• Underlying EBITDA: $12.4 billion with a margin of 51%.
• Underlying Attributable Profit: $5.1 billion.
• Return on Capital: 20%.
• Interim Dividend: USD0.50 per share, payout ratio of 50%.
• Net Operating Cash Flow: Over $8 billion for the half-year.
• Net Debt: $11.8 billion.
• Iron Ore EBITDA Margin: More than 60% for Western Australia iron ore.
• Copper EBITDA Margin: 54% with a 22% increase in volumes at Escondida.
• C1 Cost for Iron Ore: USD17.50 per ton for Western Australia iron ore.
• Capital and Exploration Expenditure: $5.2 billion for the half-year.

• Warning! GuruFocus has detected 6 Warning Signs with ASX:CGF.

Release Date: February 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BHP Group Ltd (NYSE:BHP) delivered a strong operational and financial performance for the first half of the 2025 financial year, with a focus on operational excellence and capital discipline.
• The company achieved an underlying EBITDA of $12.4 billion with a healthy margin of 51%, maintaining industry-leading performance.
• Copper production grew by 10% this half, contributing to a 24% growth over a three-year period, with significant advancements in copper and potash projects.
• BHP Group Ltd (NYSE:BHP) maintained strong cost control, achieving a 4% reduction in unit costs at major assets despite inflationary pressures.
• The company declared an interim dividend of USD0.50 per share, reflecting a payout ratio of 50%, supported by strong cash generation and a resilient balance sheet.

Negative Points

• BHP Group Ltd (NYSE:BHP) experienced an 11% decline in EBITDA due to external factors, including a significant drop in iron ore and steelmaking coal prices.
• Labor costs have been impacted by inflation, with lingering tightness in the labor market expected to affect the cost base for the rest of the financial year.
• The company faced unforeseen external challenges, including a weather-related power outage affecting Olympic Dam's operations.
• Realized prices for Western Australia Iron Ore (WAIO) were weaker than expected, attributed to quality variability and timing issues.
• The net debt is expected to increase towards the top end of the target range by the end of the financial year, raising concerns about capital allocation amidst growth opportunities.

Q & A Highlights

Q: Can you provide details on the capital intensity for the copper growth projects, particularly in South Australia? A: Mike Henry, CEO, stated that while specific numbers for capital intensity are not yet available, BHP is pleased with the progress in developing attractive growth options in both Australia and South America. The projects will compete within BHP's capital allocation framework, and those offering the best returns will be prioritized.

Q: How is BHP managing net debt and capital allocation in light of recent external challenges like the tropical cyclone at Port Hedland? A: Vandita Pant, CFO, explained that BHP's capital allocation framework is designed to handle volatility, ensuring balance sheet resilience. Despite recent challenges, BHP maintains its guidance and is confident in managing impacts. The balance sheet remains conservative, with a net debt to EBITDA ratio of 0.4 times, allowing for growth and shareholder returns.

Q: With significant growth opportunities ahead, how does BHP plan to manage its net debt range and dividend policy? A: Vandita Pant emphasized that BHP is comfortable with its net debt range and does not see it as a constraint. The company prioritizes projects that compete well within its capital allocation framework. BHP is open to adjusting its net debt range for attractive opportunities while maintaining shareholder returns.

Q: How is BHP addressing potential supply-side reforms in China and their impact on iron ore pricing? A: Mike Henry noted that BHP has improved the average quality of its iron ore products and remains the lowest-cost producer globally. The company is well-positioned to handle market disruptions due to its strong cost position and focus on operational excellence.

Q: What is BHP's stance on potential large-scale M&A, specifically regarding Anglo American? A: Mike Henry stated that while BHP occasionally evaluates opportunities, the focus remains on advancing its attractive organic growth projects in copper and potash. The company is committed to increasing shareholder value and is currently concentrating on its own growth opportunities.

Q: Can you provide more details on the development plans for the Vicuna joint venture in Argentina? A: Mike Henry mentioned that more information will be released in the coming months, including resource updates and development milestones. The long-term development will likely require desalination, and BHP is exploring various options for this.

Q: How does BHP plan to manage its decarbonization efforts and related capital expenditures? A: Mike Henry explained that decarbonization capital competes for allocation within BHP, and the company seeks positive returns from these investments. BHP is on track to meet its 2030 emissions reduction targets, and future capital deployment will depend on equipment manufacturers' progress.

Q: What are BHP's plans for shareholder returns given the current dividend payout ratio? A: Vandita Pant highlighted that BHP focuses on operational and capital productivity to enhance shareholder returns. The company is committed to maintaining a strong balance sheet while exploring options for capital recycling and other value-driven initiatives.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.