Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BHP Group Ltd (BHP, Financial) achieved record production at Western Australian Iron Ore, Spence, and Carrapateena.
- Copper production grew by 9% for the second consecutive year, making BHP the fastest-growing copper producer.
- The company declared a final dividend of USD0.74 per share, totaling $7.4 billion in dividends for the year.
- BHP's Jansen potash project is ahead of schedule, with first production forecast for late 2026.
- The company made significant progress on its social value goals, including a 32% reduction in greenhouse gas emissions from the 2020 baseline.
Negative Points
- A fatality occurred at the Saraji mine, highlighting ongoing safety challenges.
- BHP temporarily suspended its Western Australian nickel operations due to tough market conditions.
- The company faced a $2.7 billion non-cash impairment of its Western Australia nickel business.
- BHP incurred a $3.8 billion charge for the Samarco dam failure.
- Global inflation, particularly higher labor costs, impacted the company's expenses.
Q & A Highlights
Q: Can you provide more details on the decision to temporarily suspend the Western Australian nickel operations?
A: (Mike Henry, CEO) The decision to suspend our Western Australian nickel operations was driven by very tough market conditions. Significant global oversupply and higher costs meant our nickel business was losing money. We anticipate this oversupply to continue for some time, so we chose to suspend operations from October this year. This suspension preserves the option to restart if and when market conditions improve.
Q: What are the key drivers behind the strong financial performance this year?
A: (Vandita Pant, CFO) Our strong financial performance was enabled by disciplined execution of our strategy. Underlying EBITDA increased by 4% with a healthy margin of 54%. We generated more than $20 billion of net operating cash flow, which allowed us to invest $9.3 billion in our business, reduce net debt to $9.1 billion, and deliver attractive returns to shareholders. Our focus on operational excellence and cost discipline helped mitigate the effects of inflation.
Q: How is BHP progressing with its Jansen potash project?
A: (Mike Henry, CEO) Stage one of our Jansen potash project is ahead of its initial schedule, with first production forecast for late 2026. Stage two is also in execution. The project is strategically significant for BHP, expected to create value for many decades over several potential stages. We have already made significant progress on construction and are readying it for the start of operations.
Q: What are the future growth prospects for BHP's copper operations?
A: (Mike Henry, CEO) BHP has the largest copper resource of any company in the world. We have a pathway towards well over 2 million tons per year of copper production. Our copper operations in South Australia and Chile are key parts of this growth. We are also excited about our recent agreement to form a joint venture with Lundin Mining for a future copper growth opportunity in Argentina.
Q: Can you elaborate on BHP's approach to capital allocation?
A: (Vandita Pant, CFO) Our capital allocation framework (CAF) ensures all uses of capital compete to maximize value and returns for shareholders. We consistently deliver a high baseline of cash flows, having generated net operating cash flow above $15 billion for all but one of the past 15 years. Looking forward, we expect to increase our capital and exploration expenditure to unlock productivity, decarbonize our assets, and deliver growth in future-facing commodities.
Q: How is BHP addressing safety and social value goals?
A: (Mike Henry, CEO) Safety remains our absolute priority. We improved the frequency of high potential injuries by 36% during the year. We also made good progress on our social value goals, cutting operational greenhouse gas emissions by 32% from our 2020 baseline. We increased female employee participation to over 37% and our spend with small, local, and indigenous businesses to $3.3 billion.
Q: What is the outlook for global economic growth and its impact on BHP?
A: (Mike Henry, CEO) We expect global economic growth to be slightly above 3% for the 2024 and 2025 calendar years. Developed economies will face gradual relief from higher interest rates, while India is set to continue as the world's fastest-growing major economy. China is experiencing an uneven recovery, with steady growth in some sectors but pressure in the property market. These dynamics will support continued strong demand for our products, although we expect some price volatility.
Q: How is BHP positioned to benefit from the demand outlook for copper and potash?
A: (Mike Henry, CEO) The demand outlooks for copper and potash are particularly durable. Global demand for copper is projected to grow by around 70% between 2021 and 2050, driven by urbanization, industrialization, and the energy transition. Similarly, we expect global demand for potash to grow by around 70% by 2050, driven by rising population, improving living standards, and the need to improve land productivity. BHP is well-positioned to benefit from these trends due to our world-leading resource positions and growth options.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
