BHP

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Transcript Summary

BHP reported strong half-year results for December 2025, with underlying EBITDA up 25% to a 58% margin. The company is successfully pivoting to future-facing metals, with copper now accounting for over 50% of group earnings. Key highlights include record production at Escondida and Western Australia Iron Ore (WAIO), where BHP remains the global low-cost leader at $17.66 per tonne. Financial strength allowed for a $0.73 per share interim dividend, a 46% increase. Strategically, BHP is unlocking significant capital through a $4.3 billion silver streaming deal at Antamina and a $2 billion WAIO power agreement. These funds will support growth and shareholder returns. The Jansen Potash project is on track for 2027, albeit with a revised $8.4 billion budget for Stage 1. Looking forward, BHP expects copper demand to grow 70% by 2050, fueled by the energy transition and AI. With a robust pipeline including the Vicuna JV and Copper South Australia, management targets 3-4% annual production growth through 2035. This combination of operational stability and disciplined capital allocation positions BHP to continue delivering top-tier shareholder returns.

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BHP Group Limited: Massive Legal Overhang and Asset Write-downs Masked by Underlying Metrics

Full Earnings Call Transcript — Q2 • 2026-02-17

Mike Henry: Thank you for joining us to hear about BHP's December 2025 half year results. I'm joined by our Chief Financial Officer, Vandita Pant. This has been another good half, both operationally and financially. Our strong performance on production delivery and cost control, coupled with a strong commodity price environment has underpinned continued balance sheet strength and growth in cash returns for the period. We continue to deliver well against our strategy, and we can see the fruits of our strategy execution evident not only in our continued operational excellence, but also in the fact that just over half of our earnings for the period came from our copper business. That's up 30 percentage points over the past 3 years, and this is the result of our deliberate actions to grow our copper business, including through more reliable operations at Olympic Dam, our focus on grade and sequencing at Escondida and our OZ Minerals acquisition. This has positioned us well for the strengthening copper dynamics that we have forecast. And we have built a strong pipeline of growth in both copper and in potash. I remember one of my predecessors many years ago talking about how the combination of a strong, stable asset base, operational performance and balance sheet, combined with growth options was the winning formula for value creation. And in the almost 25 years since the merger of BHP and Billiton, we have delivered the highest total shareholder return of the major diversified miners and around 4x that of the MSCI, World Metals and Mining Index. That formula is as valid today as it was then. Today, Vandita and I will share how we are well placed to continue delivering on our strategy and growing value for shareholders. This half, we set operational records in copper and iron ore at a time of high commodity prices, and we did it safely. At Escondida, we raised copper production guidance for this year and next, and we remain on track to meet full year guidance across the rest of our business. We advanced our copper growth options, targeting around 2.5 million tonnes of copper equivalent per year, including byproducts by the mid-2030s. And over the past 3 months, we've announced agreements in relation to Western Australia Iron ore's inland power use and Antamina's future silver production. Across the group, we see potential for up to $10 billion in capital that could be unlocked and reinvested into higher returning opportunities and/or increase shareholder returns. Our performance and our confidence in the business have allowed us to determine an interim dividend of USD 0.73 per share, up 46% half-on-half. Of course, nothing matters more than safety. Key safety metrics improved during the half with a lower high potential injury frequency and improved hazard identification. Most importantly, no one lost their life on the job. Alongside the improvements enabled by our BHP operating system, we're also using more technology to keep people out of harm's way and detect risks earlier. BHP's strategy remains clear and simple. We invest in highly attractive commodities, operate world-class assets excellently, allocate capital with discipline and offer a distinctive approach to social value. Our track record is compelling, margins averaging above 50% over 25 years, a strong balance sheet and over $110 billion returned to shareholders over the past decade. We are also progressing organic growth options to deliver compound annual copper equivalent production growth of 3% to 4% through to 2035. Stability plus growth equals value. Let me delve into a couple of these quickly, starting with operational excellence. At our assets, our prioritization of safety, operational reliability and continuous improvement is enabled through our BHP Operating System, or BOS. BOS empowers our teams to identify opportunities and act on them quickly. It has also been a key factor in our track record of meeting our production and unit cost guidance more reliably than our competitors. In copper, we've raised production guidance by a cumulative 150,000 tonnes over the next 2 years. We're capturing the current high copper and gold prices. And at Western Australia Iron Ore, we've increased our lead as the world's lowest cost major producer. In fact, we've reduced costs in real terms post-COVID, the only major Pilbara producer to do so. This is a critical advantage as competition in this market intensifies. Why are we so focused on operational performance? Because it's incumbent on us to generate maximum value for the capital we have deployed in the business. It has also positioned us to derive maximum benefit from this period of higher prices. This delivers value for shareholders now through higher payouts. It also allows us to invest in the future. And this investment will drive growth over both the near and longer term from around 3% per year through to 2030 and accelerating beyond that. Underpinning this is expected growth of around 5% per year on average in our copper business. A significant portion of our growth comes from brownfield expansions or greenfield projects, which we have derisked through partnerships and stage development. Shareholders can have confidence in our execution. Now of course, not all dollars get reinvested in growth. We have a clear capital allocation framework that has ensured attractive cash returns to shareholders are protected. In doing so, this has ensured better discipline in how we invest through forcing competition for capital. Disciplined capital allocation has been central to BHP's strategy for many years and contributed to our consistently strong shareholder returns. As I mentioned before, we have returned over $110 billion to shareholders via dividends, share buybacks and demergers over the past decade. This represents over 70% of today's market capitalization. With that, I'll hand over to Vandita to take you through our financial performance.
Vandita Pant: Thanks, Mike. Our strong operational performance is reflected in our healthy set of financial results. Our underlying EBITDA grew by 25% with an increased margin of 58%. Our underlying attributable profit was $6.2 billion, and our return on capital employed was 24%, both up significantly over the past year. Every 6 months, we assess shareholder returns through our capital allocation framework to ensure dividends reflect performance. Based on our strong results, confidence in our outlook and cash flows, we have determined a half year dividend of $3.7 billion, a payout ratio of 60%. As you can see on this slide, we delivered well in the areas we can control. This enabled us to fully capture the benefit of higher copper, gold and iron ore prices. Across the group, production increased 2% and unit costs improved around 4.5% despite inflation of more than 2% and currency pressures. These financial results are the outcome of the strong performance Mike has mentioned from across our business. In copper, we generated a record $8 billion of EBITDA in the half, over half the group total at a margin of 66%. Our copper assets each produce significant amount of byproducts. We are not only the world's largest copper producer, but also a global top 20 gold producer and the world's third largest uranium producer, valuable positions at a time of near record prices of these commodities. Escondida delivered steady volumes despite 10% lower grade. The team has done well to identify opportunities to improve throughput and recovery. Along with higher prices for byproducts, this delivered a 16% improvement in costs. Copper South Australia also delivered solid performance with copper production up 2% and gold up 12%. A strong gold production was key to its more than 50% reduction in unit costs. Western Australia Iron Ore achieved record first half production and shipments while completing the Car Dumper 3 rebuild on budget and ahead of schedule. With C1 costs up only 1% to $17.66 per tonne, WAIO has extended its lead as the lowest cost major iron ore producer globally. Steelmaking coal volumes at BMA rose 2% with strong performance at our open cut mines, offsetting geotechnical challenges at our underground mine. Our work to stabilize the supply chain is progressing well with the team delivering the highest first half stripping volumes in 5 years. And New South Wales Energy Coal continues to perform well as the transition to closure progresses as planned. Now BHP is by design, a diversified miner rather than focused on a single commodity. This is our competitive advantage. Our diversified portfolio helps deliver consistently strong cash flow, which supports investment and returns to shareholders through the cycle. This not only helps protect us from downturns in commodity price cycles, it positions us to thrive through them relative to a single commodity company. As this slide shows, at spot prices, we expect to generate around $60 billion in attributable free cash flow over the next 5 years. That's cash flow after funding our investment in growth. Even in an extreme and prolonged low price environment, one in which prices fell 20% to 40% below current levels and stayed there for 5 years, we would generate around $10 billion in attributable free cash flow over that period. Now let me talk about our capital allocation framework, which ensures all uses of capital compete to maximize value and return for our shareholders. You're all familiar with the framework, so I won't go through it in detail. But let me just highlight one aspect. As I mentioned 6 months ago, we continuously seek to unlock additional value from our capital base and assets. Today, we announced the most valuable ever silver streaming agreement relating to our share of Antamina's future silver production. This unlocks value from a noncore commodity at a time of strong silver market conditions. BHP retains full exposure to our share of all future copper production of Antamina. On completion, we will receive $4.3 billion in cash, an amount just shy of broker estimates of our share of Antamina's entire value. This follows our agreement in December in relation to our share of WAIO inland power consumption. On completion of that transaction, we will receive $2 billion in return for a tariff linked to power use over 25 years. Importantly, this will not impact the ownership of any assets. BHP will retain full operational and strategic control of WAIO. These agreements are examples of BHP's razor-sharp approach to capital portfolio and asset management. They improve our financial flexibility, unlock value and benefit BHP's shareholders. Together, they will unlock over $6 billion of cash. Across the business, we see potential to unlock up to a total of $10 billion. As always, this will go through our capital allocation assessment to be applied to higher returning and more value-accretive uses, including growth and shareholder returns. This disciplined approach is central to how we maximize long-term value for shareholders. With that, I'll now hand back to Mike.
Mike Henry: Thanks, Vandita. Let me briefly share our view on the markets before I take you through our growth plans. Commodities saw healthy demand in 2025, supported by more favorable trade outcomes than expected, supportive policy and improved confidence. Despite continued policy and geopolitical uncertainty, we expect global GDP growth in 2026 to be broadly in line with last year, supported by policy responses in major economies. We expect China's 15th 5-year plan to lift domestic household demand and to prioritize technological development. Exports are also likely to remain resilient due to their cost competitiveness. India's positive momentum should continue, driven by ongoing infrastructure investment, expanding manufacturing capacity, including in steel and metals and improved financial conditions. We also see European growth picking up through 2026 and the U.S. remaining steady. This backdrop is expected to support ongoing robust demand for our commodities. Combined with tight supply, fundamentals for our commodities remain supportive, and BHP is well placed against this backdrop. Our success over time has been underpinned by our ability to regularly reshape our portfolio for the future, and we have done so yet again in recent years. Our world-class assets are large, long life, low cost and have options to grow. We are the world's largest copper producer. We run the world's highest margin iron ore business. Our steelmaking coal business produces some of the world's best metallurgical coal, and we are building a significant new business in potash. Let's take a closer look at some of our assets. In iron ore, we set about positioning ourselves for fiercer competition in iron ore markets. We became the world's lowest cost major iron ore producer, and we've maintained and, in fact, grown that position over the past 6 years. But we're not stopping there. We have a clear pathway to grow volumes to over 305 million tonnes per year by the end of financial year '28 and to reduce costs by 10% to below $17.50 per tonne in the medium term. We have created the option to grow up to 330 million tonnes per year should market conditions warrant. Our cost leadership delivers $10 per tonne more free cash flow than our next closest major competitor. That has delivered $10 billion to $15 billion in extra free cash flow than our major competitors since financial year '20. In January, we completed a detailed review of the cost and schedule estimates for Stage 1. First production remains on track for mid-2027, but we updated our cost estimate to $8.4 billion. We believe our Jansen Potash asset in Canada can be another whale-like asset. What do I mean by that? Once ramped up, Jansen will be a world-class low-cost potash producer. It's expected to deliver around $1 billion of EBITDA per year per stage with margins above 60%. It will also make BHP stronger because potash demand drivers and key customer markets are differentiated from our other commodities, meaning even lower volatility in earnings and cash flow generation. In copper, we are already the world's largest producer, and we have clear plans to increase our production. Our lower-risk pathway represents production growth of around 40% by 2035. This is capital efficient, predominantly brownfield growth that will further increase the proportion of our earnings from copper. This is an exciting position to be in. Global demand for copper is projected to grow by around 70% between 2021 and 2050. That demand is durable and multifaceted, traditional economic growth, the energy transition and the need for data centers to support increasing use of artificial intelligence. These will all need more copper. Let me explain how BHP plans to help supply this. Escondida continues to perform strongly, and we are progressing towards submitting the application for the environmental permit for the new concentrator within the next 6 months. A final investment decision remains on track for 2027 or 2028. After lifting production guidance for financial year '26 last month, we've also raised financial year '27 guidance to between 1 million and 1.1 million tonnes. Including the 400,000 tonnes of incremental production over 2027 to 2031 that we announced last year, the recent increase in guidance means we now expect to deliver over 500,000 more tonnes over the next 5 years compared to what we announced at the Chile site visit in 2024. At today's prices and margins, that would be an additional $5 billion of EBITDA over that period. Also in South America, the Vicuna joint venture with Lundin Mining is advancing rapidly. Vicuna recently applied for Argentina's RIGI scheme, which would provide 40 years of greater stability and improved economic conditions for its development. The opportunity in the district is significant and continues to grow with recent drilling adding another 9 million tonnes of contained copper. That's equivalent to another 1.5 Josemarias. Vicuna's staged approach to development, which derisks the project, remains unchanged. We could make a final investment decision on Stage 1 as early as the end of this calendar year. Once all 3 stages are fully developed, Vicuna has the potential to be a global top 5 copper and top 5 gold producing asset. Finally, at Copper South Australia, we are progressing our plan to unlock the full potential of this polymetallic resource. If it were a stand-alone business, today, Copper South Australia would be a global top 15 copper producing asset, the fifth largest gold producer on the ASX and produce around 5% of the world's uranium. This is a considerable base from which to grow. With strong and reliable performance at Olympic Dam and the addition of Carrapateena and Prominent Hill, Copper South Australia is well positioned for growth towards 650,000 tonnes of copper per year or close to 1 million tonnes, including byproducts in the late 2030s and to do so at a competitive capital intensity. We expect to provide an update on Copper South Australia's growth plans later this year. In closing, we have a clear and simple strategy, proven over many years. We are delivering strong, stable operational and financial results. And from our position as the world's largest copper producer today, we have a clear path to significantly grow our production. Our stability and our growth means we are well positioned to create value both now and far into the future. Thank you.