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BHP share price: where next following FY20 production results?

We examine the highlights from BHP’s latest production results.

BHP Source: Bloomberg

BHP share price volatile following market release

While the BHP Group (BHP) share price rallied on Tuesday, after the miner released its latest round of production results, the company saw its share price fall sharply on Wednesday, amid a broad market selloff.

BHP last traded at $37.44 per share.

In spite of those share price fluctuations, BHP delivered a solid set of Q4 and full-year production results – reporting production guidance beats across its iron ore, metallurgical coal and copper and energy coal divisions.

By comparison, production across the miner's petroleum divisions, as well as production output from BHP’s Cerrejon energy coal and Antamina copper mines – came in below prior guidance. Both Cerrejon and Antamina had to be temporarily shut down due to the coronavirus pandemic, though both operations are now returning to normal, the company flagged.

FY20 production results and guidance in focus

Overall, and looking at some of BHP’s key FY20 production results, on a year-over-year basis, the miner reported:

  • Iron ore production of 248 million tonnes, up 4%
  • Copper production of 1,724 kilotonnes, up 2%
  • Petroleum production of 109 million barrels of oil equivalent, down 10%
  • Energy coal production of 23 million tonnes, down 16%

Commenting on these production results, BHP's CEO, Mike Henry said:

'Our diversified portfolio and high quality assets, together with our strong balance sheet, make us resilient to the ongoing uncertain in the markets for our commodities.’

Looking at the performance of BHP’s iron ore division, the company noted that its strong FY20 production results were built on productivity gains derived from the maintenance programs undertaken over the last few years; as well as the record production performance recorded at the Jimblebar and Yandi sites

Looking forward, BHP said it expected to produce between 244 million tonnes to 253 million tonnes of iron ore in fiscal 2021.

Elsewhere, the miner noted that it expected to produce between 1,480 kilotonnes to 1,645 kilotonnes of copper in FY21. Analysts from UBS said that this guidance came in around 10% below their expectations, while noting that 'This is not a short term phenomenon, and is likely to persist into FY22.'

BHP said it would provide the market with updated capital and exploration expenditure guidance for FY21 during its full-year, fiscal 20 results.

BHP dividend expectations

Looking forward and from a dividends perspective, analysts from Credit Suisse said 'We assume a simple 50% payout in our numbers, but there is unquestionably capacity to pay more given ND is at the lower end of the range.'

On that payout ratio, the investment bank estimates that BHP would pay a final dividend of US43 cents per share. On the more bullish end of the spectrum however, Credit Suisse analysts mused that:

'If we were to assume a 70% payout – consistent with previous years, it would equate to US60cps.'

For reference, in FY19 BHP paid total dividends of US$2.35 per share.

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