BHP Faces Dividend Cut and Legacy Risks Amid Strong Operational Gains
BHP Group Limited reported a remarkable 376% increase in half-year profit despite an 8% revenue dip, driven by operational excellence and strategic investments in copper and potash. The company declared a lower interim dividend, signaling a balanced approach to shareholder returns and growth.
- Profit after tax soared 376% to US$4.4 billion
- Revenue declined 8% to US$25.2 billion due to lower iron ore prices
- Interim dividend cut to 50 US cents per share from 72 cents
- Copper production up 10%, contributing 39% to underlying EBITDA
- US$5.2 billion invested in capital and exploration, including US$3.2 billion in potash and copper
Robust Profit Growth Amid Revenue Pressure
BHP Group Limited delivered a standout financial performance for the half year ended 31 December 2024, with profit after taxation attributable to shareholders surging 376% to US$4.4 billion. This impressive leap came despite an 8% decline in revenue to US$25.2 billion, primarily driven by lower realised prices for iron ore and steelmaking coal. The company’s ability to maintain strong margins and control costs underpinned this resilience.
Operational Excellence Drives Copper Growth
Copper emerged as a key growth driver, with production increasing 10% and its contribution to underlying EBITDA rising to 39%, up from 25% in the prior corresponding period. Escondida, BHP’s flagship copper asset, set a 10-year production record, benefiting from higher ore grades and improved recoveries. The company’s Western Australia Iron Ore (WAIO) operations maintained their status as the lowest-cost major iron ore producer globally, reinforcing BHP’s competitive position despite challenging market conditions.
Strategic Investments and Growth Initiatives
BHP continued to invest heavily in future-facing commodities, allocating US$5.2 billion to capital and exploration expenditure, a 10% increase year-on-year. Notably, US$3.2 billion was directed towards potash and copper projects, including the successful formation of Vicuña Corp, a US$2 billion joint venture with Lundin Mining to develop the Filo del Sol and Josemaria copper projects in Argentina and Chile. These investments position BHP to capitalize on long-term demand trends driven by urbanization, energy transition, and digital infrastructure growth.
Dividend Policy Reflects Balanced Capital Allocation
Reflecting the company’s strong cash flow and operational performance, BHP declared an interim dividend of 50 US cents per share, fully franked, down from 72 cents in the prior period. This 50% payout ratio aligns with BHP’s capital allocation framework, balancing shareholder returns with reinvestment in growth projects. Since January 2021, BHP has returned approximately US$50 billion in cash to shareholders, underscoring its commitment to delivering value.
Navigating Legacy and Market Risks
BHP made significant progress in resolving legacy issues, including the Samarco dam failure settlement agreement ratified by Brazil’s Supreme Court in November 2024. The agreement clarifies future cash flow obligations and environmental programs, reducing regulatory uncertainty. Market-wise, BHP remains cautious amid global economic and trade uncertainties, with early signs of recovery in China and resilient demand in the US and India. Inflationary pressures have eased but remain a factor in cost management strategies.
Leadership Transition and Future Outlook
Looking ahead, Ross McEwan will succeed Ken Mackenzie as Chair on 31 March 2025, marking a new chapter in BHP’s governance. CEO Mike Henry emphasized the company’s operational resilience and strategic positioning to meet the growing demand for metals and minerals essential to the energy transition and digital economy. BHP’s disciplined capital management and focus on productivity improvements are expected to sustain its industry-leading margins and shareholder returns.
Bottom Line?
BHP’s half-year results showcase operational strength and strategic foresight, but market volatility and legacy costs warrant close investor attention.
Questions in the middle?
- How will BHP balance dividend payouts with capital-intensive growth projects in the medium term?
- What impact will the Samarco settlement have on BHP’s cash flow and risk profile going forward?
- Can BHP sustain its low-cost leadership in iron ore amid evolving market and regulatory pressures?
