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BHP Group (ASX:BHP, NYSE:BHP) has announced a notable 2% increase in its annual underlying profit, demonstrating a robust performance across its iron ore and copper divisions. For the fiscal year ending June 30, BHP reported an underlying attributable profit of $13.66 billion, surpassing the Visible Alpha consensus estimate of $13.26 billion and exceeding last year's figure of $13.42 billion.
Strategic Focus on Copper Amid Economic Shifts
The world's largest listed mining company is intensifying its focus on copper, a key commodity in the global energy transition. This shift comes as the demand outlook for iron ore, BHP's primary revenue source, faces challenges due to slowing economic growth in China. BHP’s strategic pivot is underscored by its decision to abandon a substantial $49 billion bid to acquire Anglo American (JO:AGLJ) earlier this year. Instead, the company is exploring alternative growth avenues.
Expansion Plans and Capital Allocation
BHP has outlined ambitious plans for its copper assets, particularly in Argentina and South Australia. The miner recently announced a joint venture with Canada's Lundin Mining (OTC:LUNMF) to acquire Filo Corp for C$4.5 billion ($3.25 billion). This move highlights BHP's commitment to expanding its copper portfolio, crucial for future growth.
The company has also set a clear path for increased capital and exploration spending. For the 2025 financial year, BHP plans to raise its capital expenditure to approximately $10 billion, with an average annual spending of around $11 billion in the medium term, up from $9.3 billion last year. This investment will support its strategic focus on copper and other growth opportunities.
Financial Health and Future Outlook
BHP’s financial health remains strong, with a net debt of $9.1 billion as of June 30, positioned within its target range of $5 billion to $15 billion. The company’s approach to maintaining flexibility in its balance sheet reflects its readiness to seize value-accretive opportunities.
Despite the increase in capital expenditure, BHP’s dividend payout for the year was $0.74 per share, lower than the previous year's $0.80 per share. The full-year dividend totaled $1.46 per share, marking its lowest annual dividend since the 2020 financial year but still ranking among the top four dividends in its history.
Looking Ahead
BHP’s results underscore its strong cash flow and solid balance sheet, paving the way for future growth in the copper sector. As global markets evolve and energy transition drives demand for copper, BHP’s strategic investments and expansion efforts position it well for continued success.
