BHP Group share price moderates after FY23 results show sharp profit decline

Key takeaways:

1. Impressive operational performance: BHP Group achieved notable increases in iron ore, copper, and nickel production in FY23.

2. Decline in profit: Despite the positive operational performance, BHP experienced a significant decline in attributable profit from total operations for FY23

3. Reduction in net operating cash flow: The lower profit from operations resulted in a reduction in BHP's net operating cash flow.

4. Capital allocation and debt: BHP adhered to its Capital Allocation Framework (CAF) by generating free cash flow of $5.6bn, although the company's net debt increased by $4.3bn since December 2022.

5. Commitment to shareholders: Despite the financial challenges faced, BHP demonstrated its commitment to shareholders by announcing a final dividend of $0.80 per share, equivalent to a 59% payout ratio.

BHP Group FY23 results review

The BHP Group (BHP), a multinational mining, metals, and petroleum company, posted impressive operational performance figures for the financial year 2023 (FY23). The company recorded a 1% increase in iron ore production, a 9% hike in copper production, and a 4% rise in nickel production. These production increases were achieved due to record production at various BHP facilities, including Western Australia Iron Ore (WAIO), Olympic Dam, and Spence.

However, attributable profit from total operations for FY23 declined 58% from the prior year. Additionally, the underlying attributable profit, which adjusts FY22 for discontinued operations fell by 37%.

The company's net operating cash flow also saw a reduction due to the lower profit from operations. This was partially offset by the resultant reduced income tax and royalty-related taxation payments. Despite lower prices and sales volumes, revenue-based royalties at BHP Mitsubishi Alliance (BMA) increased following the introduction of the new Queensland royalty regime in July 2022.

In line with the Capital Allocation Framework (CAF), BHP generated free cash flow of $5.6bn after investing $13.1bn. However, the company's net debt increased by $10.8bn or $4.3bn since December 2022.

Despite the financial challenges, BHP demonstrated its commitment to its shareholders by announcing a final dividend of $0.80 per share, equivalent to a 59% payout ratio.

BHP has demonstrated resilience in a challenging market environment, leveraging smart operational strategies to boost production and maintain shareholder returns. The company's commitment to its capital allocation framework and shareholder value is commendable.

BHP Group (ASX) – technical view

The BHP Group currently trades within a sideways range bound between levels 42.20 (support) and 47.35 (resistance). The share price is looking oversold near the support of this range.
Range traders might hope to see a bullish price reversal above the 42.20 support level. In this scenario a move back towards resistance at 47.35 might be favoured, while a close below 42.20 would suggest the failure thereof.

BHP Group (JSE)

The BHP Group (SA listing) currently trades within a sideways range bound between levels 52250 (support) and 56800 (resistance). The share price is looking oversold near the support of this range.

Range traders might hope to see a bullish price reversal above the 52250-support level. In this scenario a move back towards resistance at 56800 might be favoured, while a close below 52250 would suggest the failure thereof.