on a continuing operations basis, except as noted.
Social valueiii
In FY23, we made progress against all six pillars of our social value framework, while continuing to embed social value assessments into our decision making.
| Decarbonisation | Safe, inclusive, and future-ready workforce | |
| Operational GHG emissions9.8 Mt CO2-e Down 11%FY22 11.0 Mt CO2-e | Female employee representation35.2% Up 2.9% ptsFY22 32.3% | |
| In June 2023, we shared an update on our plan to achieve our operational decarbonisation target and goal, and we are on track to meet our FY30 target to reduce Scope 1 and Scope 2 emissions from our operated assets by at least 30% from FY20 levels.We now have seven collaborative partnerships with steelmakers responsible for ~19% of reported global steel productioniv to support our Scope 3 goals. | Doubled from 17.6% in CY16, and a point of differentiation to our competitors.Approximately 48% of our external hires in FY23 were female. We improved our representation of women in leadership to 29.7%, which is also well ahead of our competitors. | |
| Healthy environment | Responsible supply chains | |
| Natural capital accounting pilot completed | BHP Responsible Minerals Program commenced | |
| A mining industry first at Beenup. We also completed important biodiversity and/or ecosystems baseline mapping for all land and water areas at our operated assets (excluding legacy assetsv) and released Context Based Water Targets that apply until FY30. | A fit for purpose due diligence program for our minerals and metals supply chain aligned with OECD guidance. For further information, refer to BHP Responsible Minerals Program. | |
| Indigenous partnerships | Thriving, empowered communities | |
| Indigenous procurement spendUS$333 m Up 122%FY22 US$150 m | Indigenous employee representation8.6% Australia9.7% Chile7.7% Canada | Total economic contributionviUS$54.2 bnFY22 US$82.5 bn |
| During FY23, we released our sixth Reconciliation Action Plan, which was recognised with ‘Elevate’ status by Reconciliation Australia, and our updated Indigenous Peoples Policy Statement. Both considered Indigenous voices in the process. | We contributed US$40.8 bn to suppliers, community and social investments, employees and governments during the year. This was 75% of our total economic contribution with shareholder payments being US$13.4bn (25%). | |
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BHP | Financial results for the year ended 30 June 2023
| In FY23, social investment of ~US$150 m consisted of funding such as direct community development, environmental projects and to the BHP Foundation to address some of the most critical sustainable development challenges facing society that are directly relevant to the resources sector. | |||
| Detailed information on social value is included in Appendix 1 and OFR 6 in the Annual Report | |||
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BHP | Financial results for the year ended 30 June 2023
Group Financial Performance
Earnings and margins
Continued reliable operational performance with disciplined cost control led to strong financials.
| RevenueUS$53.8 bn Down 17%FY22 US$65.1 bn Attributable profit – total operationsUS$12.9 bn Down 58%FY22 US$30.9 bn Underlying attributable profitiiUS$13.4 bn Down 37%FY22 US$21.3 bn Profit from operationsUS$22.9 bn Down 33%FY22 US$34.1 bn Underlying EBITDAiiUS$28.0 bn Down 31%FY22 US$40.6 bn Underlying EBITDA marginii54%FY22 65% Adjusted effective tax rate30.9%FY22 31.2%FY24e 30 – 35% | BHP’s revenue decreased by US$11.3 bn primarily as a result of significantly lower prices across iron ore, metallurgical coal, and copper.Attributable profit for the year reflects our disciplined cost and reliable operational performance amid the lower price environment, and includes an exceptional loss of US$0.5 bn. For further details see Note 3 – Exceptional items.Adjusted for the US$10.7 bn profit related to discontinued operations as well as exceptional losses of US$1.1 bn in FY22, Underlying attributable profit decreased by US$7.9 bn.While we increased copper, iron ore and nickel sales volumes, and exchange rates were favourable, profit from operations and Underlying EBITDA decreased primarily as a result of the lower prices across major commodities, and the impacts of inflation on our underlying cost base, particularly on labour, diesel and electricity prices.Our focus on cost discipline has allowed us to mitigate the effects of the current inflationary environment. Unit costsii were ~9%vii higher across our major assets, however WAIO extended its lead as the lowest cost major iron ore producer globally.For further details see Underlying EBITDA waterfall. | We experienced an effective inflation rate of ~10% in the financial year and expect the lagged impact of inflation to continue into FY24, particularly in labour costs.Our adjusted effective tax rate was above the 30% Australian corporate tax rate primarily due to:· dividend withholding taxes related to our Chilean operations; and· current year tax losses not expected to be recoverable.Our operating costs include US$3.8 bn of revenue or production based royalties. This includes US$1.7 bn of royalties incurred by BHP in respect of our Queensland operations, which combined with income taxes equates to an adjusted effective tax rate including royalties of 55%. The introduction of the new royalty regime resulted in an additional US$0.7 bn in royalties paid to the Queensland Government by BHP in relation to FY23.Once the US$3.8 bn of revenue and production based royalties are included, our Group effective tax rate was 41.3%.The adjusted effective tax rate for FY24 is expected to be in the range of 30 to 35%. |
| Detailed financial information is included in Appendix 1 and OFR 4 in the Annual Report |
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BHP | Financial results for the year ended 30 June 2023
Cash flow and balance sheet
Strong capital discipline underpinned US$13.1 bn of investments in the period.
| Net operating cash flowUS$18.7 bn Down 36%FY22 US$29.3 bn Capital and exploration expenditureUS$7.1 bn Up 16%FY22 US$6.1 bn Free cash flowiiUS$5.6 bn Down 77%FY22 US$24.3 bn Net debtiiUS$11.2 bnFY22 US$0.3 bnH1 FY23 US$6.9 bn Gearing ratioii18.7%FY22 0.7%H1 FY23 12.9% | Our net operating cash flow reduced as a result of the lower profit from operations, which was partially offset by the resultant reduced income tax and royalty-related taxation payments. Despite lower prices and sales volumes, revenue-based royalties at BHP Mitsubishi Alliance (BMA) increased following the introduction of the new Queensland royalty regime in July 2022.In line with our Capital Allocation Framework (CAF), we generated free cash flow of US$5.6 bn after investing US$13.1 bn in the following:· US$5.9 bn acquisition of OZ Minerals Ltd (OZL) in May 2023;· US$4.1 bn in organic development including US$2.3 bn on improvement, US$1.2 bn on future‑facing commodities, and US$350 m of exploration spend.· US$3.0 bn of maintenance and decarbonisation expenditureviii.We expect capital and exploration expenditure (with flexibility to adjust and subject to exchange rate movements) to be:· For FY24 and FY25, ~US$10 bn per annum, including US$0.4 bn of exploration in FY24;· In the medium term, ~US$11 bn per annum on averageix.These amounts include around US$4 bn in aggregate until FY30 for operational decarbonisation. | BHP’s balance sheet remains strong. During FY23, Moody’s upgraded BHP’s credit rating to A1 while S&P Global’s rating has remained at A-. BHP retired US$2.3 bn of debt and raised US$7.7 bn of which US$5 bn relates to the OZL acquisition facility.Our net debt increased by US$10.8 bn in the year (or US$4.3 bn from December 2022) largely reflecting the:· Purchase of OZL and assumption of US$1.1 bn of its interest bearing liabilities; and· Dividends paid to BHP shareholders of US$13.3 bn, and US$1.2 bn to non‑controlling interests.These were partially offset by cash flow generated by the operations.Our net debt target range of between US$5 and US$15 bn enables us to maintain a resilient balance sheet during periods of change and external uncertainties while retaining the flexibility to allocate capital within our CAF towards shareholder returns and growth opportunities. In the near term, we expect to remain towards the upper end of the net debt target range.For further details see Note 21 – Net debt. |
| Detailed financial information is included in Appendix 1 and OFR 4 in the Annual Report |
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BHP | Financial results for the year ended 30 June 2023
Value and returns
Continuing to balance investing in the business and cash returns to shareholders.
| Full year dividendUS$1.70 per shareFully franked64% payout ratio Earnings per share – basic255 US cpsFY22 611 US cpsEarnings per share – underlyingii265 US cpsFY22 421 US cps Underlying return on capital employed (ROCE)ii28.8%FY22 48.1% | Our operations continued to generate strong Underlying ROCE of 28.8%. A final dividend of US$0.80 per share (US$4.1 bn), equivalent to a 59% payout ratio and inclusive of an additional amount of US$0.64 bn above the minimum 50% payout policy, will be paid to shareholders on 28 September 2023. | This brings total cash dividends announced for FY23 to US$1.70 per share, including an additional amount of US$1.9 bn above the minimum payout policy, and making this the third largest full year ordinary dividend declared.Over the past three years, this amounts to more than US$40 bn cash returned to shareholders. |
Important dates for shareholders
BHP’s Dividend Reinvestment Plan (DRP) will operate in respect of the final dividend. Full terms and conditions of the DRP and details about how to participate can be found at: bhp.com
| Events in respect of the final dividend | Date |
| Announcement of currency conversion into RAND | 29 August 2023 |
| Last day to trade cum dividend on Johannesburg Stock Exchange Limited (JSE) | 5 September 2023 |
| Ex-dividend Date JSE | 6 September 2023 |
| Ex-dividend Date Australian Securities Exchange (ASX), London Stock Exchange (LSE) and New York Stock Exchange (NYSE) | 7 September 2023 |
| Record Date | 8 September 2023 |
| Announcement of currency conversion into AUD, GBP and NZD | 11 September 2023 |
| DRP and Currency Election date | 11 September 2023 |
| Payment Date | 28 September 2023 |
| DRP Allocation Date | 12 October 2023 |
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BHP | Financial results for the year ended 30 June 2023
Shareholders registered on the South African branch register will not be able to dematerialise or rematerialise their shareholdings between the dates of 5 September 2023 and 8 September 2023 (inclusive), and transfers between the Australian register and the South African branch register will not be permitted between the dates of 28 August 2023 and 11 September 2023 (inclusive). American Depositary Shares (ADSs) each represent two fully paid ordinary shares and receive dividends accordingly.
Any eligible shareholder who wishes to participate in the DRP, or to vary a participation election should do so before 11 September 2023, or, in the case of shareholdings on the South African branch register of BHP Group Limited, in accordance with the instructions of your CSDP or broker. The DRP Allocation Price will be calculated in each jurisdiction as an average of the price paid for all shares actually purchased to satisfy DRP elections. The DRP Allocation Price applicable to each exchange will be made available at: bhp.com/DRP
Economic outlookx
As was the case in prior years, BHP’s external operating environment in FY23 was volatile. Our key commodity prices were materially weaker leading to lower revenue generation, while we also managed significant cost inflation across the business.
In the long run, we expect that population growth, rising living standards, and the infrastructure required for decarbonisation will drive demand for steel, non-ferrous metals and fertilisers.
In the near term, while the outlook for the developed world is uncertain, we expect China and India to remain relative sources of stability for commodity demand. We anticipate that these competing forces may have a variable impact on commodity prices in the period. On the cost front, we expect that the lag effect of the inflation peaks observed in FY23 and continued labour market tightness will continue to impact our cost base throughout FY24.
Commodity demand
The demand for commodities in the developed world has slowed substantially due to the impact of anti-inflationary policies and the energy crisis itself. While the energy crisis has faded, the lag effect of higher interest rates will suppress economic growth in the developed world in FY24. Demand though has remained relatively robust in China and India.
The Chinese economy has been volatile since the zero-Covid policy was eased in December 2022. The March quarter saw a better-than-expected recovery in a range of sectors important to commodity demand, raising hopes of a strong year overall. However, that momentum did not carry over fully to the June quarter. That was especially the case in the steel-intensive real estate sector, whereas copper-intensive sectors like automobiles, power machinery, consumer durables (e.g. air-conditioners) and the electricity grid have seen solid growth. The authorities have acknowledged that more policy support is needed to fully embed the recovery. For FY24, the key question is how effective this latest policy push will be.
The demand picture has been more balanced in India, where an investment upswing is in place and commodity demand has been accordingly robust. The Indian economy has healthy momentum as the country moves towards a general election, which is expected to be held in the first half of CY24.
For the review and outlook relating to our individual commodities please refer to the relevant segment sections from page 7.
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BHP | Financial results for the year ended 30 June 2023
Costs and inflation
At our half year results in February 2023, we noted that the negative impact of inflation on our cost base was narrowing. Pressures had eased in non-energy raw materials, logistics and manufacturing supply chains, energy risks had become balanced, while labour costs remained the key forward-looking inflationary risk. However, even as the pulse in “prompt” input costs faded, we indicated that the lagged effect of inflation would continue to be felt through the business, and that is broadly how the second half of FY23 played out.
Broad-based inflation has eased noticeably, and additional pressure has come out of industry-specific supply chains. The lagged effect of non-labour inflation (including pricing in contracts that reset periodically based on historical outcomes) is expected to impact the business into FY24. The labour market remains a core inflationary concern. This concern is amplified by the proposed regulatory reform in Australia, which has the potential to add significantly to our labour costs.
Overall, the cost of mining production is now estimated to be higher than it was prior to the pandemic. This implies that price support is also expected to be higher than in previous cycles and low-cost operators stand to capture potentially higher relative margins in certain commodities.
For more detail, please refer to the Prospects blog which can be found on our website.