BHP Group (BHP) Earnings Up Y/Y in First Half of Fiscal 2022

BHP Group Limited BHP reported underlying attributable profit from continuing operations of $9.7 billion in the first half of fiscal 2022 (ended Dec 31, 2021), which marked a year-over-year surge of 57%, reflecting higher prices and strong operational performance. Underlying earnings per share came in at $1.92 compared with $1.22 earned in the prior-year period. Earnings per American Depositary Share (ADS) came in at $3.83 for the reported period. Notably, BHP’s each American Depositary Shares represents two fully-paid ordinary shares.For total operations, the company’s underlying attributable profit improved 77% year over year to $10.7 billion in the reported period. Including an exceptional loss of $1.2 billion that includes the impact of the Samarco dam failure and impairment of US deferred tax assets no longer expected to be recoverable after the Petroleum demerger. BHP Group’s attributable profit was $9.4 billion in the six-month period ended Dec 31, 2021. The figure reflects a 144% growth from the prior year.Revenues for the first half of fiscal 2022 totaled $30.5 billion, up 27% year on year. The Iron ore segment’s revenues increased 12% year over year to $16 billion. Revenues in the Copper segment rose 20% to $8 billion. Meanwhile, revenues at the Coal segment surged 147% year over year to $5.4 billion.Underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations increased 33% year over year to $18.5 billion. This was driven by higher average realized prices for all of its major commodities, near-record iron-ore production volumes at WAIO, higher concentrate sales at Spence, benefits from cost-reduction actions and positive impact of movements in the Australian dollar and Chilean peso against the US dollar. However, higher costs associated with COVID-19, inflated diesel and acid prices and other inflationary pressures offset some of these gains.Underlying EBITDA was up 9% year on year to $11.1 billion for the Iron ore segment. The same was up 14% to $4.3 billion for the Copper segment. The Coal segment’s underlying EBITDA was $2.6 billion against a loss of $0.2 billion in the prior year.

Financial Position

As of Dec 31, 2021, BHP Group had cash and cash equivalents of $12.4 billion, down from $15.2 billion as of Jun 30, 2021. In the half year ended Dec 31, 2021, the company generated $11.5 billion of operating cash flow from continuing operations compared with $9.1 billion recorded in the prior-year comparable period. This improvement can be attributed to higher realized prices across major commodities and strong operational performance. Net debt was $6.1 billion as of Dec 31, 2021, lower than $11.8 billion a year earlier. BHP’s board has announced to pay a record interim dividend of $1.50 per share or a total of $7.6 billion. This translates to a payout ratio of 78%.

Fiscal 2022 Guidance

BHP affirmed its production guidance for iron ore at 249-259 Mt for fiscal 2022 compared with 253.5 Mt produced in fiscal 2021. The company expects copper production to come near the low end of its guided range of 1,590 kt and 1,760 kt. Production guidance of Metallurgical coal is at 38-41 Mt. The guidance for energy coal production remains at 13-15 Mt. Nickel production for fiscal 2022 has been retained between 85 kt and 95 kt.Escondida unit cost is anticipated at $1.20-$1.40 per pound. Queensland Coal unit cost for the fiscal is expected at $85-$94 per ton. NSWEC unit costs are predicted between $62 per ton and $70 per ton. The company stated WAIO unit cost guidance is tracking at the lower end of the guidance of $17.50-$18.50 per ton.

Other Updates

BHP expects to complete the proposed merger of its Petroleum business with Woodside in the June quarter, subject to the satisfaction of conditions precedent, including approval by Woodside shareholders.In January 2022, BHP completed the unification of BHP’s dual-listed corporate structure. Also, the company completed the Cerrejón divestment last month. The divestment of BHP Mitsui Coal (BMC) is expected by the middle of this year. Meanwhile, the review process for New South Wales Energy Coal (NSWEC) is progressing.

Price PerformanceZacks Investment Research

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BHP Group's shares have fallen 3% over the past year compared with the industry’s decline of 2.4%.

Zacks Rank & Other Stocks to Consider

BHP currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Other top-ranked stocks worth considering in the basic materials space include Commercial Metals Company CMC, Albemarle Corporation ALB and AdvanSix Inc. ASIX.Commercial Metals, sporting a Zacks Rank #1, has a projected earnings growth rate of 62% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised upward by 22.7% over the past 60 days.Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 13.1%. CMC has rallied around 61% in a year.Albemarle, carrying a Zacks Rank #1, has an expected earnings growth rate of 56.2% for the current year. ALB's consensus estimate for the current year has been revised 8.9% upward over the past 60 days.Albemarle beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 22.1%. ALB shares have gained around 38% in a year.AdvanSix, carrying a Zacks Rank #2, has an expected earnings growth rate of 7.4% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised upward by 3.2% in the past 60 days.AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 46.9%. ASIX has appreciated around 63% in a year.

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By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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