Earnings Preview: What to expect from BHP's upcoming earnings report?
Australia's leading iron ore miners, including BHP Group, Fortescue, and Rio Tinto, are facing significant challenges as iron ore prices plummeted to their lowest since 2022. Concerns are mounting that a global supply surplus is outpacing demand, exacerbated by a crisis within China's steel industry, which is leading to output cuts. This downturn coincides with major miners increasing their exports. $BHP Group Ltd (BHP.AU)$ have retreated by 16.48% from their peak of A$49.583, $BHP Group Ltd (BHP.US)$ have declined by 17.30% from their high of $67.41. Approaching its earnings release date, $BHP Group Ltd (BHP.AU)$ and $BHP Group Ltd (BHP.US)$ rose by 2.32% and 1.97% respectively this week. BHP is scheduled to release its FY24 financial results before the market open on August 27 AEST.
BHP has met its production targets across all commodities for the fiscal year 2024:
- Copper output saw a 9% rise, reaching 1,865.2kt, with forecasts for FY25 suggesting a slight variation, ranging from 1,845kt to 2,045kt.
- Iron ore production inched up by 1% to 259.7Mt, with expectations for the next fiscal year hovering between 255Mt and 265.5Mt.
- Metallurgical coal production took a 23% dip to 22.3Mt, and projections for FY25 indicate a further reduction to a range of 16.5Mt to 19Mt. This reflects the impact of asset divestments at Blackwater and Daunia, as well as increased strip ratios.
- Energy coal production enjoyed an 8% boost to 15.4Mt, due to improved weather conditions and labour availability, along with a rise in trucking efficiency. The anticipated production for FY25 is estimated to be between 13Mt and 15Mt.
- Nickel production for FY24 inched up by 2% to 81.6kt. On July 11, BHP announced a planned temporary halt to its Western Australia Nickel operations from October 2024 due to a global oversupply and sustained low market prices. Operations are set to cease by October 2024, with wrap-up activities for the suspension concluding by December 2024.
According to Mike Henry, the CEO of BHP,
We finished the year with a strong fourth quarter, achieving several production records and we are meeting current production and unit cost guidance for all commodities. We continued to execute against our strategy, progressing growth options in the commodities the world needs to meet the demands of the energy transition and population growth. This includes our Jansen potash mine in Canada, where construction of Stage 1 is now more than 50% complete and Stage 2 is underway. We will see first production in 2026 and will be a major global producer of potash by the end of the decade.
BHP has released an estimates consensus file, revealing market expectations for its FY24 total revenue to reach A$55.807 billion. The file also projects an underlying EBITDA of A$28.835 billion and a net profit of A$13.523 billion for the fiscal year.
Goldman Sachs is feeling positive about the miner ahead of its results release. The broker said:
Attractive valuation, but at a premium to RIO: BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5.5x; and at 0.9xNAV vs RIO at 0.8x NAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).
Barclays currently has an equalweight rating and A$51.10 price target on its shares, commenting:
Despite the company’s best-insector margins, asset quality, low geographic risk profile and limited leverage to commodity prices, its current trading premium to peers doesn’t represent an especially compelling entry point, in our view.
Source: BHP, the Mortley Fool, Bloomberg
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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