The BHP Group Ltd (ASX: BHP) share price is under the spotlight after reporting its FY25 half-year result.
BHP is one of the world’s largest mining businesses in the world, with a presence in commodities like iron ore, copper and coal.
BHP HY25 result
Let’s look at some of the main highlights from the six months to 31 December 2024:
- Revenue down 8% to US$25.2 billion
- Underlying EBITDA down 11% to US$12.4 billion
- Underlying attributable profit down 23% to US$5.1 billion
- Net operating cashflow down 6% to US$8.3 billion
- Free cash flow down 30% to US$2.6 billion
- Attributable profit up 376% to US$4.4 billion
- Interim dividend down 30.6% to US$0.50 per share
What happened during this period?
BHP explained that its revenue decreased by US$2 billion largely because of the decline in iron ore and steelmaking coal prices, partially offset by higher copper prices.
The ASX mining share said its productivity initiatives and cost discipline, combined with favourable foreign exchange movements. Unit costs were around 3.9% lower across its major assets, with its iron ore mining maintaining its position as the lowest-cost major iron ore producer globally. Escondida (copper) impressively reduced unit costs by 12%. Profitability is obviously important for the BHP share price.
The underlying EBITDA declined because of the lower revenue. However, interestingly, copper’s contribution increased to 39% of underlying EBITDA, up from 25% in HY24, due to a 10% increase in copper volumes and higher copper prices.
The attributable profit only looked so good this year because last year’s number included US$6.6 billion of ‘exceptional items’ related to the Samarco dam failure and the impairment of its Western Australia nickel assets.
Jansen work
BHP has a project under construction called Jansen in Canada, which is focused on potash. This is a type of fertiliser that’s seen supposedly as greener.
The first stage of Jansen is 63% complete and remains on track for first production by the end of the 2026 calendar year.
Jasen stage two is 6% complete, with first production expected in FY29.
Outlook for the BHP share price
The miner’s success for the foreseeable future is largely dependent on what happens with the iron ore and copper prices.
Due to Cyclone Zelia, production is expected to be in the lower half of its annual production guidance of between 282mt to 294mt.
BHP wants to increase annual iron ore production to more than 305mt per year in the medium-term and it’s assessing options to increase production up to 330mt per year, if market conditions warrant that.
On the outlook for iron ore, BHP said:
In the near term, global seaborne demand is expected to remain in a plateau phase with marginal declines from China mostly balanced by growth in developing Asia. Supply growth from major producers is anticipated to continue in the coming years. New iron ore projects in Africa and potentially some mine restarts are expected bring further supply pressures from 2026.
Our estimate of cost support continues to sit in the US$80 – US$100/t range on a 62% Fe CFR basis, formed by approximately 180 Mt of higher cost supply, mainly from Australian junior miners, Indian fines and some Chinese domestic mines. Over threequarters of this supply has costs above US$90/t. Export volumes of price-sensitive Indian fines almost halved year-on-year over HY25. As the market turns more competitive, some additional high-cost suppliers may leave the market in the coming years.
We maintain our view that China’s steel production is likely to have plateaued around the 1 Bt level until the late 2020s.
On copper, the mining giant said:
In the near term, the copper market is expected to be broadly balanced. China’s demand will continue to grow due to stimulus directed to power infrastructure and consumer durables, and demand from growing electric vehicle penetration should continue to be robust. While headwinds might persist in Europe, we are more optimistic for demand growth in North America and India, as well as Southeast Asia and the Middle East, where new fabricating capacity is expected to ramp up.
Mine supply continues to grow modestly but is facing challenges, lagging overall demand. Copper concentrates balance is expected to remain very tight and the industry will rely on rising copper scrap supply to help fill this gap for the next couple of years. We note that global visible cathode inventories are low compared to historical levels and there will be limited scope for inventories to rise.
This could lead to critically low inventories in the event of any mine supply disruptions in the latter part of this decade. In the long run, we believe annual copper demand will grow from 32 Mtpa currently to over 50 Mtpa by 2050, with the key drivers being ‘Traditional’ economic growth (home building, electrical equipment and household appliances), ‘Energy Transition’ (renewables and electric vehicles) and ‘Digital’ (Artificial Intelligence and Data Centres demand of 3 Mtpa by 2050).
We anticipate that the cost curve for the mines needed to meet this demand is likely to steepen as both operational and development challenges progressively increase. For future mine supply to be incentivised we think prices will need to rise from levels seen in the first half of FY25 and be sufficiently high to trigger investment.
While the outlook for iron ore is uncertain, BHP’s growing exposure to copper seems like a smart move. However, its dividends may not be as appealing in the shorter-term unless the iron ore price jumps or until copper earnings increase.
At the current BHP share price, I’d probably prefer other ASX dividend shares.
