The BHP Group Ltd (ASX: BHP) share price is under the spotlight this week as the ASX's largest business reveals its earnings report to investors.
It's due to hand in its result on 16 August 2022 for the year ending 30 June 2022.
Investors have already had an insight into the operational performance of the business with BHP's operational review. It told shareholders about the company's production, production related costs, and updates on projects.
The production update for the period ending 30 June 2022 allowed BHP to tell investors about its quarterly production and annual production.
In FY22, BHP produced 1,573.5 kt of copper, which was down 4% year over year.
Annual production of iron ore was flat year over year at 253.2 mt.
Metallurgical coal production was down 9% for the year to 29.1 mt.
FY22 energy coal production of 13.7 mt was down 4% compared to FY21.
Nickel production for FY22 was 76.8 kt, down 14% year over year.
Image source: Getty Images
What is expected of BHP in FY22?
According to Commsec, the consensus expectation is that BHP is going to generate US$16.4 billion of net profit after tax (NPAT) in FY22.
The estimate on CMC Markets suggests that BHP could generate $5.89 of earnings per share (EPS) while paying an annual dividend of $4.44 per share. At the current BHP share price, that puts the company's valuation at under seven times FY22's estimated earnings. The projected grossed-up dividend yield is 16.3%.
There is a whole range of estimates for how much profit the business may make and how large the dividend could be. But it's clear BHP is expected to generate many billions of dollars of net profit and pay a large dividend as well.
Cash flow could be another one of the most important metrics to look at. Certainly, each figure could affect the BHP share price.
Other areas to look at in the FY22 report
As always, it's important to look at the balance sheet. Of course, the profit generated by a business is important. But, the health of the business should also be measured by its balance sheet, including how much debt a business has.
At 31 December 2021, BHP had net debt of US$6.1 billion, which was a reduction from US$11.8 billion in the prior corresponding period. Net debt is the total debt minus the cash the company holds. So, BHP had US$6 billion more debt than cash. If it had more cash than debt, it would be called 'net cash'.
Projects are another area of potential importance. In particular, I am interested to see what BHP has to say about its potash Jansen project. Potash is a greener form of fertiliser with Jansen a project that BHP is working on in Canada. It's trying to accelerate its plans to take advantage of higher fertiliser prices.
I'm also curious to see if BHP says much about its bid for copper miner OZ Minerals Limited (ASX: OZL). Last week, BHP launched a takeover bid for the smaller miner which OZ Minerals rejected.
Will BHP explain in detail why it's interested in the company? Also, will BHP say it's not going to bid again because the OZ Minerals board wants too much? We'll see.
BHP share price snapshot
Over the last month, BHP shares have risen by around 4%.
