- BHP posts record earnings and cash flow
- Sees recovering Chinese commodities demand
- Books $7.1 billion one-off gain from Woodside merger
Diversified miner BHP (BHP) saw its earnings for the 12 months to 30 June hit record levels thanks to higher commodity prices and one-off gains associated with the merger of its oil and gas assets with Woodside Energy (WDS:ASX).
Probably the main reason why BHP shares are trading higher today and dragging the rest of the mining sector up is a surprisingly upbeat assessment of the outlook for Chinese demand.
BHP, no longer a FTSE 100 constituent after moving its primary listing to Australia in early 2022, gained 4.3% to £23.34 as it posted pre-tax profit up 36% year-on-year to $33.1 billion driven by higher coal and copper prices.
It also booked an exceptional gain of $7.1 billion thanks to the Woodside transaction. ‘BHP delivered strong operational performance and disciplined cost control to realise record underlying earnings of $40.6 billion and record free cash flow of $24.3 billion. We have reduced debt and announced a final dividend of $1.75 per share,’ said CEO Mike Henry.
CHINA ‘SOURCE OF STABILITY’ FOR COMMODITIES DEMAND
On China, Henry said the company expects the world's second largest economy to emerge as a ‘source of stability’ for commodity demand in the year ahead as it exits Covid restrictions.
Jefferies analyst Christopher La Femina commented: ‘Financial year 2022 was a stellar year for BHP as the company generated record high EBITDA (earnings before interest, tax, depreciation and amortisation) and free cash flow (17.6% yield on the current price).
‘It was another fatality-free year for the company (no fatalities in the last three-and-a-half years). While BHP did have some operating issues last year, strong safety performance in mining is generally a good indicator of operational discipline and tends to be a good leading indicator for operating performance.
‘The full year dividend of $3.25 per share ($1.75 per share declared in the second half) increased 8% year-on-year and equates to an impressive 11.9% yield. The company ended the year with a clean balance sheet.’
