BHP (ASX:BHP) share price on watch after earnings beat and record dividend

This mining giant had a strong half…

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • BHP delivered strong revenue and earnings growth during the first half
  • The Big Australian has declared a record interim dividend
  • Full year unit cost guidance for WAIO and Escondida remains unchanged

The BHP Group Ltd (ASX: BHP) share price will be one to watch this morning.

This follows the release of the mining giant's eagerly anticipated half year results.

BHP share price on watch after beating expectations

  • Revenue from continuing operations up 27% to US$30,527 million
  • Total revenue up 32% to US$33,784 million
  • Underlying EBITDA up 46% to US$21,381 million
  • Underlying EBITDA from continuing operations up 33% to US$18,463 million
  • Underlying profit from continuing operations up 57% to US$9,715 million
  • Free cash flow from continuing operations of US$8.5 billion
  • Record fully franked interim dividend of US$1.50 per share

What happened during the first half?

BHP was on form during the first half and delivered a 27% increase in revenue to US$30,527 million and a 57% jump in underlying profit to US$9,715 million. Management advised that this reflects higher sales prices across its major commodities, near record production at WAIO and higher concentrate sales at Spence, and favourable exchange rate movements.

This was partially offset by the impacts from planned maintenance across a number of assets, the expected copper grade decline at Escondida, significant wet weather at Queensland Coal, and inflationary pressures. The latter includes higher fuel, energy and consumable prices.

BHP's performance was impacted by COVID-19 once again. In fact, management estimates that it took a US$223 million pre-tax hit from COVID. This comprises US$69 million associated with lower volumes and US$154 million from direct costs.

This couldn't stop BHP from generating significant free cash flow during the first half, which has allowed the board to declare a record fully franked US$1.50 per share interim dividend. At current exchange rates and the latest BHP share price, this dividend alone equates to a 4.4% yield. This also represents total dividends of US$7.6 billion and a 78% payout ratio.

How does this compare to expectations?

This result appears to have come in ahead of the market's expectations.

For example, Goldman Sachs was expecting: "GSe underlying EBITDA from continuing operations (ex Petroleum) US$17.7bn vs. Visible Alpha Consensus Data US$18.4bn; NPAT US$9.1bn vs. VA cons US$9.0bn. Interim dividend US127cps (70% payout ex Petroleum) vs. VA cons US131cps (76% payout)."

Management commentary

BHP's Chief Executive Officer, Mike Henry, was pleased with the half.

He commented: "BHP had a strong first half. We achieved our third consecutive fatality free calendar year. We mitigated the impacts of COVID-19 and significant adverse weather events to turn in a solid operational performance, particularly from our flagship Western Australian Iron Ore business."

"We have announced an interim dividend of US$1.50 per share, bringing total shareholder returns to more than US$22 billion over the past 18 months. Our record interim dividend was supported by our reliable operating performance and continued strong markets for a number of our products."

"We have made strong progress on the execution of our strategy. We unified the BHP corporate structure with strong support from shareholders, we announced and advanced the proposed merger of our petroleum business with Woodside, we progressed our divestments of certain coal assets and we announced the final investment decision for our Jansen Stage 1 potash project. We have also secured further growth options in future facing commodities. BHP is well positioned for the future. We are building on our strong foundations and capital discipline to reshape our business and grow long-term value for shareholders and other stakeholders," he concluded.

Outlook

BHP has warned about industry wide inflationary pressures that are steepening operating cost curves.

Management explained: "Many commodity-linked uncontrollable costs have moved noticeably higher, in some cases to record highs. Labour costs have increased materially due to localised shortages of both general and skilled workers. This partly reflects regulatory constraints on movement across international and state borders."

"We expect cost headwinds due to supply bottlenecks to remain challenging in the 2022 calendar year, with only tentative signs of easing by the end of the period. As the actual recognition of costs tends to lag developments in prompt pricing, these pressures are expected to continue to impact on our cost base in the following calendar year."

Nevertheless, full year unit cost guidance for WAIO and Escondida remains unchanged. Whereas unit cost guidance for Queensland Coal has been increased, reflecting lower expected volumes for the full year as previously announced.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »