BHP Group Limited (ASX: BHP) released its quarterly activities report this morning for the June quarter 2019, including figures for the full financial year 2019 (FY19). Here’s what you need to know.
About BHP
BHP is a world-leading resources company, extracting and processing minerals (like iron ore and copper), oil and gas, and has more than 62,000 employees and contractors, primarily in Australia and the Americas. Headquartered in Melbourne, BHP has shares listed on both the ASX and London Stock Exchange (BHP Billiton Plc).
Here Are The Three Key Points
- Full-year production guidance for petroleum was exceeded, up 1% on FY18
- Copper and iron ore production met guidance, but copper production was down 4% on FY18
- FY19 is expected to record a negative movement in productivity of approximately US$1 billion
FY19 Negative Movement
BHP advised that underlying improvements in productivity in FY19 were largely offset by unplanned production outages which cost the company US$835 million. Further undermining productivity was a grade decline in copper and higher unit costs for coal.
The negative movement predicted at US$1 billion does not include the impact of Tropical Cyclone Veronica. An earlier report estimated the impact of the cyclone to be between 6-8Mt of iron ore.
FY20 Guidance
Petroleum volumes are expected to decrease in FY20 and come in between 110 and 116 million barrels of oil equivalent (MMboe), down from 121 MMboe in FY19.
Copper production fell 4% in FY19 but is expected to increase in FY20 to between 1,705 and 1,820 kt, up from 1,689 kt.
Iron ore production is expected to increase to between 242 and 253 Mt in FY20, up from 238 Mt in FY19. This financial year will also see a “significant maintenance program” at Port Hedland which is designed to improve productivity and provide a stable base for the supply chain.
Finally, metallurgical coal production is estimated to be between 41 and 45 Mt in FY20 compared to 42 Mt in FY19.
Major wash plant shutdowns at Goonyella, Peak Downs and Caval Ridge are all planned for the September quarter 2019 so BHP expects volumes to be significantly weighted to the final three quarters of the financial year.
Energy coal production is expected to slightly decrease to between 24 and 26 Mt, down from 27 Mt in FY19.
Summary
It’s clear that Tropical Cyclone Veronica and other unplanned outages have taken a toll on BHP in FY19 and the information released today sets a fairly negative tone for the annual report.
BHP is too cyclical for my liking and relies too heavily on commodity prices. I’d rather invest in one of the companies mentioned in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
