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BHP Group Ltd (ASX: BHP) saw its share price underperform compared to the S&P/ASX 200 Index (ASX:XJO) during the recently concluded financial year. BHP shares ended FY 2023 at AU$44.99, but by the last trading day of FY 2024, they had dropped to AU$42.68, marking a 5.1% decline over 12 months. This contrasts sharply with the 7.8% gains posted by the ASX 200 during the same period.
Dividend Impact on Returns
Despite the decline in share price, BHP delivered AU$2.35 in fully franked dividends over the year. Including these dividends, the accumulated gain for BHP shares was a marginal 0.1%. In comparison, the S&P/ASX 200 Gross Total Return Index (ASX:XJT), which factors in reinvested dividends, saw a robust 12.1% increase over the same period.
Factors Influencing BHP's Performance
First Half Surge
The first half of FY 2024 saw promising signs for BHP. On December 20, shares reached AU$50.72, significantly above current levels. Iron ore, BHP’s primary revenue generator, began FY 2023 at around US$110 per tonne and surged to over US$144 per tonne by January 3. This price spike contributed to a substantial rise in BHP’s share price during the first half of the year.
Copper, BHP’s second-largest revenue source, also showed strength. Starting FY 2024 at US$8,315 per tonne, copper prices nearly hit record highs at US$10,890 in late May before settling at US$9,600 per tonne.
Revenue and Profit Highlights
For the six months ending December 31, BHP reported a 6% year-on-year revenue increase to US$27.2 billion. However, underlying profit remained flat at US$6.6 billion, not accounting for two significant exceptional items: a US$2.5 billion impairment of Western Australia Nickel and a US$3.2 billion charge related to the Samarco tailings dam failure in Brazil.
Second Half Challenges
Despite a strong first half, BHP faced headwinds in the second half of FY 2024. Iron ore prices fell to US$100 per tonne by early April, driven by continued weakness in China's property and industrial sectors, before rebounding slightly to US$106 per tonne. Copper prices, while more resilient, also experienced a decline from their peak.
Anglo American Takeover Saga
A major event influencing BHP’s share performance was its failed AU$74 billion takeover bid for global miner Anglo American (LSE:AAL). Success in this acquisition would have positioned BHP as the world's largest copper producer. However, the deal’s collapse, attributed to the financial and logistical complexities, left BHP without Anglo’s valuable assets, including its Queensland coal operations.
Interestingly, the failed takeover may have had mixed blessings. Over the weekend, an underground fire forced the closure of Anglo's Grosvenor coal mine in Queensland, potentially sparing BHP from the operational and financial burdens associated with this incident.
Outlook for FY 2025
On the first trading day of FY 2025, BHP shares saw a slight recovery, ending the day at AU$43.30, up 1.45%. The year ahead poses both opportunities and challenges as BHP navigates fluctuating commodity prices and strategic adjustments following the Anglo American takeover attempt.
In summary, BHP Group's share price underperformance in FY 2024, despite significant dividend payouts and initial strong performance, reflects the complex interplay of commodity market volatility, strategic decisions, and external economic factors. The upcoming financial year will be crucial for the mining giant as it seeks to regain momentum and capitalize on its core strengths.
