The BHP Group Ltd (ASX: BHP) share price will be one to watch on Tuesday.
This follows the release of the mining giant's full year results this morning.
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BHP share price on watch following record profits
- Underlying EBITDA from continuing operations up 16% to a record US$40,634 million
- Underlying attributable profit up 26% to US$21,319 million
- Net operating cash flow up 13% to US$29,285 million and record free cash flow of US$24,300 million.
- Earnings per share up 25% to 421.2 US cents
- Final dividend of US$1.75 per share
What happened in FY 2022?
For the 12 eventful months ended 30 June, BHP delivered a 16% increase in underlying EBITDA from continuing operations to US$40,634 million. These results exclude its demerged petroleum assets.
This was driven almost entirely by BHP's coal operations, which reported underlying EBITDA of US$9,504 million. This was up from just US$288 million a year earlier thanks to sky high prices.
Also performing positively were BHP's copper operations, which delivered a modest increase in underlying EBITDA to US$8,565 million.
Combined, this offset an almost 18% decline in iron ore EBITDA to US$21,707 million due to softer prices for the steel making ingredient.
This ultimately led to BHP reporting record free cash flow of US$24,300 million, which allowed the mining giant to reward its shareholders handsomely with a big dividend.
The BHP board has decided to pay a fully franked final dividend of US$1.75 per share or US$8.9 billion. This includes an additional amount of US$0.60 per share (equivalent to US$3.0 billion) above the 50% minimum payout policy.
Total dividends for FY 2022 came to US$3.25 per share, the equivalent to a 77% payout ratio.
How does this compare to expectations?
Today's result was a bit of a mixed bag, which makes it difficult to predict what will happen with the BHP share price today.
For example, analysts at Morgans were forecasting EBITDA of US$40,776 million, whereas Goldman Sachs was forecasting EBITDA of US$39,900 million. This means BHP has fallen a touch short of Morgans' estimate but narrowly beaten Goldman's estimate.
Things were better for its dividend, which came in ahead of both brokers' estimates. BHP's US$3.25 per share dividend was higher than Morgans' US$2.84 per share estimate and Goldman's US$2.90 per share estimate.
Management commentary
BHP's chief executive officer, Mike Henry, was rightfully pleased with the company's performance. He said:
BHP delivered strong operational performance and disciplined cost control to realise record underlying earnings of US$40.6 billion and record free cash flow of US$24.3 billion. We have reduced debt and announced a final dividend of US$1.75 per share, bringing total cash dividends announced for the full year to a record US$3.25 per share.
BHP's total economic contribution including payments to employees, suppliers, communities, governments and shareholders totalled US$78.1 billion. This includes US$17.3 billion paid to governments through taxes and royalties and US$19.6 billion paid to shareholders after the merger of our Petroleum business with Woodside.
These strong results were due to safe and reliable operations, project delivery and capital discipline, which allowed us to capture the value of strong commodity prices. BHP remains the lowest cost iron ore producer globally and we delivered record annual sales from Western Australia Iron Ore.
Outlook
Henry appears cautiously optimistic on the future. He explained:
BHP enters the 2023 financial year in great shape strategically, operationally and financially, and well prepared to manage an uncertain near-term environment. During the year, we unified BHP's corporate structure, merged our Petroleum business with Woodside, completed the sales of our interests in the BMC and Cerrejón energy coal assets, and decided to retain and operate our New South Wales Energy Coal business until mine closure in 2030. We have improved our platform for growth through the Jansen potash project, iron ore and copper.
We expect China to emerge as a source of stability for commodity demand in the year ahead, with policy support progressively taking hold. At the same time, we expect to see a slowdown in advanced economies as monetary policy tightens, as well as ongoing geopolitical uncertainty and inflationary pressures. The direct and indirect impacts of Europe's energy crisis are a particular point of concern. Tight labour markets will remain a challenge for global and local supply chains. Waves of COVID-19 infection continue to occur in the communities where we operate, and we are planning accordingly.
Finally, BHP's FY 2023 production guidance remains unchanged since its fourth quarter update.
