BHP Group (LON:BHP) today announced its results for the half year ended 31 December 2019.
Safety and sustainability: Safety is our top priority and social value underpins everything we do
· There were no fatalities at our operated sites over the last 12 months.
· Social value is an essential precondition to shareholder value – new agreements for Escondida and Spence to transition towards 100% renewable energy sources will reduce costs and CO2 emissions.
Maximise cash flow: Stable operating performance, solid free cash flow generation and high margin
· Attributable profit of US$4.9 billion and Underlying attributable profit(i) of US$5.2 billion up 39% from the prior period.
· Profit from operations of US$8.3 billion and Underlying EBITDA(i) of US$12.1 billion at a margin(i) of 56%, with production and unit costs at all our major assets on track to achieve full year guidance.
· Net operating cash flow of US$7.4 billion and free cash flow(i) of US$3.7 billion reflects higher iron ore prices and a solid operating performance.
Capital discipline: Value accretive investments and net debt at the lower end of the target range
· Capital and exploration expenditure(i) of US$3.8 billion. Guidance for the 2020 and 2021 financial years remains unchanged, with two major projects expected to achieve first production within the next 12 months. Investment in the Ruby oil and gas project (Trinidad and Tobago) was approved in August 2019.
· We continue to advance our exploration programs in petroleum and copper, with the third phase of the drilling program at Oak Dam in South Australia in progress and expected to be completed in the June 2020 quarter.
· Our balance sheet is strong. The inclusion of derivatives (US$0.4 billion) and the application of IFRS 16 Leases (US$1.9 billion) has increased net debt(i)(1) by US$2.3 billion to US$12.8 billion at 31 December 2019, compared to US$9.2 billion reported at 30 June 2019.
Value and returns: Second highest ordinary dividend of 65 US cps and ROCE up to 19%
· The Board has determined to pay an interim dividend of 65 US cents per share or US$3.3 billion, which includes an additional amount of 14 US cents per share (equivalent to US$0.7 billion) above the 50% minimum payout policy.
· Underlying return on capital employed(i) strong at 19%.
| Half year ended 31 December | 2019US$M | 2018US$M | Change% |
| Total operations | |||
| Attributable profit | 4,868 | 3,764 | 29% |
| Basic earnings per share (cents) | 96.3 | 71.0 | 36% |
| Interim dividend per share (cents) | 65.0 | 55.0 | 18% |
| Net operating cash flow | 7,442 | 7,274 | 2% |
| Capital and exploration expenditure | 3,795 | 3,501 | 8% |
| Net debt(1) | 12,843 | 10,644 | 21% |
| Underlying attributable profit | 5,186 | 3,732 | 39% |
| Underlying basic earnings per share (cents)(i) | 102.6 | 70.4 | 46% |
| Continuing operations | |||
| Profit from operations | 8,314 | 7,333 | 13% |
| Underlying EBITDA | 12,084 | 10,539 | 15% |
| Underlying attributable profit(i) | 5,186 | 4,032 | 29% |
| Net operating cash flow | 7,442 | 6,709 | 11% |
(1) The definition of net debt has changed to include the fair value of derivatives used to hedge foreign exchange and interest rate risk related to cash and borrowings. Prior period comparatives have been restated to reflect the change in net debt calculation. Net debt was restated from US$9.2 billion to US$9.4 billion as at 30 June 2019.
IFRS 16 became effective from 1 July 2019. As at 31 December 2019, the impact from the application of IFRS 16 Leases was US$1.9 billion. Further detail is included in Note 2 to the Financial Statements.
BHP Group Chief Executive Officer, Mike Henry:
“We delivered a strong set of half-year results, grounded in solid operational performance. Underlying EBITDA was up 15 per cent, to US$12 billion, and return on capital employed increased, to 19 per cent. With solid cash flow, the Board announced an interim dividend of 65 US cents per share, our second highest on record.
BHP is in good shape. We have passionate and committed people hungry to perform. We have brought together high quality assets in a simple portfolio that allows us to create value at scale. Our balance sheet is strong and we have embedded a Capital Allocation Framework which drives discipline and better decisions.
From these strong foundations, we will build on our momentum to deliver exceptional performance. I intend for BHP to be unquestionably the industry’s best operator – safer, lower cost, more reliable and more productive – with our portfolio and capabilities fit for the future. We will be open to new ideas, more connected to those around us and more commercial in our thought and actions.
Despite near term uncertainty – due to the coronavirus outbreak, trade policy and geopolitics – we remain convinced about the positive underlying fundamentals of our commodities. We see enormous potential to reliably deliver exceptional financial and operational performance, and to grow value and returns.”
