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BHP (ASX:BHP) share price in focus on HY24 result, dividend cut

The BHP Group Ltd (ASX: BHP) share price is in the spotlight after announcing its FY24 first half result.

BHP is one of the world’s biggest miners, it mines iron ore, nickel, copper and coal.

FY24 first half result

Here are some of the highlights for the first six months of FY24:

  • Revenue increased 6% to US$27.2 billion
  • Profit from operations down 56% to US$4.8
  • Attributable profit sank 86% to US$0.9 billion
  • Underlying attributable profit flat at US$6.6 billion
  • Free cashflow increased 9% to US$3.8 billion
  • Interim dividend of US$0.72, down 20%
  • Net debt worsened by US$1.4 billion over the period to US$12.6 billion

Breakdown of the numbers

Revenue rose by US$1.5 billion thanks primarily to higher iron ore and copper prices, as well as the contribution from the new mines of Prominent Hill and Carrapateena. The New South Wales Energy Coal (NSWEC) division saw sales volumes increase, but realised prices decreased by 65%.

BHP noted that its underlying attributable profit was the same as last year, thanks to strong revenue generation and disciplined cost control. The ASX mining share revealed all of its mining projects are on track to meet their FY24 production and unit cost guidance.

Why did the attributable profit fall so hard? It was because of the ‘exceptional loss’ items totaling US$5.6 billion after the (accounting) impairment of its Western Australian nickel business and an increase to the provision of the cost of the Samarco dam failure. Profitability normally has an important influence on the BHP share price.

The company generated higher free cashflow despite investing US$5.1 billion, including US$3.4 billion in organic development. It spent around US$200 million on exploration. Operating cash flow rose 31%, which was helped by lower income tax and royalty-related tax payments.

For FY24 and FY25, it’s expecting to spend around US$10 billion per year on capital and exploration expenditure, and around US$11 billion per year in the medium-term.

Outlook for the BHP share price

BHP suggested the demand for commodities has been soft in the last 12 months. It’s expecting household consumption in the ‘developed’ world to continue to be restrained, but it expects that steel, copper and nickel demand will be “modestly firmer” in the ‘developed’ countries.

In China there is “weakness” in the real estate sector and non-steel exports. Chinese authorities have “acknowledged that additional policies will be needed to support China’s economic recovery.”

Some of the pressures on BHP’s costs have decreased, but labour costs remain a “key forward-looking inflationary risk”.

BHP said that, overall, the cost of mining production “continues to be higher” than it was before the pandemic. This “implies that price support is also expected to be higher than in previous cycles and low-cost operators stand to capture potentially higher relative margins in certain commodities.”

BHP is a very strong business, but it isn’t immune to setbacks. The dividend isn’t as big as it has been in recent reporting periods. There are other ASX dividend shares that can be more consistent in my opinion.

It may be better to wait for when there’s weakness in the iron ore market to invest, which could lead to a lower BHP share price.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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