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BHP Group (ASX:BHP), the world’s largest listed mining company, announced a 2% increase in its annual underlying profit, exceeding market expectations. The company attributed this positive performance to strong results from its iron ore and copper divisions. BHP's underlying attributable profit for the year ended June 30 reached AU$13.66 billion, surpassing the AU$13.26 billion consensus forecast by Visible Alpha and last year's AU$13.42 billion profit.
Strategic Expansion in Copper
BHP is strategically shifting its focus towards expanding its copper operations, which are increasingly critical for the global energy transition. The company has been looking to capitalize on the growing demand for copper, a key component in renewable energy technologies and electric vehicles. This strategic pivot comes as BHP faces a more challenging outlook for its primary revenue stream, iron ore, due to slowing economic growth in China, its largest market.
Earlier this year, BHP withdrew from an AU$49 billion bid to acquire Anglo American, a move that would have significantly expanded its copper business. Despite this, BHP is now pursuing alternative growth avenues. The company has unveiled detailed spending and expansion plans for two major copper regions: Argentina and South Australia.
In July, BHP announced a joint venture with Canada’s Lundin Mining to take over Filo Corp, a developer of copper projects near the Argentine-Chilean border. The joint acquisition, valued at CAU$4.5 billion (AU$3.25 billion), underscores BHP's commitment to expanding its copper portfolio.
Financial Flexibility and Debt Management
BHP’s robust financial performance has been supported by record iron ore output for the second consecutive year, which helped offset weaker coal prices and the divestiture of two coal mines. The company reported that its net debt stood at AU$9.1 billion as of June 30, placing it within its target range of AU$5 billion to AU$15 billion.
Despite the higher debt levels, BHP expressed confidence in its financial flexibility. The company stated it is "comfortable to move above our net debt target temporarily to execute value-accretive opportunities in the portfolio." This approach reflects BHP’s readiness to leverage its balance sheet to fuel growth in key areas, particularly copper.
BHP has also committed to increasing its capital and exploration expenditure. The company plans to raise its spending to around AU$10 billion in the current 2025 financial year, with an average annual expenditure of AU$11 billion from the 2026 financial year onwards, up from AU$9.3 billion in the previous year.
Dividend Payout and Shareholder Returns
BHP declared a final dividend of AU$0.74 per share, bringing the total dividend for the year to AU$1.46 per share. Although this represents a decrease from the previous year’s AU$1.60 per share, it remains one of the highest full-year dividends in the company’s history.
Andy Foster, a portfolio manager at Argo Investments, commented on BHP’s strong cash flow and solid balance sheet, highlighting the company's clear focus on copper as a key growth driver. He noted that while large-scale acquisitions have been challenging, BHP is effectively utilizing its existing assets and exploring new opportunities to drive future growth.
