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Highlights
- Global natural resources major BHP announced a record final divided of US$ 2.00 per share and bumper profits due to firming iron ore prices, strong operational performance and other factors
- The company also announced merger with petroleum giant Woodside and an investment of US$ 5.7 billion into the Jansen Stage 1 potash project
- The company’s shares surged by over 7 per cent in today’s trading session making it the highest riser on the FTSE 100 index.
Dual listed and global natural resources giant BHP Group PLC (LON: BHP) announced a record final dividend of US$ 2.00 per share in its FY 2021 results today. BHP reported strong profits, bolstered by strengthening iron ore prices.
The oil giant also announced its merger plans with Australian oil and gas giant Woodside Petroleum, wherein BHP will streamline its business and sell its petroleum arm to Woodside. The merged entity is expected to be among the top 10 independent energy company in the world, based on production and have an estimated synergy of US$ 400 million per year.
BHP also announced the approval of its investment in Jansen Stage 1 potash project of up to US$ 5.7 billion and have an estimated production of 4.35 million tonnes of potash per annum.
The news comes a day after reports emerged of Woodside being in advanced talks to buy BHP’s petrol business on Monday.
BHP Group’s (LON: BHP) share price performance
BHP’s shares were trading at GBX 2,443.50, up by 7.15 per cent as of 17 August at 12:25 PM GMT+1, making it the highest riser on the FTSE 100 index. Meanwhile the FTSE 100 index, which it is a part of, was trading at 7,161.24, up by 0.10 per cent.
(Image Source: Refinitv)
BHP’s market cap stands at £48,165.80 million and its year to date return is at 27.01 per cent as of 17 August.
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BHP’s announces strong FY 2021 results
BHP’s FY 2021 profit from operations increased by 80 per cent to US$ 25.9 billion from US$ 14.4 billion in FY 2020 due to record volumes at its Western Australia Iron Ore (WAIO) and other plays, strong commodity prices, lower fuel and energy costs and other factors.
Also, the company’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 69 per cent to US$ 37.4 billion and touched a record margin of 64 per cent in FY 2021.
The company also touched a record free cash flow (FCF) of US$ 19.4 billion due to strong operational performance and firming commodity prices such as iron ore and copper.
The record final dividend of US$ 2 per share totals to US$ 10.1 billion, bringing the FY 2021 total dividends to US$ 3.01 per share or record total dividends of US$ 15.2 billion.
Its FY 2021 total dividend payout ratio stands at 89 per cent.
BHP’s FY 2022 Guidance
The company announced its petroleum unit cost guidance in FY 2022 to be between US$ 11 and US$ 12 per barrels of oil equivalent (boe), and its petroleum production to be in a range of 99 MMboe to 106 MMboe. BHP’s FY 2021 petroleum production stood at 103 Mmboe.
Also, the group estimates its copper production in FY 2022 to be between 1,590 kt and 1,760 kt. Comparatively, its FY 2021 copper production was at 1,636 kt.
Strategic updates and future prospects
The company offloading of its petroleum business to Woodside in an all stock deal, highlights its goal of streamlining its business and focusing on the mega trends of decarbonisation and sustainability.
BHP also aims to increase its exposure to commodities such as copper and nickel, in order to benefit from the world’s transition towards a low carbon economy.
Meanwhile, the Jansen Stage 1 potash basin investment aims to the company gain access to a forward-looking commodity such as potash. BHP’s first ore has a target date of calendar year (CY) of 2027.
Access to potash will help the company leverage from global mega trends such as changing diet, increasing population, decarbonisation and more.
Also, the company aims to unify its dual listing on the Australia’s ASX and London’s LSE exchanges and instead maintain a primary listing on ASX, standard listing on LSE, secondary listing on South Africa’s JSE and an ADR on New York’s NYSE exchanges.
This unification structure is aimed to simplify the processes within the company and is expected to take place on H1 CY 2022.
Bottom Line
Overall, as the UK and the world at large increasingly plans to shift towards a low carbon economy, BHP’s announcements showes the company’s aim to leverage from these upcoming mega trends.
BHP’s streamlined business and sharper focused approach of undertaking an ESG aligned and future facing commodity strategy also highlights its aims to maximise benefits from these trends which will affect the world at a global scale.
