BHP Group Limited

ASX code: BHP www.bhp.com
Image of a line graph titled “BHP Group—monthly,” in which years are marked on the x-axis and share prices in dollars are marked on the y-axis. After a dip at beginning of 2016, the line graph mostly shows a rise in prices over the years.
Share price ($)   36.48
12-month high ($)   42.33
12-month low ($)   30.31
Market capitalisation ($mn)   184479.4
Price-to-NTA-per-share ratio   2.8
5-year share price return (% p.a.)   5.2
Dividend reinvestment plan   Yes
Sector: Materials Company Sector
Price/earnings ratio (times) 14.4 13.2
Dividend yield (%) 5.9 4.4

BHP Group was formed in 2001 from the merger of BHP, which was founded as Broken Hill Proprietary in 1885, and Billiton, which dates back to 1851. With its headquarters in Melbourne, it is today one of the world's largest diversified resources companies, with a powerful portfolio of assets incorporating iron ore, copper, coal, nickel, potash, and oil and gas. It has operations in many countries.

Latest business results (June 2019, full year)

Higher iron ore prices lay behind a modest rise in profits for BHP. Profits for the company's iron ore business rose by 25 per cent, thanks to an 18 per cent increase in average prices for the company during the year. It also benefited from an increase in sales volumes, thanks especially to record production at its Jimblebar mine in Western Australia. Iron ore was responsible for less than 40 per cent of company revenues, but nearly 50 per cent of profit. By contrast, copper profits fell by 30 per cent, as prices fell and sales volumes declined. Coal profits also fell, with lower average thermal coal prices only partially offset by a rise in metallurgical coal prices. The petroleum business benefited from higher prices, and profits rose. Note that BHP reports its results in US dollars. The Australian dollar figures in this book — converted at prevailing exchange rates — are for guidance only.

Outlook

BHP has been working over some years to lower its cost base, and this should protect it to a degree in the event of weakening Chinese demand or a global economic slowdown. In particular, it claims that its Western Australian iron ore business now has the cheapest operating costs among all its rivals. It expects that its capital spending in both the June 2020 and June 2021 years will be around US$8 billion per year, up from US$7.6 billion in June 2019. Multi-billion-dollar projects under way include the Spence copper mine expansion project in Chile, the Mad Dog petroleum venture in the Gulf of Mexico, the South Flank iron ore project in Western Australia and the Jansen potash infrastructure project in Canada. In August 2019 it approved an investment of US$283 million for the development of the Ruby oil and gas project in Trinidad and Tobago. It is also carrying out feasibility studies on a major scheme to introduce autonomous (driverless) trucks to some of its Australian coal and iron ore sites. It is considering a sale of its thermal coal assets.

Year to 30 June 2018 2019
Revenues ($mn) 56 748.7 61 511.1
  Iron ore (%) 34 39
  Copper (%) 30 24
  Coal (%) 20 21
  Petroleum (%) 12 13
EBIT ($mn) 22 839.5 23 694.4
EBIT margin (%) 40.2 38.5
Profit before tax ($mn) 21 201.3 22 216.7
Profit after tax ($mn) 12 660.5 13 147.2
Earnings per share (c) 237.85 253.81
Cash flow per share (c) 393.28 417.36
Dividend (c) 159.13 215.11
  Percentage franked 100 100
Net tangible assets per share ($) 13.92 13.15
Interest cover (times) 13.9 16.0
Return on equity (%) 16.9 18.4
Debt-to-equity ratio (%) 18.0 17.8
Current ratio 2.5 1.9