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BHP shares on watch after first-half profit jump and dividend increase

Phil Harpur
Mining shares

The BHP Group Ltd (ASX: BHP) share price will be on watch this morning following the release of its half year results for the period ending 31 December 2019.

What did BHP announce?

BHP announced attributable profit of US$4.9 billion and underlying attributable profit of US$5.2 billion, which is up 39% from the prior period. BHP’s profit from operations came in at US$8.3 billion.

The mining giant reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of US$12.1 billion at a margin of 56%, with production and unit costs for all its major assets on track to achieve full year guidance.

BHP noted that net operating cash flow of US$7.4 billion and free cash flow of US$3.7 billion reflects higher iron ore prices and a solid operating performance.

BHP commented that solid underlying performance across the portfolio was offset by the impacts from planned maintenance across a number of its assets, natural field decline in petroleum and grade decline at its copper assets. Unit costs were reported to be tracking well at all its major assets. Petroleum and Escondida unit costs were noted to be below guidance and reflected lower maintenance activity at Petroleum, and cost control and higher by-product credits at Escondida.

Capital investments and exploration

BHP commented that value accretive investments and net debt were at the lower end of the target range. Capital and exploration expenditure came in at US$3.8 billion. BHP advised that guidance for the 2020 and 2021 financial years remains unchanged, with 2 major projects expected to achieve first production within the next 12 months. Investment in the Ruby oil and gas project in Trinidad and Tobago was approved in August 2019.

BHP added that it continues to advance its exploration programs in petroleum and copper, with the third phase of the drilling program at Oak Dam in South Australia in progress and expected to be completed in the June 2020 quarter.

Strong balance sheet

BHP noted a strong balance sheet, with underlying return on capital employed of 19%.

The inclusion of derivatives (US$0.4 billion) and the application of IFRS 16 Leases (US$1.9 billion) had increased net debt by US$2.3 billion to US$12.8 billion at 31 December 2019, compared to US$9.2 billion reported at 30 June 2019.

Second highest ordinary dividend declared

BHP declared its second highest ordinary dividend of 65 US cents per share (cps), or US$3.3 billion, which includes an additional amount of 14 US cps (equivalent to US$0.7 billion) above the 50% minimum payout policy.


BHP commented that if the coronavirus outbreak is not demonstrably well contained within the March quarter, it expects to revise its expectations.

The post BHP shares on watch after first-half profit jump and dividend increase appeared first on Motley Fool Australia.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020