BHP Group BHP reported a record underlying attributable profit of $23.8 billion for fiscal 2022 (ended Jun 30, 2022), up 39% from the last fiscal year’s tally, reflecting a strong production performance and savings from its cost-control efforts as well as higher coal and copper prices.
Earnings per American Depositary Share (ADS) were $9.41 in fiscal 2022, up from $6.75 in fiscal 2021 and also higher than the Zacks Consensus Estimate of $7.53. Underlying earnings per share were $4.71 compared with $3.38 in the prior fiscal year. BHP’s each American Depositary Share represents two fully-paid ordinary shares.
BHP Group’s attributable profit amounted to $30.9 billion in fiscal 2022, including an exceptional gain of $7.1 billion. The figure of $7.1 billion included a net gain of 8.2 billion related to the merger of BHP’s Petroleum business with Woodside and a gain on disposal of interest in BHP Mitsui Coal Pty Ltd (BMC) of $840 million. This was partially offset by the current-year impact of the Samarco dam failure of $1.1 billion, corporate structure unification costs of $428 million and an impairment of the US deferred tax assets — no longer expected to be recovered — after the Petroleum demerger of $423 million. Attributable profit in fiscal 2021 was $11.3 billion, including an exceptional loss of $5.8 billion.
Revenues & Margin Performance
Revenues for fiscal 2022 totaled $65 billion, which missed the Zacks Consensus Estimate of $65.5 billion. The top line, however, indicated an improvement of 14% from the prior fiscal year’s revenues. The Iron ore segment’s dropped 10% year over year to $30.8 billion, mainly dragged down by lower iron ore prices. Revenues in the Copper segment rose 7% to $16.8 billion, reflecting higher average realized prices. The Coal segment’s revenues surged 202% to $15 billion, aided by a surge in coal prices.
Profit from operations in fiscal 2022 improved 34% year over year to $34 billion owing to higher coal and copper prices, strong underlying operational performance, including record sales at WAIO and near-record concentrator throughput at Escondida, savings from BHP’s cost-reduction initiatives and favorable exchange rate movements.
However, supply constraints, lower copper grades at Escondida, higher diesel, electricity and consumable prices, and planned maintenance mitigated these adverse impacts. Underlying earnings before interest, taxes, depreciation and amortization (EBITDA) were a record $40.6 billion for fiscal 2022, up 16% year over year, aided by a strong operational performance and its focus on cost control.
Balance Sheet & Cash Flow
Net operating cash flow for fiscal 2022 was $29.3 billion compared with $25.9 billion in fiscal 2021. BHP Group reported a record free cash flow of $24.3 billion, courtesy of higher copper and coal prices as well as disciplined cost control.
BHP’s cash and cash equivalents as of Jun 30, 2022, amounted to $17.2 billion. Capital and exploration expenditure totaled $6.1 billion, up 5% from the prior fiscal year’s level. BHP provided capital and exploration guidance of $7.6 billion for fiscal 2023 and $9 billion for the next fiscal year. As of the end of fiscal 2022, net debt was $0.3 billion, lower than $4.1 billion reported as of fiscal 2021. BHP Group’s board announced a record final dividend of $1.75 per share, taking total cash dividends announced for the full fiscal to a record $3.25.
Per management, the Jansen Stage 1 project is progressing per plan and working toward achieving its first production in 2026, a year ahead of schedule. It is also exploring options to speed up Jansen Stage 2.
The unification of BHP’s dual listed corporate structure was completed in January 2022. BHP Group’s Petroleum business was merged with Woodside Energy on Jun 1, 2022. Over the course of fiscal 2022, BHP completed the sales of interests in the BMC and Cerrejon energy coal assets. Management decided to retain and operate the New South Wales Energy Coal business until mine closure in 2030.
Fiscal 2023 Production & Cost Guidance
BHP’s iron ore production guidance for fiscal 2023 is 249-260 Mt. The midpoint of the range indicates growth of 1% from the fiscal 2022 actuals. WAIO production is expected between 246 Mt and 256 Mt (278 Mt and 290 Mt on a 100% basis), indicating the tie-in of the debottlenecking port project and the continued ramp-up of South Flank.
BHP Group expects copper production within 1,635-1,825 kt, suggesting 0% year-over-year growth at the midpoint. Production guidance for Metallurgical coal is 29-32 Mt, while for energy coal is 13-15 Mt. Nickel production for fiscal 2023 is expected between 80 kt and 90 kt, higher 76.8 kt reported in fiscal 2022.
Unit cost guidance for Western Australia Iron Ore is $18-$19 per ton. Escondida unit cost is estimated at $1.25-$1.45 per pound. BMA unit cost is expected between $90 and $100 per ton. Unit cost is expected to be higher in fiscal 2023, indicating inflation trends and higher research costs. These factors will be somewhat negated by lower exchange rates, gains from productivity improvements and cost-reduction initiatives.
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BHP Group’s shares have fallen 21.6% over the past year compared with the industry’s decline of 19.3%.
Zacks Rank & Key Picks
BHP Group currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the basic materials space are ATI Inc. ATI, Albemarle Corporation ALB and Ashland Global Holdings Inc. ASH.
ATI, currently sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 1,069.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 12.5% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
ATI’s earnings beat the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter earnings surprise of 128.9%, on average. The stock has surged 69% in a year.
Albemarle has a projected earnings growth rate of 247% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 7.8% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. ALB has gained roughly 31% in a year and has a Zacks Rank of 1 at present.
Ashland, currently carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 50.9% for fiscal 2022. The Zacks Consensus Estimate for ASH’s fiscal 2022 earnings has been revised 10.5% upward in the past 60 days.
ASH’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same once. Ashland has a trailing four-quarter earnings surprise of 1.82%, on average. Its shares have been up around 26% in a year.
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