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BHP share price: where next following FY21 results?

We examine the highlights of the mining giant’s relatively busy FY21 report and associated market releases.

To say BHP Group’s (ASX: BHP) FY21 results were busy would be an understatement.

Overall, the diversified global miner announced bumper profits, a record dividend, revealed plans to break-up its dual-listing structure, and also, maybe most importantly, revealed concrete details regarding the deal to sell its petroleum business.

Results at a glance

Across the top and bottom lines BHP reported stellar growth in FY21. For the full-year, revenue was 42% higher at US$60,817 million, while profits (NPAT) were also 42% higher at US$11,304 million, equal to US 223.5 cents per share.

Earnings (EBITDA) raced even higher than that, coming in at US$37.4 million, up 69% year-on-year, against an underlying EBITDA margin of 64%.

Broken down by segment, iron ore – which continues to trade around multi-year highs – was unsurprisingly the main driver of profitability. All up, BHP's iron ore segment delivered US$26.3 billion in total EBITDA, against an EBITDA margin of 77%. Unit costs across this segment were US$14.82 per tonne.

That far and away makes iron ore BHP's most profitable and significant segment. Copper came in at a far second, delivering FY21 EBITDA of US$8.5 billion, followed by BHP's currently-being-sold petroleum business at US$2.3 billion (more on that below), and finally metallurgical coal, at US$593 million.

Overall, management said they 'delivered on our production and cost guidance' and noted that 'we are systematically unlocking even greater performance from our assets.'

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A record dividend

Off the back of that profit performance, the miner revealed a record final dividend of US 200 cents per share – representing a 89% payout ratio.

At those levels, BHP will have returned more than US$15 billion to its shareholders in fiscal 2021. Across the last three years, the miner noted total returns to shareholders now stand at around US$38 billion.

A unified corporate structure

Elsewhere, BHP announced plans to unify its dual-listing structure, with the intention of making its primary listing that of the ASX. The company will however retain a standard listing on the LSE, a listing on the JSE, and its ADR on the NYSE.

Such a move still requires Board and regulatory approvals and is expected to be finalised in H1 CY22. One-time costs of the transition are expected to come in at between US$400-500 million.

Petroleum divestment

On Monday, before the full-year report, both BHP Group and Woodside Petroleum responded to growing media speculation over the potential sale of BHP’s petroleum business, saying that advanced discussions were already underway.

By Tuesday, both companies announced they had entered into an all-stock, merger deed, that if approved would see BHP’s entire petroleum business swallowed up by Woodside. Given that the deal is all-stock, not cash, if and when it is finalised, BHP shareholders will own ~48% of Woodside, and Woodside, by extension, would become one of the world's largest energy companies.

At the close of FY21, BHP's petroleum business was valued at a little over US$15 billion.

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