Bhp Group Ltd · ASX:BHP
Bhp — FY2020 Earnings Presentation
49 slides from Bhp's earnings presentation, Aug 18, 2020
Slide 1: Financial results Year ended 30 June 2020
Financial results Year ended 30 June 2020 Escondida 1
Slide 2: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies and objectives of management; closure or divestment of
Slide 3: Financial results Year ended 30 June 2020
Financial results Year ended 30 June 2020 Mike Henry Chief Executive Officer Nickel West 3
Slide 4: Resilient results in extraordinary times
Resilient results in extraordinary times Performance underpinned by reliable operational delivery and continuous improvement Dynamic and effective response to COVID-19 Safer, lower cost and more reliable Strong free cash flow ensuring net debt at the low end of our target range Delivering strong and
Slide 5: Response to COVID-19
Response to COVID-19 Great people, strong relationships and clear priorities supported continued operational performance Underpinned by financial strength, structure, culture, safety focus and social valueOperational resilience Diversified portfolio with balanced commodity exposure Swift response en
Slide 6: FY20 financial highlights
FY20 financial highlights Resilient margins, strong earnings, net debt at the bottom of our target range Earnings Margin Free cash flow US$22.1 bn 53% US$8.1 bn Underlying EBITDA down 5% Underlying EBITDA margin free cash flow Net debt Shareholder returns ROCE 12 bn 55 US cps 17% US$ dividend determ
Slide 7: FY20 operational highlights
FY20 operational highlights Safer, lower cost, more reliable Safety Production Unit costs Safer Records Lower Zero fatalities at WAIO, Caval Ridge, Broadmeadow 23% decrease in HPI1 by 9% across major assets2 and Poitrel 11% decrease to 4.2 TRIF Reliability Minerals exploration Major projects Improve
Slide 8: FY20 social value highlights
FY20 social value highlights Social value integrated into all we do Inclusion & diversity Local spend GHG emissions ↑ ~4,000 to 27% 18% 12% FY20 15.8 Mt of total external expenditure CO2 -e FY16 FY17 FY18 FY19 FY20 paid directly to local suppliers FY17 FY18 FY19 FY20 Female workforce participation
Slide 9: Financial results Year ended 30 June 2020
Financial results Year ended 30 June 2020 Peter Beaven Chief Financial Officer Queensland Coal 9
Slide 10: Financial performance
Financial performance EBITDA margin 53% and continued earnings per share growth Summary income statement FY20 % change (US$ billion) Underlying EBITDA 22.1 ï,” 5% Underlying EBITDA margin 53% Underlying EBIT 15.9 ï,” 7% Adjusted effective tax rate3 33.2% Adjusted effective tax rate incl. royalties3
Slide 11: Group EBITDA waterfall
Group EBITDA waterfall Strong underlying performance across the portfolio, despite COVID-19 headwinds Underlying EBITDA variance (US$ billion) External US$0.2 billionControllable US$(1.3) billion 25 23.2 1.00.623.40.10.1 22.1 (1.1) (0.3)(0.4)(0.5)(0.6) 20 FY20 volume and cash cost variance (US$bn) 1
Slide 12: Segment performance
Segment performance Strong underlying performance, offset planned maintenance, natural field decline and grade decline Iron Ore7CopperMetallurgical CoalPetroleum9 300 Mtpa run rate, Record throughputRecord volumes Broadmeadow, Resilient portfolio with a quarterly record at Escondida Caval Ridge and
Slide 13: Cash generation
Cash generation Attractive free cash flow while continuing to invest through the cycle Net operating cash flow (US$ billion) (Index, FY10=100) 35 200 30 25 20 100 15 10 5 0 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Operating cash flow (H1) Operating cash flow (H2) Onshore US proceeds
Slide 14: Capital allocation
Capital allocation Investing in value growth; disciplined adherence to our Capital Allocation Framework FY20 Operating Capital productivity productivity Net operating cash flow US$15.7 bn Maintenance capital US$1.9 bn Strong balance sheet  Minimum 50% payout ratio dividend12 US$5.0 bn Excess cash
Slide 15: Maximise value and returns
Maximise value and returns Net debt US$12.0 billion at lower end of the range; since 2016 ~US$35 billion reinvested; ~US$36 billion returned to shareholders13 Net debt at low end of target range (Net debt, US$ billion) 30 20 Target range US$12-17 bn 10 0 FY16 FY17 FY18FY19 14FY20 Actuals Net debt ta
Slide 16: Return on Capital Employed
Return on Capital Employed FY20 ROCE 17%; strong underlying performance despite challenging operating and market conditions ROCE by asset (%) 50 Excludes investment in major projects in execution 20 15 WAIO16 Antamina16 10 Escondida Queensland 5 CoalExploration15 Petroleum ex-Exploration NSWEC15 Oly
Slide 17: Financial results Year ended 30 June 2020
Financial results Year ended 30 June 2020 Mike Henry Chief Executive Officer Mt Whaleback 17
Slide 18: External environment
External environment Near-term uncertainty continues, attractive medium-term fundamentals, with long-term strategic themes intact and accelerating Short term Medium term Long term Growth in Society Demand UnevenPolicyElectrification population, in flux volatility recoveryuncertaintyof transport weal
Slide 19: Growing value in a dynamic world
Growing value in a dynamic world Building on our strong foundations to prosper in uncertain times and create value in the longer term Consistent strategy to own and operate the best assets in the best commodities Strategy to be underpinned by reliable, safe delivery of leading operational performanc
Slide 20: Approach to portfolio
Approach to portfolio Strategic scenarios inform management of portfolio for value and returns over time Value Decarbonisation of stationary power • Early retirement of non-renewable resources • Standalone renewable cost competitiveness • Grid flexibility solutions become economic Response to Climat
Slide 21: Enhancing portfolio to unlock value and growth
Enhancing portfolio to unlock value and growth Demonstrated track record and well positioned to maximise long-term value and deliver high returns Metallurgical Coal: premium franchise Iron ore: competing on cost and quality Petroleum: oil high margin with optionality • World’s leading metallurgical
Slide 22: Enhancing portfolio to unlock value and growth
Enhancing portfolio to unlock value and growth Demonstrated track record and well positioned to maximise long-term value and deliver high returns Copper: multiple attractions Nickel: battery revolution underway Potash: feeding the world • Large resource base with high-quality • Transitioning to new
Slide 23: Strengthening safety, performance and portfolio
Strengthening safety, performance and portfolio Five levers to enable BHP to become the best operator and reliably deliver leading financial returns and social value • Right workforce; inclusive and diverse Bedrock of • Strengthening leadership; increasing time in field Culture • Pace and urgency •
Slide 24: Team aligned to strategy
Team aligned to strategy Experienced team to lead culture, performance and growth Chief People President Chief Executive Chief Financial Chief Commercial Officer Petroleum Officer Officer Officer Athalie Williams Geraldine Slattery Mike Henry David Lamont Vandita Pant Chief External President Chief
Slide 25: Investment proposition
Investment proposition We have the people, assets, options, and discipline to sustainably grow long-term shareholder value and returns Maximise cash flow Capital discipline Value and returns Net debt Low-cost producer targeting lower end 20% FY20 ROCE efficiency, technology, culture of US$12-17 bn r
Slide 26: BHP
BHP 26
Slide 27: BHP Appendix
BHP Appendix 27
Slide 28: Social Value scorecard
Social Value scorecard We transparently track our performance on our social value commitments and we are making good progress Category Key indicators1 FY19H1 FY20H2 FY20FY20 Target Fatalities 1000Zero work-related fatalities High Potential Injury (HPI) frequency Year-on-year improvement of our HPI S
Slide 29: Asset performance and plans: Petroleum
Asset performance and plans Low cost operations, commercial agility, growth options Petroleum Flexible options within current portfolio to suit market conditions Resilient even in a low price environment – testing confirms no asset impairments even at US$55/bbl Value based deferrals in FY21: several
Slide 30: Asset performance and plans: Escondida
Asset performance and plans Escondida throughput record; Spence Growth Option progressing on budget Escondida New concentrator throughput record of 371 ktpd Strong cost management Lower volumes in FY21 and likely in FY22 as reduced workforce will restrict material movement – average annual 1.2 Mt me
Slide 31: Asset performance and plans: Olympic Dam and Nickel West
Asset performance and plans Olympic Dam and Nickel West sustainably increasing production and returns Olympic Dam Focused on operational stability Multi-year asset integrity program progressing well and tracking to plan Reliability to drive runtime and cost reductions across the value chain Safe and
Slide 32: Asset performance and plans: WAIO and Queensland Coal
Asset performance and plans Value growth through continuous improvement; South Flank on track for first production in mid-CY21 WAIO Reliable delivery of record production and lower costs Record annualised run rate >300 Mtpa Q4 FY20 Uplift in car dumper reliability enabled by BOS, improved maintenanc
Slide 33: Samarco and Renova Foundation
Samarco and Renova Foundation Resettlement remains a priority social program but progress slowed by COVID-19 Communities Resettlement Samarco restart Compensation • Bento Rodrigues and Paracatu: •Received LOC (Corrective Operating BRL$2.5 billion indemnification andconstruction of key public buildin
Slide 34: Exceptional items
Exceptional items Attributable profit of US$8.0 billion includes an exceptional loss of US$1.1 billion Gross Tax Net Year ended 30 June 20201 US$M US$M US$M Exceptional items by category Samarco dam failure (176) -(176) Cancellation of power contracts2 (778) 271(507) COVID-19 related costs3 (183) 53
Slide 35: Working capital and balance sheet
Working capital and balance sheet Net debt of US$12.0 billion and gearing of 18.7% Movements in working capital (US$ billion) 2.0 Includes employee provision 0.6movements, timing of operational payments and embedded 1.0 0.8 derivative movements (0.7)(0.2)(0.1) 0.0 Split broadly between increasing(0.
Slide 36: Net debt: definition and IFRS
Net debt: definition and IFRS 16 Operating lease commitments brought onto balance sheet from 1 July 2019 Net debt target range US$12-17 bn Net debt –changes in net debt definition to include debt-related derivatives of ~US$0.2 bn on 1 July 2019 (unrelated to IFRS 16) definition –reviewed definition
Slide 37: IFRS Leases: FY20 impacts
IFRS 16 Leases: FY20 impacts Accounting change only; no impact to net cash flows Balance sheet1 Income statement Cash flow statementDisclosuresFinancial metrics Right of use assets Operating lease Operating costs Operating cash outflow Net debt (PP&E) commitments (IAS 17) US$0.6 bn US$0.6 bn US$1.6
Slide 38: IFRS Leases: FY20 impacts
IFRS 16 Leases: FY20 impacts Accounting changes only, no impact to net cash flows Balance sheet Income statementUnit cost Group Lease liabilities Depreciation1EBITDA1No change to unit US$2.8 bn US$0.6 bn US$0.6 bn cost guidance WAIO2 US$0.12 bn US$0.05 bn US$0.08 bn 3% Queensland Coal2 US$0.15 bn US
Slide 39: Projects in feasibility
Projects in feasibility Jansen Stage 1 Scarborough Saskatchewan, Canada Australia Shaft equipping, mine development, processing facility, site 13 subsea wells tied back to a semisubmersible FPU2; dry gas infrastructure and outbound logistics pipeline ~435 km in length transports dry gas from the FPU
Slide 40: Technology
Technology Streamlined, more effective and nimble function leading charge to solve asset challenges Effectiveness Remote operating Testing grounds Restructured Integration Innovation Reorientated to apply technology more CIO live in Santiago in July 2019; Best of technologies to improve effectively
Slide 41: Improving through standardisation and ways of working
Improving through standardisation and ways of working Empowering our people to continuously improve through standardised systems, processes and ways of working Maintenance and Engineering Centre of Excellence (MECoE) Combines advanced planning capability, defect elimination and value analytics to de
Slide 42: BHP guidance
BHP guidance Group FY21e FY22e Capital and exploration expenditure (US$bn) ~7 ~8.5Cash basis. Including: Maintenance 2.1 Includes non-discretionary capital expenditure to maintain asset integrity, reduce risks and meet compliance requirements. Also includes capitalised deferred development and produ
Slide 43: BHP guidance (continued)
BHP guidance (continued) Copper FY21e Medium term Copper production (kt) 1,480 – 1,645 Escondida: 940 – 1,030 kt; Olympic Dam: 180 – 205 kt; Pampa Norte 240 – 270 kt; Antamina: 120 – 140 kt (zinc 140 – 160 kt). Capital and exploration expenditure (US$bn) 2.3 Includes ~US$60 million exploration expen
Slide 44: BHP guidance (continued)
BHP guidance (continued) Coal FY21e Medium term Metallurgical coal production (Mt) 40 – 4446 –52Expected deterioration in market outlook due to the impact of COVID-19. Energy coal production (Mt) 22 – 24NSWEC: 15 – 17 Mt; Cerrejón: ~7 Mt. Capital and exploration expenditure (US$bn) 0.7 Queensland Co
Slide 45: Key Underlying EBITDA sensitivities
Key Underlying EBITDA sensitivities Approximate impact1 on FY21 Underlying EBITDA of changes of: US$ million US$1/t on iron ore price2 233 US$1/bbl on oil price3 32 US$1/t on metallurgical coal price 37 US¢1/lb on copper price2 32 US$1/t on energy coal price2 16 US¢1/lb on nickel price 1.6 AUD (US¢1
Slide 46: Ore Reserves—Competent Person Statement
Ore Reserves—Competent Person Statement Competent Person Statement The information in this presentation that relates to Nickel West Ore Reserves estimate as at 30 June 2020 is based on information prepared by the Competent Persons for each deposit in accordance with the Australian Securities Exchang
Slide 47: Nickel West Total FY2011 to FY2020 Ore Reserves
Nickel West Total FY2011 to FY2020 Ore Reserves (100% basis) Financial Proved Ore Reserves (Mt) Probable Ore Reserves(Mt) Total Ore ReservesBHP Deposit Year Interest Mt %NiMt%NiMt%NiktNi % Nickel West 2020 194 0.57820.782760.631740100 2019 182 0.57770.732580.611580100 2018 78 0.60520.731300.66852100
Slide 48: Footnotes
Footnotes 1. Slide 7: High Potential Injury frequency: number of injuries from events where there was the potential for a fatality per million hours worked, presented on a total operations basis. 2. Slide 7: Based on the copper equivalent for major assets (Queensland Coal, WAIO, Petroleum and Escond
Slide 49: BHP
BHP SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BHP Group Limited and BHP Group Plc Date: August 18, 2020 By: /s/ Caroline Cox Name: Caroline Cox T