If you prefer to read about BHP, instead of watching the 8 minute interview, see below
BHP's earnings results, their best ever. What are the highlights?
In the 2022 financial year BHP made an outstanding $65.1 billion in revenue from selling iron ore, copper, coal, and petroleum to different regions across the globe. To the delight of shareholders, BHP recorded its highest ever gross profit of $23 billion, that’s a 26% jump on the prior result. The record result also meant BHP was able to pay out its highest ever dividend on record. Almost a 16% gross dividend yield. As we reported in our Quick Take
, the stellar results was bolstered by a 271% jump in the thermal coal price, and a 43% spike in the nickel price. On top of that, BHP's financial results were also thickened by its partial sales of its oil and gas business to Woodside, and from selling some of its coal assets to Stanmore Coal.
BHP is the world's largest iron ore producer, the 2nd largest copper producer & top four nickel producer, making it globally significant
Today, BHP’s revenue is split from 58% iron ore, 27% from copper, the remaining revenue from coal and petroleum. Five years from now, BHP’s revenue split will look very different, with the company wanting to focus on producing more green metals, including copper and nickel, while BHP will also replace its fossil fuel income (coal and petrol) by pivoting to becoming the world’s leader in potash, essential for the food industry. In a separate interview BHP's Chief Executive Officer Mike Henry said: the long-term outlook for copper, nickel and potash is really strong because of the “unstoppable global trends: decarbonization, electrification, population growth, increasing standards of living.”
In 2023 the world’s biggest miner sees commodity demand improving
As per our Quick Take notes, BHP sees China emerging as a source of stable commodity demand in the year ahead. BHP sees supply covering demand in the near-term for copper and nickel. This implies higher pricing can be expected given demand will likely grow quicker than supply. However, BHP says iron ore will likely remain in surplus through 2023. This implies iron ore pricing could remain contained.
BHP's sales to China are soaring
Sales to China have been increasing for half a decade as China has drastically increased its demand for iron ore (the key element in steel). Today sales to China make up 65% of the business. And despite China saying it wants to produce its own iron ore, BHP says China does not have the resources to to do. Thus, China will likely remain dependent on other nations for the key steel ingredient. BHP sees its iron ore business growing in magnitude to cater for growing iron ore demand and sees its business growing from a 290 million tones business to a 330mt juggernaut.
Industrial metal demand will keep growing
BHP affirmed that despite the global push to being carbon neutral, the world will still need iron ore. Specifically, In 30 years, the world will need 1.8 times more steel that it produces today. As for copper; BHP sees double the amount of copper being needed in the next 30 years (compared to today's global need). And double the amount of nickel will be needed too. BHP sees itself as being a major player in these markets.
BHP's Green transformation
BHP’s push to ‘going green’ involves focusing on copper, nickel and potash. BHP sees these as being the key commodities of the future. David sees strong demand for all these of its key focus commodities in a decarbonized world. And ‘as the world needs to feed itself’ potash and fertilizer will play an important role. BHP will however continue to look at lithium and cobalt, however at the moment, it doesn’t see them fitting its portfolio.
Why BHP is a favorite stock for many investors
In 2022 alone, BHP contributed $72 billion to the global economy. By market size its the 85th biggest company in the globe. It has one of the lowest price to earnings ratios, being 7.14 times (meaning its relatively cheap compared it what it earns). While it's historically produced one of the best dividends, paying a 16% dividend yield. In terms of share price performance, over the last five years its shares have risen 80% (as at the time of publishing August, 22, 2022).
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<Please note, the video interview with David Lamont, was recorded on the day BHP handed down their financial results, Tuesday August 16 2022>