REG - BHP Group Limited - Results for the half year ended 31 December 2021
15/02/2022 07:00
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RNS Number : 6553B BHP Group Limited 15 February 2022
Release Time IMMEDIATE
Date 15 February 2022
Number 08/22
BHP RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2021
Note: All guidance is subject to further potential impacts from COVID-19
during the 2022 financial year.
Keeping our people and communities safe
- We achieved our third consecutive year fatality free.
- Our focus on safety and health has helped us to mitigate the impacts of
COVID-19 and deliver continued strong operational performance.
Margin of 64%, higher realised prices, disciplined cost performance and near
record production at Western Australia Iron Ore (WAIO)
· Profit from operations of US$14.8 billion, up 50%. Underlying
EBITDA((i)) of US$18.5 billion at a margin((i)) of 64% for continuing
operations. Disciplined cost performance, with unit cost guidance reiterated
(at guidance exchange rates((ii))) with the exception of Queensland Coal which
has increased, reflecting lower expected volumes for the full year as a result
of significant wet weather and labour constraints.
· Attributable profit of US$9.4 billion and Underlying attributable
profit((i)) of US$10.7 billion up 77% from the prior period for total
operations.
- Net operating cash flow of US$11.5 billion and free cash flow((i)) of US$8.5
billion for continuing operations reflects higher realised prices across our
major commodities and reliable operational performance.
Disciplined capital allocation and a revised net debt target to between US$5
and US$15 billion
- Capital and exploration expenditure((i)) of US$2.9 billion for continuing
operations. Guidance for minerals capital and exploration expenditure for the
full year has decreased by US$0.2 billion to US$6.5 billion as a result of
favourable exchange rate movements.
- Our potash developments are tracking to plan. The Jansen shaft project is
98% complete and the Jansen Stage 1 project has commenced contract awards.
- We have added to our early stage growth options in future facing commodities
by executing agreements for interests in additional Australian copper projects
in October 2021, including the Elliott project in the Northern Territory, and
investing in the Kabanga Nickel Project in Tanzania in December 2021.
- Our commitment to a strong balance sheet remains. We have revised our net
debt target range to between US$5 and US$15 billion. The revised range will
support a resilient balance sheet and retain the flexibility to allocate
capital towards shareholder returns and future organic and inorganic
investment opportunities. Net debt((i)) at 31 December 2021 was US$6.1
billion.
Value and returns: Record interim dividend of US$1.50 per share and Underlying
ROCE up to 39.5%
- We will pay a record interim dividend of US$1.50 per share or US$7.6
billion, equivalent to a 78% payout ratio((iii)).
- Underlying return on capital employed((i)) strengthened further to 39.5% for
total operations.
Strategic actions progressing to plan
- In January 2022, BHP completed the unification of BHP's dual listed
corporate structure.
- The Cerrejón divestment to Glencore completed in January 2022 and the
announced share sale agreement to divest BHP Mitsui Coal (BMC) is expected to
complete in the middle of the 2022 calendar year. The review process for New
South Wales Energy Coal (NSWEC) is progressing, in line with the two-year
timeframe we set last year.
1
- Completion of the proposed merger of our Petroleum business with Woodside is
expected in the June 2022 quarter subject to satisfaction of conditions
precedent including approval by Woodside shareholders.
Results for the half year ended 31 December 2021
The December 2021 half year financial results have been prepared on the basis
that the BHP Petroleum business is a discontinued operation. The financial
contribution of Petroleum entities impacted has been disclosed as separate
line items, "Discontinued operations", in the BHP Group's Consolidated Income
statement and Consolidated Cash flow statement, and has not been included when
calculating the minimum dividend payout. BMC will continue to be consolidated
with Queensland Coal as a continuing operation until the expected completion
in the middle of the 2022 calendar year. On the Consolidated Balance Sheet,
both BMC and BHP Petroleum have been reclassified as assets held for sale and
excluded from net operating assets.
Half year ended 31 December 2021 2020 Change
US$M US$M %
Total operations
Attributable profit 9,443 3,876 144%
Basic earnings per share (cents) 186.6 76.6 144%
Interim dividend per share (cents) 150.0 101.0 49%
Net operating cash flow 13,277 9,369 42%
Capital and exploration expenditure 3,677 3,614 2%
Net debt 6,090 11,839 (49%)
Underlying attributable profit 10,687 6,036 77%
Underlying basic earnings per ordinary share (cents)((i)) 211.2 119.4 77%
Continuing operations
Profit from operations 14,845 9,889 50%
Underlying EBITDA 18,463 13,887 33%
Underlying attributable profit 9,715 6,200 57%
Net operating cash flow 11,529 9,148 26%
Capital and exploration expenditure 2,878 2,921 (1%)
Underlying basic earnings per ordinary share (cents) 192.0 122.6 57%
Underlying EBITDA including the contribution from Petroleum assets classified 21,381 14,680 46%
as discontinued operations
BHP Chief Executive Officer, Mike Henry:
"BHP had a strong first half. We achieved our third consecutive fatality free
calendar year. We mitigated the impacts of COVID-19 and significant adverse
weather events to turn in a solid operational performance, particularly from
our flagship Western Australian Iron Ore business.
We have announced an interim dividend of US$1.50 per share, bringing total
shareholder returns to more than US$22 billion over the past 18 months.
Our record interim dividend was supported by our reliable operating
performance and continued strong markets for a number of our products.
We have made strong progress on the execution of our strategy. We unified the
BHP corporate structure with strong support from shareholders, we announced
and advanced the proposed merger of our petroleum business with Woodside, we
progressed our divestments of certain coal assets and we announced the final
investment decision for our Jansen Stage 1 potash project. We have also
secured further growth options in future facing commodities.
BHP is well positioned for the future. We are building on our strong
foundations and capital discipline to reshape our business and grow long-term
value for shareholders and other stakeholders."
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Health and safety
The safety, health and wellbeing of our workforce and the communities in which
we operate are fundamental priorities for our business. Our global safety
improvement programs are progressing and our safety leading indicators have
continued a strong underlying positive trend. We have now achieved our third
consecutive year without a fatality and we have seen a sustained improvement
in our key safety performance indicators. High Potential Injury frequency has
decreased by 10 per cent during the half year, a reduction of 36 per cent
since 31 December 2018. Total Recordable Injury Frequency has increased
slightly, up three per cent during the half year to 3.8, but is 12 per cent
lower over the last three years.
Community transmission of COVID-19 has increased in the jurisdictions in which
we operate. We remain vigilant and continue to escalate or deescalate controls
taking into account the prevailing risk as well as guidelines from local and
national government bodies and expert health advice in the countries where we
operate. Many of these measures remain in an elevated state at present. BHP is
strongly encouraging workers who have received their first and second doses of
COVID-19 vaccines to receive a booster dose as soon as they are eligible to do
so. In Western Australia, a public health direction requires, from 5 February
2022, the majority of resource industry workers to receive a booster dose
within one month of becoming eligible, and BHP is actively considering whether
to make boosters a requirement for entry to BHP workplaces in other locations.
We are firmly committed to eliminating incidents of sexual assault and sexual
harassment in our workplaces and accommodation villages, and have strengthened
our approach to prevention, reporting and response. We have made significant
progress in implementing controls to prevent incidents of sexual assault and
sexual harassment and to mitigate the impact of incidents that do occur. Areas
of focus include increased clarity and enforcement of respectful and safe
workplace behaviours, leadership and education, contractor and third-party
engagement, security measures at our accommodation villages and support for
impacted persons. We also have ongoing engagement with external experts to
learn from best practice.
Social value
We are committed to creating long-term sustainable value for shareholders and
all those who benefit from, or are impacted by, BHP's business. Social value
and long-term financial value are intrinsically linked. We seek out
opportunities that grow both social and financial value. Our focus on social
value positions us to maximise our contribution more broadly to society - to
our employees and contractors, customers and suppliers, governments,
Indigenous stakeholders and other communities.
We demonstrate social value through multiple dimensions - in our operational
and business performance and how we achieve it, in our setting and achieving
of high standards of Environmental, Social and Governance (ESG) practices, and
in the nature of our relationships with stakeholders. Social value is not
merely a concept or an intent; it involves continued planned delivery of
tangible outcomes. Over the course of the first half of the 2022 financial
year, among other outcomes, we continued to advance social value in a range of
areas including in our interactions with small and medium business
enterprises, in supporting workforce skills development, in Indigenous
partnerships and on decarbonisation.
Empowered communities
We are committed to contributing to the prosperity of the communities where we
have a presence. We have continued to support local and Indigenous communities
with additional funds to boost COVID-19 vaccine awareness and accessibility.
We continue to support local business and training to enhance economic
recovery and diversification. From 1 July 2021, we reduced our payment terms
for small, local and Indigenous enterprises to 7 days. This came into effect
across 31 countries and benefited over 4,000 suppliers.
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We recognise that building capacity and skills is a critical element in the
long-term ability of local communities to prosper and thrive. BHP partnered
with the Australian Government Department of Education, Skills and Employment
to deliver up to 1,000 skills development opportunities in regional Australia,
through our voluntary social investment program. Through the Future of Work
Program we are working with stakeholders to identify local workforce and
business needs in regional areas, and tailoring training opportunities
accordingly. The program provides opportunities to unemployed, young and
Indigenous Australians across the regions where BHP operates to develop skills
and better access employment. It also helps small, medium and Indigenous-run
businesses to upskill employees, including skills to work in a digital
environment, taking advantage of new opportunities we expect to be created
through the economic recovery.
We also fund the BHP Foundation, which continues to work with partner
organisations globally to address some of the world's most critical
sustainable development challenges. These efforts are designed to address
challenges that are directly relevant to the global resources sector and
contribute towards many of the United Nations Sustainable Development Goals
focusing on the governance of natural resources, environmental resilience and
education equity. The BHP Foundation's global partnerships extend across 32
projects and 49 countries, including 'Opening Extractives', led by Extractive
Industries Transparency Initiative (EITI) and Open Ownership, supporting
governments to transform the availability and use of beneficial ownership data
for effective governance in the extractives sector and helping to end the use
of anonymous companies; and the 10 Deserts Project which has established the
world's largest network of Indigenous-managed conservation areas spanning more
than 35 per cent of Australia. Further information can be found at:
bhp.com/foundation (http://www.bhp.com/foundation) .
Inclusion
We are progressing a number of improvements to ensure our workplaces are
culturally safe, free from any form of harassment, racial discrimination and
vilification, or bullying. This includes ensuring that allegations of racial
discrimination and vilification are investigated by BHP's Central
Investigations Team, which is separate to the functional or operational area
of occurrence. A decision was taken in September 2020 that all allegations of
racial discrimination and vilification are to be assigned to the most serious
investigation category. We are also taking steps to address racial pay
disparity. In the US, we have piloted a survey that included information on
ethnic background. This supported a pay equity review and resultant
adjustments. We are in the process of rolling the survey out company-wide in
the 2022 calendar year. In our Commercial function based in Singapore, we have
increased our Asian leadership from 43 per cent in May 2021 to 54 per cent in
December 2021. We will continue to work with our people, industry peers and
external experts to lift our performance and that of the industry.
Gender diversity
We continue to build a more inclusive and diverse workforce that better
reflects the communities in which we operate and further enhances performance.
This includes our aspirational goal of a gender balanced workforce by the end
of the 2025 financial year. In the first half of the 2022 financial year, 46
per cent of our external hires were female, which has resulted in a further
increase of female representation in the workforce, up 0.8 percentage points
to 30.6 per cent. The Executive Leadership Team established in the 2020
calendar year is gender balanced.
Indigenous partnerships
We recognise the connection of Indigenous peoples to the land and water, and
we seek to recognise this by listening, learning and building shared
understandings and objectives. Our approach to cultural heritage focuses on
building and maintaining genuine and mutually beneficial partnerships with
Indigenous peoples and is driven by the commitments made in our Indigenous
Peoples Policy Statement, our Indigenous Peoples Strategy and our Regional
Indigenous Peoples plans, including the Australian Reconciliation Action Plan.
These plans include key targets for increasing Indigenous representation in
the workforce and engaging with Indigenous businesses. Indigenous
representation has increased across all operating regions and BHP has spent
over US$69 million in the December 2021 half year with Indigenous and First
Nation's businesses globally.
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During the half year, we continued to work with Indigenous groups and
representative organisations to further strengthen our cultural heritage
management practices. We recognise our responsibility to respect and sustain
the cultural landscapes in which we operate and work in partnership to ensure
we respect the rights of the Indigenous peoples who are its custodians. We
also continue to support efforts to further strengthen the laws, policies and
practices that regulate the management of cultural heritage values. In August
2021, and after a year of negotiations, the Barada Barna Aboriginal
Corporation, on behalf of the Barada Barna people, and BMC signed a Native
Title Project Agreement for South Walker Creek Mine in Central Queensland.
Our progress on decarbonisation
Climate Transition Action Plan
In September 2021, we released our Climate Transition Action Plan (CTAP),
which was strongly supported by shareholders through the non-binding advisory
'Say on Climate' shareholder vote at our Annual General Meetings in 2021. The
CTAP outlines BHP's updated approach to reducing greenhouse gas (GHG)
emissions and managing climate risks across our global value chain, including
the detail of our value chain (Scope 3) net zero goal.
We expect our diversified portfolio to be resilient under a number of
different long-term scenarios, and we continue to pursue opportunities to
further strengthen our portfolio and our exposure to long-term decarbonisation
trends.
Our progress on operational decarbonisation (Scope 1 and Scope 2)
We have made progress on actions required to meet our medium-term target and
long-term goal to reduce operational emissions. In January 2022, Escondida and
Spence completed the transition to four renewable power contracts to increase
flexibility for our power portfolio, as part of our continued aim to supply
Escondida and Spence's energy requirements from 100 per cent renewable energy
sources by the mid-2020s.
In Australia, Olympic Dam partnered with Iberdrola at the Port Augusta
Renewable Energy Park to reduce Olympic Dam's emissions position to zero from
50 per cent of its electricity consumption by 2025, based on current forecast
demand. This follows BHP's entry into renewable energy agreements for our
operations in Nickel West in 2021 and Queensland Coal in 2020.
To support our goal to achieve net-zero operational GHG emissions by 2050, BHP
has become a founding member of Komatsu's GHG Alliance, which aims to develop
commercially viable zero-greenhouse gas emissions haul trucks. We are also
working in partnership with Caterpillar Inc. to accelerate their development
and deployment of zero-emissions mining trucks at BHP operations.
Our progress on value chain decarbonisation (Scope 3)
We have made progress on actions to support the reduction of value chain
emissions through partnerships with our customers. COP26 in Glasgow
highlighted the increasing importance on collaboration for 'breakthrough'
discoveries, particularly in steelmaking. In October 2021, BHP announced the
signing of a Memorandum of Understanding (MoU) with South Korea's POSCO, one
of the world's largest steelmakers, to undertake pilot and plant trials to
reduce emissions in the steelmaking process. This, combined with other MoUs,
means we now have partnerships with major steelmakers with a combined output
of approximately 12 per cent of reported global steel production. In November
2021, we officially joined the Global Low-carbon Metallurgical Innovation
Alliance, with the aim of boosting the global steel industry's low-carbon
transformation. The alliance, initiated by China Baowu Steel Group, is
comprised of 62 enterprises, colleges and universities and scientific research
institutions from 15 countries.
5
In the first half of the 2022 financial year, we also announced a
collaboration with Tesla Inc. to make the nickel-based battery supply chain
more sustainable, with a focus on end-to-end raw material traceability using
blockchain technology. BHP also entered into a MoU with Toyota Tsusho
Corporation and Japan's Prime Planet Energy & Solutions to create a Green
Electric Vehicle Ecosystem that will seek to enhance sustainability,
recyclability and traceability, starting with nickel sulphate supply.
In maritime, BHP signed the Call to Action for Shipping Decarbonisation to
urge world leaders to align shipping with the goals of the Paris Agreement.
This is one dimension of our commitment to maritime decarbonisation, which
includes our new target, announced in September 2021, of net zero by 2050 for
greenhouse gas emissions from all shipping of our products by 2050, subject to
the widespread availability of carbon neutral solutions, including
low/zero-emission technology on board suitable ships and low/zero-emission
marine fuels((iv)).
Value chain stewardship
BHP was awarded the Copper Mark for Escondida, Spence and Olympic Dam. The
Copper Mark is an assurance framework specific to the copper industry,
developed to ensure that value chain participants demonstrate best practice in
responsible production and contribute to the United Nations' Sustainable
Development Goals. Additionally, BHP and leading US copper cable and wire
manufacturer, Southwire, have completed their first 'carbon neutral'((v))
copper transaction involving delivery from BHP's mines in Chile to Southwire's
processing activities in Georgia, United States.
Environmental performance
We are on track to achieve our five-year target to reduce FY22 fresh water
withdrawal by 15 per cent from FY17 levels.
The importance of the intersection between biodiversity and climate effects
was noted at several major intergovernmental meetings in 2021. A new US$3.3
million research program by BHP and CSIRO, Australia's national science
agency, will seek to measure and quantify the net emissions reduction
potential of Australia's mangroves, seagrasses and tidal marshes, which can
absorb carbon faster than land-based forests. They also provide coastal
communities with essential benefits for coastal protection, fish production
and biodiversity. This project aims to develop metrics to measure these
benefits for incorporation into Australian and international standards.
As part of BHP's commitment to contribute to environmental resilience and
biodiversity outcomes in a collaborative way, BHP joined the Taskforce on
Nature-related Financial Disclosures (TNFD) Forum, a global multi-disciplinary
consultative group of institutions seeking to develop and deliver a
natured-based risk management and disclosure framework. It aims to support a
shift in global financial flows away from nature-negative outcomes and toward
nature-positive ones.
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Social value: key indicators scorecard((1))
Target H1 H2 H1 FY21 Comment
FY22
FY21
FY21
Fatalities Zero work-related fatalities 0 0 0 0 No fatalities at our operated assets over the last 36 months.
High Potential Injury (HPI) frequency((vi)) (per million hours worked) Year-on-year improvement in HPI frequency 0.18 0.20 0.20 0.20 36 per cent reduction since 31 December 2018.
TRIF((vi)) Year-on-year improvement in TRIF 3.8 3.7 3.6 3.7 12 per cent reduction over the last three years.
(per million hours worked)
Operational greenhouse gas (GHG) emissions((vi)) Maintain FY22 operational GHG emissions at or below FY17 levels((2)(3)) while 6.8 8.0 8.2 16.2 On track to meet our FY22 and FY30 targets with the reductions in emissions
(Mt CO(2)-e) we continue to grow our business and reduce emissions by at least 30 per cent from renewable power contracts at Escondida, Spence, Queensland Coal, Nickel
from FY20 levels((3)) by FY30 West and Olympic Dam.
Value chain emissions((vi)) Steelmaking: 2030 goal to support industry to develop technologies and On track to deliver 2030 goal with MoU with South Korea's POSCO signed in H1
pathways capable of 30 per cent emissions intensity reduction in integrated FY22.
steelmaking, with widespread adoption expected post-2030
Maritime transportation: 2030 goal to support 40 per cent emissions intensity On track to deliver 2030 goal.
reduction of BHP-chartered shipping of our products
Freshwater withdrawals((vi)) (GL) Reduce FY22 freshwater withdrawals by 15 per cent from FY17 levels((4)) 55.3 60.9 52.6 113.5 On track to meet our five-year target.
Community and social investment No less than one per cent of pre-tax profit (three-year rolling average) 46.9 144.3 30.5 174.8 On track to deliver our target.
(US$M)
Local procurement spend Support the growth of local businesses in the regions where we operate 1,172 1,064 1,112 2,176 Over US$1.9 billion directed to local suppliers in each of the past two
financial years.
(US$M)
Female workforce participation((vi)) (%) Aspirational goal for gender balance by the end of FY25 30.6 29.8 27.4 29.8 74 per cent increase from FY16((5)), with 46 per cent female external hires in
H1 FY21.
Indigenous workforce participation((vi)) (%) Australia: aim to achieve 8.0 per cent by the end of FY25 8.0 7.2 6.7 7.2 Assets continue to focus on Indigenous employment.
Chile: aim to achieve 10.0 per cent by the end of FY26 8.5 7.5 6.8 7.5 Assets continue to focus on Indigenous employment.
Canada - Potash: aim to achieve 20.0 per cent by the end of FY27 13.7 13.7 12.8 13.7 Assets continue to focus on Indigenous employment.
(1) All data points are presented on a total operations basis and are
subject to non-financial assurance reviews. Some previously reported data
points have been re-stated as a result of audit and assurance reviews
completed subsequent to release of information or reclassification. Re-stated
figures are shown in italics.
(2) In FY17, our operational GHG emissions were 14.6 Mt CO(2)-e (excluding
Onshore US). Greenhouse gas emissions are subject to final sustainability
assurance review.
(3) FY17 and FY20 baselines will be adjusted for any material acquisitions
and divestments based on GHG emissions at the completion of the transaction.
Carbon offsets will be used as required.
(4) In FY17, our fresh water withdrawals were 156.1 GL (on an adjusted
basis, excluding Onshore US). The FY17 baseline data has been adjusted to
account for: the materiality of the strike affecting water withdrawals at
Escondida in FY17 and improvements to water balance methodologies at WAIO and
Queensland Coal and exclusion of hypersaline, wastewater, entrainment,
supplies from desalination and Discontinued operations (Onshore US assets) in
FY19 and FY20.
(5) In FY16, our female representation was 17.6%.
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Samarco
BHP Brasil remains committed to Samarco supporting the Renova Foundation and
its work to progress the remediation and compensatory programs to restore the
environment and re-establish communities affected by the Fundão dam failure,
as set out in the Framework Agreement entered into in March 2016 by BHP
Brasil, Samarco, Vale and relevant Brazilian authorities.
In total, Renova has spent R$19.6 billion (approximately US$4.2
billion((vii))) on remediation and compensation programs to 31 December 2021.
Compensation and financial assistance increased to a total of approximately
R$8.7 billion (approximately US$1.8 billion((vii))) in payments to support
approximately 370,000 people affected by the Fundão dam failure. This
includes approximately 51,200 payments paid through the court-mandated "Novel
System". Resettlement of communities continues to progress, with 128
resettlement cases across the region completed, and a further 176 in progress,
through construction of houses and public buildings, allocation of plots or
cash payments.
Negotiations are ongoing with State and Federal Prosecutors and other
Brazilian public authorities on the review of the Framework Agreement, seeking
a definitive and substantive settlement of claims relating to the dam failure.
In October 2021, the 12th Federal Court delivered a ruling that expanded the
scope of eligible individuals of the court mandated compensation process
("Novel System"), extended its geographical scope and increased
indemnification amounts for certain categories of damage. While the decision
is under appeal and applications have been made to clarify certain aspects of
the ruling, the ruling has been considered in determining the cost estimates
that form the basis of the Group's dam failure provision as at 31 December
2021. The Group's provisions related to the Samarco dam failure have increased
by US$327 million since 30 June 2021, to a total of US$3.1 billion as at 31
December 2021.
In the December 2021 half year, BHP reported an exceptional loss of US$821
million (after tax) in relation to the Fundão dam failure. This predominantly
reflected an increase in cost estimates for the Samarco dam failure provision,
primarily as a result of the 12th Federal Court's decision and fair value
change on forward exchange derivatives. Additional commentary is included on
page 47.
Samarco's Judicial Reorganisation process is continuing in the Commercial
Courts of Belo Horizonte, State of Minas Gerais. The Judicial Reorganisation
is a process for Samarco to restructure its financial debts in order to
establish a sustainable independent financial position that would allow
Samarco to continue its operations safely and meet its Renova Foundation
obligations. BHP Brasil will continue to support Samarco in this process.
8
Financial performance
Note: All guidance is subject to further potential impacts from COVID-19
during the 2022 financial year
Earnings and margins
· Attributable profit of US$9.4 billion includes an exceptional
loss of US$1.2 billion (31 December 2020: US$3.9 billion, which included an
exceptional loss of US$2.2 billion).
· The exceptional loss of US$1.2 billion (after tax) relates to the
current half year impact of the Samarco dam failure of US$821 million as well
as an impairment of US deferred tax assets no longer expected to be
recoverable after the Petroleum demerger of US$423 million.
· Underlying attributable profit of US$10.7 billion for total
operations (31 December 2020: US$6.0 billion) was underpinned by disciplined
cost performance across our operations.
· Profit from operations (continuing operations) of US$14.8 billion
(31 December 2020: US$9.9 billion) increased as a result of higher sales
prices across our major commodities, near record production at WAIO and higher
concentrate sales at Spence, and favourable exchange rate movements. This was
partially offset by the impacts from planned maintenance across a number of
our assets, expected copper grade decline at Escondida, significant wet
weather at Queensland Coal and inflationary pressures, including higher fuel,
energy and consumable prices.
· The total impact from COVID-19 on our operations was US$223
million (pre-tax) (31 December 2020: US$405 million). This represents the
following impacts: lower volumes at our operated assets of US$69 million
(31 December 2020: US$138 million) and direct costs of US$154 million
incurred (31 December 2020: US$267 million, reported as an exceptional item),
such as social distancing measures including additional charter flights,
accommodation, security and health and hygiene services and also temporary
relocation costs due to border restrictions, combined with higher demurrage
and other standby charges due to delays caused by COVID-19.
· Underlying EBITDA (continuing operations) of US$18.5 billion (31
December 2020: US$13.9 billion), with an increased EBITDA margin (continuing
operations) of 64 per cent (31 December 2020: 60 per cent). Additional
commentary is included on page 15.
· Underlying return on capital employed strengthened to 39.5 per
cent (31 December 2020: 23.6 per cent). Underlying return on capital employed,
excluding Petroleum, is approximately 42.9 per cent.
Costs
· Full year unit cost guidance for WAIO and Escondida remains
unchanged (based on exchange rates of AUD/USD 0.78 and USD/CLP 727). Unit cost
guidance for Queensland Coal has been increased, reflecting lower expected
volumes for the full year as previously announced.
· Unit costs((i)) at WAIO are below guidance at the half year
(based on an exchange rate of AUD/USD 0.78) and are tracking towards the lower
end of the guidance range on a full year basis. WAIO unit costs, on a C1 basis
excluding third party royalties, were 18 per cent higher than the prior period
at US$14.74 per tonne (31 December 2020: US$12.46 per tonne) driven by higher
diesel prices (US$0.84 per tonne) and costs associated with the South Flank
ramp up (US$0.82 per tonne).
· Escondida unit costs were at the top end of the guidance range
(based on an exchange rate of USD/CLP 727) and reflect the planned lower
concentrator feed grade. Concentrator feed grade is expected to improve in the
June 2022 half year as the mine sequence moves towards higher grade areas.
9
· Queensland Coal unit costs are tracking above the revised
guidance range at the half year (based on an exchange rate of AUD/USD 0.78)
primarily due to lower volumes in the first half due to significant wet
weather impacts and labour constraints. A stronger second half performance is
expected following planned maintenance undertaken in the first half, however
COVID-19 related absenteeism impacts remain a risk for the second half of the
2022 financial year.
10
· Historical costs and guidance for our major assets are summarised
below:
H1 FY22 at
Medium-term FY22 guidance realised H1 FY21((3)) H1 FY22((2))
guidance((1))
guidance((1))
exchange
exchange
rates((1))
rates((2)) vs
H1 FY21((3))
Escondida unit cost (US$/lb) <1.10 1.20 - 1.40 1.40 1.29 0.90 43%
WAIO unit cost (US$/t)((4)) <16 17.50 - 18.50 17.38 16.15 14.38 12%
Queensland Coal unit cost (US$/t)((5)) −((6)) 85 - 94 98.63 91.39 84.92 8%
Discontinued operations
Petroleum unit cost (US$/boe) −((7)) −((7)) 10.82 10.51 10.30 2%
(1) FY22 and medium-term unit cost guidance are based on exchange rates of
AUD/USD 0.78 and USD/CLP 727.
(2) Average realised exchange rates for H1 FY22 of AUD/USD 0.73 and
USD/CLP 798.
(3) H1 FY21 unit costs exclude the impact from COVID-19 which was reported
as an exceptional item.
(4) WAIO unit costs exclude freight and government royalties. C1 unit
costs, excluding third party royalties, are detailed on page 22.
(5) We announced the share sale agreement to divest our interest in BMC in
November 2021, however we will continue to report BMC as part of Queensland
Coal and we maintain economic and operating control of BMC until the sale has
completed.
(6) Coal imports into China remains uncertain and as a result Queensland
Coal medium-term unit cost guidance is not able to be provided.
(7) Given our announcement of a binding share sale agreement for the
proposed merger of BHP's oil and gas portfolio with Woodside in November 2021,
no further unit cost guidance for Petroleum will be provided.
· Production and guidance are summarised below:
Production Medium-term guidance FY22 H1 FY22 H1 FY21 H1 FY22 vs
guidance
H1 FY21
Copper (kt) 1,590 - 1,760 Low end 742 841 (12%)
Escondida (kt) ~1,200((1)) 1,020 - 1,080 Narrowed range 488 572 (15%)
Other copper((2)) (kt) 520 - 590 Lowered 254 269 (5%)
Iron ore (Mt) 249 - 259 Unchanged 129 128 1%
WAIO (Mt) 246 - 255 Unchanged 127 128 (1)%
WAIO (100% basis) (Mt) 290((3)) 278 - 288 Unchanged 144 145 0%
Samarco (Mt) 3 - 4 Unchanged 2 0 >100%
Metallurgical coal (Mt)((4)) −((5)) 38 - 41 Lowered 18 19 (8%)
Queensland Coal (100% basis) (Mt) 68 - 72 Lowered 31 34 (10%)
Energy Coal - NSWEC (Mt) 13 - 15 Unchanged 7 7 5%
Energy Coal - Cerrejón (Mt) −((6)) 4 1 >100%
Nickel (kt) 85 - 95 Unchanged 40 46 (15%)
Discontinued operations
Petroleum (MMboe) −((7)) −((7)) 53 50 5%
(1) Represents annual average copper production over the medium term.
(2) Other copper comprises Pampa Norte, Olympic Dam and Antamina.
(3) In September 2021, WAIO received regulatory approval to increase
capacity at its Port Hedland operations to 330 Mtpa (100 per cent basis),
subject to the outcomes of a standard appeals processes. Our near-term focus
remains on sustainable achievement of 290 Mtpa, with plans to creep beyond
this through productivity improvements in the medium term.
(4) We announced the share sale agreement to divest our interest in BMC in
November 2021, however we will continue to report BMC as part of Queensland
Coal and we maintain economic and operating control of BMC until the sale has
completed.
(5) Coal imports into China remains uncertain and as a result Queensland
Coal medium-term production guidance is not able to be provided.
(6) We have ceased providing Cerrejón production guidance due to the
completion of the divestment of our interest. The transaction has an effective
economic date of 31 December 2020 and volumes have been reported separately.
(7) Given our announcement of a binding share sale agreement for the
proposed merger of BHP's oil and gas portfolio with Woodside in November 2021,
no further annual production guidance for Petroleum will be provided. However,
until merger completion, we expect a production run rate broadly consistent
with the original FY22 production guidance of between 99 and 106 MMboe.
11
Cash flow and balance sheet
· Net operating cash flows (continuing operations) of US$11.5
billion (31 December 2020: 9.1 billion) reflects strong prices across our
major commodities and a reliable operating performance during the period. This
includes an unfavourable working capital movement of US$2.2 billion largely
related to inventory builds, net price impacts on receivables and royalties,
and other movements. Income tax and royalty-related taxation payments of
US$5.0 billion include approximately US$2.0 billion of tax instalments and
final tax payments relating to the 2021 financial year.
· Free cash flow (continuing operations) of US$8.5 billion for the
half year (31 December 2020: US$5.9 billion), and free cash flow of US$9.7
billion (total operations), inclusive of capital and exploration expenditure
of US$3.7 billion.
· Our balance sheet remains strong with net debt at US$6.1 billion
at 31 December 2021 (30 June 2021: US$4.1 billion; 31 December 2020: US$11.8
billion). The increase of US$2.0 billion in net debt in the half year (or a
decrease of US$5.7 billion from 31 December 2020) reflects strong free cash
flow generation by the operations more than offset by the record final
dividend paid to shareholders in September 2021 of US$10.0 billion, dividends
paid to non-controlling interests of US$1.3 billion and US$0.5 billion of
lease additions.
H1 FY22 H1 FY21
US$M US$M
Net debt at the beginning of the period 4,121 12,044
Lease additions 497 909
Free cash flow (9,688) (5,160)
Dividends paid 10,029 2,767
Dividends paid to NCI 1,273 762
Transfer to liability directly associated with assets held for sale (528) −
Other movements 386 517
Net debt at the end of the period 6,090 11,839
· Following a review of the net debt target, we have revised the
range to between US$5 and US$15 billion from the previous target range of
between US$12 and US$17 billion. The revised net debt target range will enable
BHP to maintain a resilient balance sheet during periods of change and
external uncertainties and retain flexibility to allocate capital within our
Capital Allocation Framework towards shareholder returns and future organic
and inorganic investment opportunities.
· Gearing ratio((i)) of 10.0 per cent (30 June 2021: 6.9 per cent;
31 December 2020: 18.1 per cent).
Dividends
· We will pay a record interim dividend of US$1.50 per share or
US$7.6 billion, including an additional amount of US$2.7 billion above the
minimum payout policy. This is equivalent to a 78 per cent payout ratio((iii))
(31 December 2020: 85 per cent).
· We have consistently delivered high cash returns, with more than
US$22 billion of total announced returns to shareholders over the last 18
months.
Capital and exploration
· Capital and exploration expenditure of US$3.7 billion (total
operations) in the December 2021 half year included maintenance
expenditure((viii)) of US$1.1 billion, minerals exploration of US$0.1 billion
and Petroleum expenditure of US$0.8 billion.
· Capital and exploration expenditure of approximately US$6.5
billion (continuing operations) is now expected for the 2022 financial year.
This is US$0.2 billion lower than previous guidance predominantly due to
favourable exchange rate movements. Guidance is subject to exchange rate
movements.
12
· Historical capital and exploration expenditure and guidance are
summarised below:
FY22e H1 FY22 H1 FY21 FY21
US$M
US$M
US$M
US$M
Maintenance((1)) 2,800 1,090 1,034 2,259
Development - Minerals 3,500 1,678 1,801 3,353
Capital expenditure (purchases of property, plant and equipment) 6,300 2,768 2,835 5,612
Add: exploration expenditure 200 110 86 192
Capital expenditure - Continuing operations 6,500 2,878 2,921 5,804
Capital expenditure - Discontinued operations −((2)) 799 693 1,316
Capital and exploration expenditure - Total operations − 3,677 3,614 7,120
(1) Includes capitalised deferred stripping of approximately US$800
million for FY22 and US$409 million for H1 FY22 (H1 FY21: US$396 million;
FY21: $810 million).
(2) Given our announcement of a binding share sale agreement for the
proposed merger of BHP's oil and gas portfolio with Woodside in November 2021,
no further capital and exploration guidance for Petroleum will be provided.
· Average annual sustaining capital expenditure guidance over the
medium term, excluding costs associated with carbon abatement and our
automation programs, is unchanged and forecast to be approximately:
‒ US$4.50 per tonne for WAIO; and
‒ US$10 per tonne for Queensland Coal.
· Capital expenditure on decarbonisation is expected to be at the
upper end of the guidance range of between US$2 to US$4 billion until the
2030 calendar year.
Projects
· At the end of December 2021, BHP had two major projects under
development, the US$2.97 billion Jansen mine shafts project and the US$5.7
billion Jansen Stage 1 project.
13
· Major projects are summarised below:
Commodity Project and ownership Project scope / capacity((1)) Capital Date of initial production Progress / comments
expenditure((1))
US$M
Budget Target
Projects in execution at 31 December 2021 - continuing operations
Potash Jansen Potash((2)) Investment to finish the excavation and lining of the production and service 2,972 CY27 The project is 98% complete. Target project completion in
shafts, and to continue the installation of essential surface infrastructure
(Canada) and utilities. CY22
100%
Potash Jansen Stage 1 Design, engineering and construction of an underground potash mine and surface 5,723 CY27 Approved in August 2021, the project is 3% complete.
infrastructure, with capacity to produce 4.35 Mtpa.
(Canada)
100%
Projects in execution at 31 December 2021 - discontinued operations
Petroleum Mad Dog Phase 2 New floating production facility with the capacity to produce up to 140,000 2,154 CY22 On schedule and budget. The overall project is 97% complete.
(US Gulf of Mexico) gross barrels of crude oil per day.
23.9% (non-operator)
Petroleum Shenzi North development (US Gulf of Mexico) 72% (operator) A two-well subsea tie-in to the Shenzi platform, with the capacity to produce 392 CY24 On schedule and budget. The overall project is 5% complete.
up to 30,000 gross barrels of oil equivalent per day.
Petroleum Scarborough (Western Australia) 26.5% (non-operator) New upstream facilities designed to deliver daily gas quantities to 1,500 CY26 Sanctioned in November 2021.
manufacture 8 Mtpa LNG and 180 TJ/day of domestic gas.
On schedule and budget.
The overall project is 10% complete.
(1) Unless noted otherwise, references to capacity are on a 100 per cent
basis, references to capital expenditure from subsidiaries are reported on a
100 per cent basis and references to capital expenditure from joint operations
reflect BHP's share.
(2) Capital expenditure of approximately US$120 million is expected for
FY22.
· On 7 September 2021, BHP received regulatory approval to increase
capacity at our Port Hedland operations up to 330 Mtpa (100 per cent basis),
subject to the outcomes of standard appeals processes. Our near-term focus
remains on sustainable achievement of 290 Mtpa of iron ore, with plans to
creep beyond this through productivity improvements in the medium term.
· We continue to progress with the implementation of autonomous
trucks across our Australian iron ore and coal mine sites.
‒ In December 2021, we approved the South Flank Autonomous Haulage
Project to automate the current fleet of 41 Komatsu haul trucks. The project
is scheduled to commence in the June 2022 quarter and is expected to be
completed within 18 months.
‒ At the Daunia coal mine in Central Queensland, the second coal
operation to implement autonomous haul trucks, all trucks are now commissioned
and operational, on schedule and budget.
‒ At the Goonyella Riverside mine in Queensland, the first coal site
to implement autonomous haul trucks, the deployment of 86 autonomous trucks
continues in line with the plan and is expected to be completed in the middle
of the 2022 calendar year, on schedule and budget.
14
Operations Services
Operations Services performs business critical services across our minerals
operations in Australia, including maintaining a significant portion of
ultra-class trucks and moving significant volumes of material as part of
production services. At 31 December 2021, Operations Services was responsible
across Minerals Australia for maintaining 38 per cent of BHP's haul trucks,
including 92 per cent of ultra-class trucks at BMA, and the 308 km of
conveyors in our WAIO operations.
The BHP FutureFit Academy, launched in May 2020, has welcomed over 520
students and graduated over 200 maintenance associates during this period. The
FutureFit Academy extended its curriculum to Production in 2021 and is now
able to deliver a nationally accredited qualification in Surface Extraction
Operations.
Outlook
Economic outlook
We remain positive in our outlook for long-term global economic growth and
commodity demand. Population growth, the infrastructure of decarbonisation and
rising living standards are all expected to drive demand for energy, metals
and fertilisers for decades to come.
In the near term, volatility in the operating environment is expected to
continue. Momentum towards recovery remains intact across most key regions,
although China slowed over the second half of the 2021 calendar year, and
vigilance around COVID-19 risks is still a constant for all. We anticipate
that the headwinds that buffeted China will diminish as the 2022 calendar
proceeds. A desynchronised exit from emergency policy settings around the
globe is a source of uncertainty.
Industry wide inflationary pressure has been pronounced, lifting and
steepening operating cost curves and challenging timely project delivery. Many
commodity-linked uncontrollable costs have moved noticeably higher, in some
cases to record highs. Labour costs have increased materially due to localised
shortages of both general and skilled workers. This partly reflects regulatory
constraints on movement across international and state borders. We expect cost
headwinds due to supply bottlenecks to remain challenging in the 2022 calendar
year, with only tentative signs of easing by the end of the period. As the
actual recognition of costs tends to lag developments in prompt pricing, these
pressures are expected to continue to impact on our cost base in the following
calendar year. Demand-led inflation in the broader economy, reflecting a
healthy tension between rising demand and the ability to meet it, is expected
to endure for some time. That is fundamentally positive for the resources
industry. After more than half a decade of industry wide capital discipline,
positive developments in demand are broadly expected to manifest in tighter
market balances. That can potentially prolong the period of attractive pricing
that we currently observe across the portfolio. Low cost operators stand to
capture increased margins in certain commodities.
15
Commodities outlook
In the half year ended 31 December 2021, the key theme in steel was a policy
induced production crunch in China. The starting point for Chinese output
expectations in the 2022 calendar year is zero growth from the 1.033 Bt
produced in 2021. End-use demand in China is expected to firm over the course
of the 2022 calendar year, as easier policy gradually takes hold. As is common
at the start of a new five-year plan, infrastructure is expected to be
supportive of steel demand.
Iron ore prices declined in the first half of the 2022 financial year as
China's steel production curbs took hold, while seaborne supply improved.
Prices have since stabilised and recovered, albeit not to the previous highs.
In the medium term, China's demand for iron ore is expected to be lower than
it is today as crude steel production plateaus and the scrap-to-steel ratio
rises. In the long-term, prices are expected to be determined by high cost
production, on a value-in-use adjusted basis, from Australia or Brazil. It is
imperative that we continue to compete on both quality and operational
effectiveness.
Metallurgical coal prices surged to record highs in the first half of the 2022
financial year on multi-regional supply constraints amidst challenging
operating conditions. Even so, the industry faces a difficult and uncertain
period ahead while natural trade flows are impaired. Longer term, high quality
metallurgical coals will continue to provide value-in-use benefits to
integrated steelmakers as they seek to optimise the energy and emissions
intensity of their operations. This will particularly be the case in emerging
Asia, where the blast furnace fleet is still young, and transitional
technologies are expected to dominate decarbonisation efforts in the next
20-30 years.
Energy coal prices reached all-time highs in the first half of the 2022
financial year as constrained supply coincided with very strong demand from
both Asia and Europe. China's policy in respect of energy coal imports remains
a key medium-term uncertainty.
Copper prices have receded slightly from the record highs established in the
second half of the 2021 financial year, but they remain very high in absolute
terms. Longer term, both demand and supply factors indicate that copper is an
attractive avenue for future growth.
Nickel prices performed well over the first half of the 2022 financial year
and the positive momentum continues. Depleting stocks was a recurrent theme
over the half, with strong demand from both traditional uses and batteries
coupled with supply uncertainty. Longer term, we believe nickel will be a core
beneficiary of the electrification mega-trend and that nickel sulphides will
be particularly attractive.
Potash prices have increased sharply over the last 18 months, despite latent
excess production capacity. Longer term, potash stands to benefit from the
intersection of a number of global megatrends: rising population, changing
diets and the need for the sustainable intensification of agriculture. The
compelling demand picture, and the maturity of the existing asset base, offers
an attractive entry opportunity for a world class operation later this
decade.
Crude oil prices traded in an approximate range of US$65-85 per bbl (Brent)
over the last half year, with prices moving above US$90 per bbl early in the
current half. Beyond the current phase, considerable investment is going to be
required to fill the medium and longer term supply-demand gap we expect to
emerge. If that investment is not forthcoming in a timely way, the possibility
of oil prices moving up aggressively cannot be ruled out.
The Japan-Korea Marker price for LNG has been extremely elevated, with
all-time high spot pricing achieved in the lead-up to the northern hemisphere
winter. Longer term, assets advantaged by their proximity to existing
infrastructure or customers, or both, in addition to competitive emissions
intensities, are expected to be attractive.
Further information on BHP's economic and commodity outlook can be found at:
bhp.com/prospects (https://www.bhp.com/news/prospects)
16
Income statement
Underlying attributable profit and Underlying EBITDA are presented below.
Underlying attributable profit
Half year ended 31 December 2021 2020
US$M US$M
Restated
Profit after taxation attributable to BHP shareholders 9,443 3,876
Total exceptional items attributable to BHP shareholders((1)) 1,244 2,160
Underlying attributable profit 10,687 6,036
(Profit)/loss after taxation attributable to members of BHP for Discontinued (972) 192
operations
Total exceptional items attributable to BHP shareholders for Discontinued − (28)
operations
Underlying attributable profit - Continuing operations 9,715 6,200
Weighted basic average number of shares (Million) 5,061 5,057
Underlying basic earnings per ordinary share - Continuing operations 192.0 122.6
(1) Refer to page 17 and to note 2 'Exceptional items' and note 10
'Significant events - Samarco dam failure' of the Financial Report for further
information.
Underlying EBITDA
Half year ended 31 December 2021 2020
US$M US$M
Restated
Profit from operations 14,845 9,889
Exceptional items included in profit from operations((1)) 729 1,511
Underlying EBIT 15,574 11,400
Depreciation and amortisation expense 2,851 2,405
Net impairments 38 629
Exceptional item included in Depreciation, amortisation and impairments((2)) − (547)
Underlying EBITDA 18,463 13,887
(1) Exceptional items loss of US$729 million excludes net finance costs of
US$93 million related to the Samarco dam failure. Refer to page 17 and to note
2 'Exceptional items' and note 10 'Significant events - Samarco dam failure'
of the Financial Report for further information.
(2) Relates to impairment charges in relation to NSWEC. Refer to note 2
'Exceptional items'.
17
Underlying EBITDA
The following table and commentary describe the impact of the principal
factors((i)) that affected Underlying EBITDA for the December 2021 half year
compared with the December 2020 half year:
US$M
Half year ended 31 December 2020 (Restated) 13,887
Net price impact:
Change in sales prices 6,248 Higher average realised prices for all of our major commodities.
Price-linked costs (570) Increased royalties reflecting higher realised prices, mainly for
metallurgical and thermal coal products.
5,678
Change in volumes (969) Near record volumes at WAIO and higher concentrate sales at Spence reflecting
the continued ramp up of the Spence Growth Option despite lower than expected
recoveries, were more than offset by lower planned copper concentrator feed
grade at Escondida, lower volumes at Olympic Dam as a result of the planned
major smelter maintenance campaign, lower Queensland Coal volumes due to
significant wet weather impacts from La Niña and labour constraints, and
lower volumes at Nickel West due to planned maintenance during the period.
Change in controllable cash costs (465) Higher costs across the Group associated with COVID-19 (US$154 million), which
was reported as an exceptional item last year, and higher costs at WAIO due to
the South Flank operational ramp-up expenditure. Incremental costs associated
with end-of-negotiation workforce bonus payments at Escondida, and a prior
period one-off gain from the cancelled power contracts at Escondida and
Spence. This was partially offset by favourable inventory movements at Olympic
Dam. Coal costs were broadly flat.
Change in other costs:
Exchange rates 591 Impact of movements in the Australian dollar and Chilean peso against the US
dollar.
Inflation (294) Impact of inflation on the Group's cost base.
Fuel, energy, and consumable price movements (305) Predominantly higher diesel and acid prices.
Non-Cash 35 Mainly higher capitalisation due to increased waste movement at Escondida.
27
Asset sales 5
Ceased and sold operations (7)
Other items 307 Other includes higher recovery of freight costs caused by movements in the
freight index on consecutive voyage charter (CVC) voyages and higher average
realised sales prices received by Antamina, partially offset by the write-off
of iron ore dormant stockpiles.
Half year ended 31 December 2021 18,463
18
Prices and exchange rates
The average realised prices achieved for our major commodities are summarised
in the following table:
Average realised prices((1)) H1 FY22 H1 FY21 H2 FY21 FY21 H1 FY22 vs H1 FY22 vs H1 FY22 vs
H1 FY21
H2 FY21
FY21
Copper (US$/lb) 4.31 3.32 4.34 3.81 30% (1%) 13%
Iron ore (US$/wmt, FOB) 113.54 103.78 158.17 130.56 9% (28%) (13%)
Metallurgical coal (US$/t) 259.71 97.61 114.81 106.64 166% 126% 144%
Hard coking coal (HCC) (US$/t)((2)) 278.60 106.30 118.54 112.72 162% 135% 147%
Weak coking coal (WCC) (US$/t)((2)) 218.65 73.17 104.40 89.62 199% 109% 144%
Thermal coal (US$/t)((3)) 137.68 44.35 70.83 58.42 210% 94% 136%
Nickel metal (US$/t) 19,651 15,140 17,537 16,250 30% 12% 21%
Discontinued operations
Oil (crude and condensate) (US$/bbl) 73.62((4)) 41.24((4)) 63.05 52.56 79% 17% 40%
Natural gas (US$/Mscf)((5)) 5.78((4)) 3.83 4.86 4.34 51% 19% 33%
LNG (US$/Mscf) 15.10 4.45 7.04 5.63 239% 114% 168%
(1) Based on provisional, unaudited estimates. Prices exclude sales from
equity accounted investments, third party product and internal sales, and
represent the weighted average of various sales terms (for example: FOB, CIF
and CFR), unless otherwise noted. Includes the impact of provisional pricing
and finalisation adjustments.
(2) Hard coking coal (HCC) refers generally to those metallurgical coals
with a Coke Strength after Reaction (CSR) of 35 and above, which includes
coals across the spectrum from Premium Coking to Semi Hard Coking coals, while
weak coking coal (WCC) refers generally to those metallurgical coals with a
CSR below 35.
(3) Export sales only; excludes Cerrejón. Includes thermal coal sales
from metallurgical coal mines
(4) The average realised prices for oil (crude and condensate) and natural
gas have been adjusted after the release of the Operational Review for the
half year ended 31 December 2021 to reflect tax barrels and ceased and sold
assets adjustments.
(5) Includes internal sales.
In copper, the provisional pricing and finalisation adjustments increased
Underlying EBITDA by US$11 million in the December 2021 half year and are
included in the average realised copper price in the above table.
The following exchange rates relative to the US dollar have been applied in
the financial information:
Average Average As at As at As at
Half year ended
Half year ended
31 December
31 December
30 June
31 December
31 December
2021
2020
2021
2021
2020
Australian dollar((1)) 0.73 0.72 0.73 0.77 0.75
Chilean peso 798 771 845 711 735
(1) Displayed as US$ to A$1 based on common convention.
Depreciation, amortisation and impairments
Depreciation, amortisation and impairments excluding exceptional items
increased by US$402 million to US$2.9 billion, reflecting higher depreciation
and amortisation at WAIO from the commissioning of South Flank and updates to
the closure provision at Yandi at the end of the 2021 financial year.
Additional charges at Pampa Norte reflects the Spence Growth Option (SGO)
commissioning in the prior year.
Net finance costs
Net finance costs decreased by US$524 million to US$352 million mainly due to
lower interest rates on a lower average debt balance for the period and
premiums of US$395 million paid as part of the value accretive multi-currency
hybrid repurchase programs completed during the prior period.
19
Taxation expense
2021 2020 (Restated)
Half year ended 31 December Profit before taxation Income tax expense % Profit before taxation Income tax expense %
US$M US$M US$M US$M
Statutory effective tax rate 14,493 (4,959) 34.2 9,013 (3,993) 44.3
Adjusted for:
Exchange rate movements − (91) − (48)
Exceptional items((1)) 822 422 1,552 590
Adjusted effective tax rate 15,315 (4,628) 30.2 10,565 (3,451) 32.7
(1) Refer exceptional items below for further details.
The Group's adjusted effective tax rate, which excludes the influence of
exchange rate movements and exceptional items, is 30.2 per cent (31 December
2020: 32.7 per cent) and is above 30 per cent primarily due to the impact of
withholding taxes on current and future dividends from Chilean operations
partially offset by a reversal of previously derecognised tax losses relating
to NSWEC. The adjusted effective tax rate is lower than at 31 December 2020
predominantly due to the reversal of NSWEC tax losses derecognised in the
prior period. The adjusted effective tax rate for the 2022 financial year is
expected to be in the range of 30 to 35 per cent, revised from 32 to 37 per
cent.
Other royalty and excise arrangements which are not profit based are
recognised as operating costs within Profit before taxation. These amounted to
US$1.7 billion during the period (31 December 2020: US$1.3 billion).
Exceptional items
The following table sets out the exceptional items for the December 2021 half
year. Additional commentary is included on page 39.
Half year ended 31 December 2021 Gross Tax Net
US$M US$M US$M
Exceptional items by category
Samarco dam failure (822) 1 (821)
Impairment of US deferred tax assets − (423) (423)
Total (822) (422) (1,244)
Attributable to non-controlling interests − − −
Attributable to BHP shareholders (822) (422) (1,244)
Debt management and liquidity
BHP continues to optimise its balance sheet and debt position.
During the December 2021 half year, gross debt decreased by US$2.0 billion to
US$19.0 billion at 31 December 2021. This decrease includes a US$0.5 billion
repayment of 3.250 per cent USD senior notes that matured on 21 November 2021,
US$0.5 billion of coal and petroleum leases transferred to liabilities
directly associated with assets held for sale and US$0.5 billion of favourable
foreign exchange and interest rate adjustments.
At the subsidiary level, Escondida refinanced US$0.3 billion of long-term debt
that was due to mature in the period.
BHP continues to hold a robust liquidity position with US$12.4 billion in cash
and cash equivalents. The Group also has a US$5.5 billion commercial paper
program backed by a US$5.5 billion revolving credit facility. During the
period the Group completed a one-year extension of the revolving credit
facility which is now due to mature in October 2026. Furthermore, the Group
also updated the facility for the cessation of various interbank offered rates
('IBORs') and the facility now refers to risk-free rates for all IBORs that
are being or have been discontinued. As at 31 December 2021, the Group had no
outstanding commercial paper and no drawn amount under the revolving credit
facility.
20
Dividend
The BHP Board today determined to pay an interim dividend of US$1.50 per share (US$7.6 billion). The interim dividend to be paid by BHP Group Limited will be fully franked for Australian taxation purposes.
BHP's Dividend Reinvestment Plan (DRP) will operate in respect of the interim
dividend. Full terms and conditions of the DRP and details about how to
participate can be found at: bhp.com (http://www.bhp.com)
Events in respect of the interim dividend Date
Announcement of currency conversion into RAND 18 February 2022
Last day to trade cum dividend on Johannesburg Stock Exchange Limited (JSE) 22 February 2022
Ex-dividend Date JSE 23 February 2022
Last day to trade cum dividend on Australian Securities Exchange (ASX), London 23 February 2022
Stock Exchange (LSE) and
New York Stock Exchange (NYSE)
Ex-dividend Date ASX, LSE and NYSE 24 February 2022
Record Date 25 February 2022
Announcement of currency conversion into AUD, GBP and NZD 28 February 2022
DRP and Currency Election date 28 February 2022
Payment Date 28 March 2022
DRP Allocation Date 5 April 2022
BHP Group Limited shareholders registered on the South African section of the
register will not be able to dematerialise or rematerialise their
shareholdings between the dates of 23 February 2022 and 25 February 2022
(inclusive), nor will transfers between the Australian register and the South
African register be permitted between the dates of 18 February 2022 and
25 February 2022 (inclusive). American Depositary Shares (ADSs) each
represent two fully paid ordinary shares and receive dividends accordingly.
Details of the currency exchange rates applicable for the dividend will be
announced to the relevant stock exchanges following conversion and will appear
on the Group's website.
Any eligible shareholder who wishes to participate in the DRP, or to vary a
participation election, should do so in accordance with the timetable above
or, in the case of shareholdings on the South African branch register of BHP
Group Limited, in accordance with the instructions of your CSDP or broker. Any
former BHP Group Plc shareholder who previously made an election to
participate in the BHP Group Plc dividend reinvestment plan will need to make
a new election if they wish to participate in the DRP. The DRP Allocation
Price will be calculated in each jurisdiction as an average of the price paid
for all shares or equivalent interests actually purchased to satisfy DRP
elections. The Allocation Price applicable to each exchange will made
available at: bhp.com/DRP (https://www.bhp.com/drp/)
Corporate governance
Susan Kilsby and Anita Frew retired from the Board following the 2021 Annual
General Meetings on 11 November 2021.
On 2 September 2021 and 10 February 2022, we announced the appointment of two
independent non-executive directors. Michelle Hinchliffe will commence on 1
March 2022 and Catherine Tanna will commence on 4 April 2022.
The current members of the Board's committees are:
Risk and Audit Nomination and Governance Committee Remuneration Sustainability
Committee Committee Committee
Terry Bowen (Chair) Ken MacKenzie (Chair) Christine O'Reilly (Chair) John Mogford (Chair)
Xiaoqun Clever Terry Bowen Gary Goldberg (SID)((1)) Ian Cockerill
Ian Cockerill Gary Goldberg (SID)((1)) Dion Weisler Gary Goldberg (SID)((1))
Christine O'Reilly John Mogford Dion Weisler
Christine O'Reilly
(1) Senior Independent Director (SID)
21
Segment summary((1)(2))
A summary of performance for the December 2021 and December 2020 half years is
presented below. Unless otherwise noted, information in this section has been
presented on a continuing operation basis to exclude the contribution from
Petroleum.
Half year ended Revenue((3)) Underlying Underlying Exceptional Net Capital Exploration Exploration
31 December 2021 EBITDA((4)) EBIT((4)) items((5)) operating expenditure gross((6)) to profit((7))
US$M assets((4))
Copper 8,494 4,272 3,377 (212) 27,647 1,275 34 34
Iron Ore 15,818 11,153 9,991 (512) 17,997 814 51 30
Coal 5,368 2,642 2,235 − 7,856 313 8 2
Group and unallocated items((8)) 847 396 (29) (5) 3,123 366 17 14
Inter-segment adjustment − − − − − − − −
Total Group 30,527 18,463 15,574 (729) 56,623 2,768 110 80
Half year ended Revenue((3)) Underlying Underlying Exceptional Net Capital Exploration Exploration
31 December 2020 EBITDA((4)) EBIT((4)) items operating expenditure gross((6)) to profit((7))
(Restated) assets((4))
US$M
Copper 7,067 3,738 2,899 (38) 26,623 1,108 18 18
Iron Ore 14,058 10,244 9,320 (500) 19,026 1,101 49 26
Coal 2,170 (201) (601) (959) 8,792 320 11 4
Group and unallocated items((8)) 749 106 (218) (14) 3,892 306 8 8
Inter-segment adjustment − − − − − − − −
Total Group 24,044 13,887 11,400 (1,511) 58,333 2,835 86 56
(1) On 22 November 2021, the Group signed a binding share sale agreement
(SSA) for the merger of the Group's oil and gas portfolio with Woodside
('proposed merger'). The Petroleum business remains part of the Group until
completion of the proposed merger which is expected in the June 2022 quarter.
In the meantime, following that announcement, the Group's Petroleum business
no longer meets the reporting segment recognition criteria as outlined in IFRS
8 'Operating segments' and therefore does not form part of the reportable
segments summarised above. A detailed summary of performance of the Petroleum
assets presented as a single amount in the line item entitled 'Profit/(loss)
after taxation from discontinued operations' is outlined below. Refer to note
11 'Discontinued operations and Assets and liabilities held for sale' of the
Financial Report for further information.
Petroleum - Discontinued operations Revenue Underlying Underlying Exceptional Net Capital Exploration Exploration
US$M EBITDA EBIT items operating expenditure gross to profit
assets
Half year ended 31 December 2021 3,257 2,918 2,037 − 8,245 556 243 112
Half year ended 31 December 2020 1,595 793 (108) (31) 8,548 498 195 242
(2) Group and segment level information is reported on a statutory basis
which reflects the application of the equity accounting method in preparing
the Group financial statements - in accordance with IFRS. Underlying EBITDA of
the Group and the reportable segments, includes depreciation, amortisation and
impairments (D&A), net finance costs and taxation expense of US$300
million (H1 FY21: US$259 million) related to equity accounted investments. It
excludes exceptional items loss of US$702 million (H1 FY21: US$678 million
loss) related to share of profit/loss from equity accounted investments,
related impairments and expenses.
Group profit before taxation comprised Underlying EBITDA,
exceptional items, depreciation, amortisation and impairments of US$3,618
million (H1 FY21: US$3,998 million) and net finance costs of US$352 million
(H1 FY21: US$876 million).
(3) Revenue is based on Group realised prices and includes third party
products. Sale of third party products by the Group contributed revenue of
US$1,674 million and Underlying EBITDA of US$10 million (H1 FY21: US$958
million and US$58 million).
(4) For more information on the reconciliation of certain alternative
performance measures to our statutory measures, reasons for usefulness and
calculation methodology, please refer to alternative performance measures set
on pages 62 to 74.
(5) Exceptional items loss of US$729 million excludes net finance costs of
US$93 million included in the total loss before taxation of US$822 million
related to the Samarco dam failure. Refer to note 2 'Exceptional items' and
note 10 'Significant events - Samarco dam failure' of the Financial Report for
further information.
(6) Includes US$30 million capitalised exploration (H1 FY21: US$30
million).
(7) Includes US$ nil of exploration expenditure previously capitalised,
written off as impaired (included in depreciation and amortisation) (H1 FY21:
US$ nil).
22
(8) Group and unallocated items includes functions, other unallocated
operations including Potash, Nickel West, legacy assets, and consolidation
adjustments. Revenue not attributable to reportable segments comprises the
sale of freight and fuel to third parties, as well as revenues from
unallocated operations. Exploration and technology activities are recognised
within relevant segments.
Half year ended Revenue Underlying D&A Underlying Net operating assets((4)) Capital Exploration Exploration
31 December 2021 EBITDA((4)) EBIT((4)) expenditure gross to profit
US$M
Potash − (63) 1 (64) 3,283 158 − −
Nickel West 838 118 39 79 498 169 14 12
Half year ended Revenue Underlying D&A Underlying Net operating assets((4)) Capital Exploration Exploration
31 December 2020 EBITDA((4)) EBIT((4)) expenditure gross to profit
US$M
Potash − (80) 1 (81) 4,203 105 − −
Nickel West 737 121 52 69 175 130 8 8
Copper
Underlying EBITDA for the December 2021 half year increased by US$534 million
to US$4.3 billion.
US$M
Underlying EBITDA for the half year ended 31 December 2020 3,738
Net price impact:
Change in sales prices 1,325 Higher average realised price:
Copper US$4.31/lb (H1 FY21: US$3.32/lb).
Price-linked costs 4
Change in volumes (649) Lower planned concentrator feed grade at Escondida and stacking feed grade at
Spence, partially offset by higher concentrate sales at Spence, reflecting the
continued ramp up of the Spence Growth Option despite lower than expected
recoveries. Lower copper volumes at Olympic Dam as a result of the planned
major smelter maintenance campaign in the period.
Change in controllable cash costs (185) End-of-negotiation workforce bonus payments at Escondida and incremental costs
of US$65 million associated with mitigating the impacts of COVID-19 (reported
as an exceptional item in the prior period). In the prior period, costs
benefited from a one-off gain from the cancelled power contracts at Escondida
and Spence. This was partially offset by lower costs at Olympic Dam reflecting
favourable inventory movements as a result of reduced operational activity
during the major smelter maintenance campaign.
Change in other costs:
Exchange rates 242
Inflation (116)
Fuel, energy, and consumable price movements (176) Predominantly higher diesel and acid prices.
Non-cash 19 Higher capitalisation due to increased waste movement at Escondida.
Other 70 Other includes increased profit at Antamina driven by higher realised prices
for both copper and zinc.
Underlying EBITDA for the half year ended 31 December 2021 4,272
Escondida unit costs increased by 43 per cent to US$1.29 per pound, as
expected, reflecting higher prices for consumables, lower by-product credits
and incremental costs associated with mitigating the impacts of COVID-19.
Whilst inflationary pressures persist, the unit cost increase for the half
year largely relates to one-off impacts, including end-of-negotiation
workforce bonus payments, and a gain recorded in the prior period as a result
of cancelled power contracts as the mine shifts towards 100 per cent renewable
energy.
23
Full year unit cost guidance for the 2022 financial year remains unchanged at
between US$1.20 and US$1.40 per pound (based on an exchange rate of USD/CLP
727). In the medium term, we expect unit costs to be less than US$1.10 per
pound (based on an exchange rate of USD/CLP 727), with further operational
efficiency and maintenance improvements expected to offset higher power
consumption and water costs, as well as grade decline.
Escondida unit costs (US$M) H1 FY22 H2 FY21 H1 FY21 FY21
Revenue 4,829 4,954 4,516 9,470
Underlying EBITDA 3,124 3,464 3,019 6,483
Gross costs 1,705 1,490 1,497 2,987
Less: by-product credits 214 206 272 478
Less: freight 103 83 79 162
Net costs 1,388 1,201 1,146 2,347
Sales (kt) 487 490 576 1,066
Sales (Mlb) 1,074 1,080 1,270 2,350
Cost per pound (US$)((1)(2)(3)) 1.29 1.11 0.90 1.00
(1) H1 FY22 based on average exchange rates of USD/CLP 798.
(2) H1 FY22 includes COVID-19 related costs of US$0.03 per pound, which
was reported as an exceptional item in FY21 (H1 FY21: US$0.02 per pound; FY21:
US$0.03 per pound).
(3) H1 FY21 and FY21 included a gain from the optimised outcome from
renegotiation of cancelled power contracts of US$0.07 per pound and US$0.04
per pound respectively.
SGO demonstrated full concentrator throughput of 95 ktpd in the December 2021
quarter. However, plant design modifications, including modifications to the
rougher flotation circuit will be required to increase SGO recoveries and
achieve planned copper production levels. The Spence guidance to average 300
ktpa (including cathodes) in the first four years of production will be
subject to the timing of these modifications being completed.
In January 2022, Escondida and Spence completed the transition to four
renewable power contracts to increase flexibility for our power portfolio,
reduce energy prices at both operations by an estimated 20 per cent and ensure
security of supply. We continue to aim to supply Escondida and Spence's energy
requirements from 100 per cent renewable energy sources from the mid-2020s.
Financial information for Copper for the December 2021 and December 2020 half
years is presented below.
Half year ended Revenue Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2021 EBITDA EBIT operating expenditure gross to profit
US$M assets
Escondida((1)) 4,829 3,124 461 2,663 11,826 419
Pampa Norte((2)) 1,375 760 234 526 4,779 321
Antamina((3)) 932 679 72 607 1,366 176
Olympic Dam 652 90 193 (103) 9,638 520
Other((3)(4)) 1 (91) 8 (99) 38 15
Total Copper from Group production 7,789 4,562 968 3,594 27,647 1,451
Third party products 1,637 10 − 10 − −
Total Copper 9,426 4,572 968 3,604 27,647 1,451 39 39
Adjustment for equity accounted investments((5)) (932) (300) (73) (227) − (176) (5) (5)
Total Copper statutory result 8,494 4,272 895 3,377 27,647 1,275 34 34
24
Half year ended Revenue Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2020 EBITDA EBIT operating expenditure gross to profit
US$M assets
Escondida((1)) 4,516 3,019 491 2,528 11,994 328
Pampa Norte((2)) 700 327 191 136 4,304 332
Antamina((3)) 751 515 72 443 1,385 117
Olympic Dam 913 169 155 14 8,896 442
Other((3)(4)) − (105) 3 (108) 44 6
Total Copper from Group production 6,880 3,925 912 3,013 26,623 1,225
Third party products 938 55 − 55 − −
Total Copper 7,818 3,980 912 3,068 26,623 1,225 21 19
Adjustment for equity accounted investments((5)) (751) (242) (73) (169) − (117) (3) (1)
Total Copper statutory result 7,067 3,738 839 2,899 26,623 1,108 18 18
(1) Escondida is consolidated under IFRS 10 and reported on a 100 per cent
basis.
(2) Includes Spence and Cerro Colorado.
(3) Antamina, SolGold and Resolution are equity accounted investments and
their financial information presented above with the exception of net
operating assets reflects BHP Group's share.
(4) Predominantly comprises divisional activities, greenfield exploration
and business development. Includes Resolution and SolGold.
(5) Total Copper statutory result revenue excludes US$932 million (H1
FY21: US$751 million) revenue related to Antamina. Total Copper statutory
result Underlying EBITDA includes US$73 million (H1 FY21: US$73 million)
D&A and US$227 million (H1 FY21: US$169 million) net finance costs and
taxation expense related to Antamina, Resolution and SolGold that are also
included in Underlying EBIT. Total Copper Capital expenditure excludes US$176
million (H1 FY21: US$117 million) related to Antamina. Exploration gross
excludes US$5 million (H1 FY21: US$3 million) related to SolGold of which US$5
million (H1 FY21: US$1 million) was expensed.
25
Iron Ore
Underlying EBITDA for the December 2021 half year increased by US$909 million
to US$11.2 billion.
US$M
Underlying EBITDA for the half year ended 31 December 2020 10,244
Net price impact:
Change in sales prices 1,257 Higher average realised price:
Iron ore US$113.54 wmt, FOB (H1 FY21: US$103.78/wmt, FOB).
Price-linked costs (66) Higher royalties in line with higher prices.
Change in volumes (27) Sales volumes were broadly flat reflecting continued strong operational
performance, despite impacts of temporary labour constraints relating to
COVID-19 border restrictions and planned maintenance activities.
Change in controllable cash costs (240) Increased South Flank operational ramp up spend, incremental costs associated
with COVID-19 (mainly higher demurrage costs, reported as an exceptional item
in the prior period) and inventory movements to support the supply chain.
Change in other costs:
Exchange rates 190
Inflation (89)
Fuel, energy, and consumable price movements (57) Higher diesel prices.
Other (59) Other includes the write-off of dormant stockpiles, partially offset by other
items.
Underlying EBITDA for the half year ended 31 December 2021 11,153
WAIO unit costs increased by 12 per cent to US$16.15 per tonne (or US$14.74
per tonne on a C1 basis excluding third party royalties((4))). The increase in
unit cost was mostly due to higher diesel prices reflecting inflationary
headwinds, price-linked third party royalties, costs associated with the ramp
up of South Flank, and costs associated with COVID-19 of approximately US$0.56
per tonne, which has been taken to unit costs in this period and reported as
an exceptional item in the prior period. Sales volumes were slightly lower due
to the impact of temporary labour constraints relating to COVID-19 border
restrictions. The cost increase was partially offset by the impact of
favourable exchange rate movements.
Full year unit cost guidance for the 2022 financial year remains unchanged and
is trending towards the lower end at between US$17.50 and US$18.50 per tonne
(based on an exchange rate of AUD/USD 0.78). In the medium term, we expect to
lower our unit costs to less than US$16 per tonne (based on an exchange rate
of AUD/USD 0.78) reflecting ongoing improvements across the supply chain.
WAIO unit costs (US$M) H1 FY22 H2 FY21 H1 FY21 FY21
Revenue 15,750 20,345 13,992 34,337
Underlying EBITDA 11,227 16,050 10,220 26,270
Gross costs 4,523 4,295 3,772 8,067
Less: freight((1)) 1,399 929 826 1,755
Less: royalties 1,069 1,476 1,101 2,577
Net costs 2,055 1,890 1,845 3,735
Sales (kt, equity share) 127,221 123,779 128,273 252,052
Cost per tonne (US$)((2)(3)) 16.15 15.27 14.38 14.82
Cost per tonne on a C1 basis excluding third party royalties (US$)((3)(4)) 14.74 13.52 12.46 12.98
(1) H1 FY22 freight costs and vessel demand increased significantly as a
result of global supply chain pressures relating to COVID-19.
(2) H1 FY22 based on an average exchange rate of AUD/USD 0.73.
(3) H1 FY22 includes COVID-19 related costs of US$0.56 per tonne, which
was reported as an exceptional item in FY21 (H1 FY21: US$0.56 per tonne; FY21:
US$0.51 per tonne).
(4) Excludes third party royalties of US$1.84 per tonne (H1 FY21: US$1.68
per tonne), net inventory movements US$(0.76) per tonne (H1 FY21: US$(1.30)
per tonne), depletion of production stripping US$0.61 per tonne (H1 FY21:
US$0.72 per tonne), exploration expenses, marketing purchases, demurrage,
exchange rate gains/losses, and other income US$(0.28) per tonne (H1FY21:
US$0.63 per tonne) and operational readiness costs relating to South Flank US$
nil (H1 FY21: US$0.19 per tonne).
26
Financial information for Iron Ore for the December 2021 and December 2020
half years is presented below.
Half year ended Revenue Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2021 EBITDA EBIT operating expenditure gross((1)) to profit
US$M assets
Western Australia Iron Ore 15,750 11,227 1,058 10,169 21,087 814
Samarco((2)) − − − − (3,119) −
Other((3)) 59 (74) 104 (178) 29 −
Total Iron Ore from Group production 15,809 11,153 1,162 9,991 17,997 814
Third party products((4)) 9 − − − − −
Total Iron Ore 15,818 11,153 1,162 9,991 17,997 814 51 30
Adjustment for equity accounted investments − − − − − − − −
Total Iron Ore statutory result 15,818 11,153 1,162 9,991 17,997 814 51 30
Half year ended Revenue Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2020 EBITDA EBIT operating expenditure gross((1)) to profit
US$M assets
Western Australia Iron Ore 13,992 10,220 911 9,309 20,942 1,100
Samarco((2)) − − − − (2,158) −
Other((3)) 58 21 13 8 242 1
Total Iron Ore from Group production 14,050 10,241 924 9,317 19,026 1,101
Third party products((4)) 8 3 − 3 − −
Total Iron Ore 14,058 10,244 924 9,320 19,026 1,101 49 26
Adjustment for equity accounted investments − − − − − − − −
Total Iron Ore statutory result 14,058 10,244 924 9,320 19,026 1,101 49 26
(1) Includes US$21 million of capitalised exploration (H1 FY21: US$23
million).
(2) Samarco is an equity accounted investment and its financial
information presented above, with the exception of net operating assets,
reflects BHP Billiton Brasil Ltda's share. All financial impacts following the
Samarco dam failure have been reported as exceptional items in both reporting
periods.
(3) Predominantly comprises divisional activities, towage services,
business development and ceased operations.
(4) Includes inter-segment and external sales of contracted gas purchases.
27
Coal
Underlying EBITDA for the December 2021 half year increased by US$2.8 billion
to US$2.6 billion.
US$M
Underlying EBITDA for the half year ended 31 December 2020 (201)
Net price impact:
Change in sales prices 3,417 Higher average prices:
Hard coking coal US$278.60/t (H1 FY21: US$106.30);
Weak coking coal US$218.65/t (H1 FY21: US$73.17/t);
Thermal coal US$137.68/t (H1 FY21: US$44.35/t).
Price-linked costs (446) Higher royalties in line with higher prices.
Change in volumes (172) Lower volumes at Queensland Coal due to significant wet weather impacts from
La Niña coupled with additional maintenance and labour constraints. Increased
volumes at NSWEC as a result of increased stripping volumes in lower strip
ratio areas as well as a ship loader outage in the prior period.
Change in controllable cash costs 26 Cost reduction initiatives and favourable inventory movements partially offset
by inventory revaluations at BMC as a result of the asset held for sale
classification, additional costs to support the focus on higher quality
products at NSWEC and incremental COVID-19 related costs.
Change in other costs:
Exchange rates 106
Inflation (59)
Fuel, energy, and consumable price movements (56) Predominantly higher diesel prices.
Other 27 Other items.
Underlying EBITDA for the half year ended 31 December 2021 2,642
Queensland Coal unit costs increased by eight per cent to US$91 per tonne for
the half year, primarily due to lower volumes following significant La Niña
wet weather impacts, additional maintenance and labour constraints. This was
partially offset by cost reduction initiatives and favourable inventory and
exchange rate movements.
Unit cost guidance for the 2022 financial year has been increased to between
US$85 and US$94 per tonne (based on an exchange rate of AUD/USD 0.78) from
between US$80 and US$90 per tonne, reflecting lower expected volumes for the
full year. Workforce absenteeism arising from COVID-19 remains a risk for the
remainder of the financial year.
Queensland Coal unit costs (US$M) H1 FY22 H2 FY21 H1 FY21 FY21
Revenue 4,342 2,459 1,856 4,315
Underlying EBITDA 2,236 534 59 593
Gross costs 2,106 1,925 1,797 3,722
Less: freight 25 24 45 69
Less: royalties 511 194 136 330
Net costs 1,570 1,707 1,616 3,323
Sales (kt, equity share) 17,180 21,589 19,030 40,619
Cost per tonne (US$)((1)(2)) 91.39 79.07 84.92 81.81
(1) H1 FY22 based on an average exchange rate of AUD/USD 0.73.
(2) H1 FY22 includes COVID-19 related costs of US$0.26 per tonne, which
was reported as an exceptional item in FY21 (H1 FY21: US$1.42 per tonne; FY21:
US$0.91 per tonne).
NSWEC unit costs increased by two per cent to US$68 per tonne due to increased
maintenance, fleet and processing costs enabling the increased production of
higher quality products which now make up approximately 80 per cent of sales
volumes, unfavourable inventory movements and some inflationary pressures.
This was partially offset by increased volumes as a result of continued truck
productivity and mining in lower strip ratio areas, despite increased rainfall
as well as cost reduction initiatives and favourable exchange rate movements.
28
Unit cost guidance for the 2022 financial year remains unchanged at between
US$62 and US$70 per tonne (based on an exchange rate of AUD/USD 0.78).
NSWEC unit costs (US$M) H1 FY22 H2 FY21 H1 FY21 FY21
Revenue 1,026 525 314 839
Underlying EBITDA 435 11 (180) (169)
Gross costs 591 514 494 1,008
Less: royalties 84 41 25 66
Net costs 507 473 469 942
Sales (kt, equity share) 7,498 7,518 7,108 14,626
Cost per tonne (US$)((1)(2)) 67.62 62.92 65.98 64.41
(1) H1 FY22 based on an average exchange rate of AUD/USD 0.73.
(2) H1 FY22 includes COVID-19 related costs of US$0.84 per tonne, which
was reported as an exceptional item in FY21 (H1 FY21: US$0.56 per tonne; FY21:
US$0.40 per tonne).
Financial information for Coal for the December 2021 and December 2020 half
years is presented below.
Half year ended Revenue Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2021 EBITDA EBIT operating expenditure gross to profit
US$M assets
Queensland Coal((1)) 4,342 2,236 357 1,879 8,066 283
New South Wales Energy Coal((2)) 1,070 458 54 404 (212) 23
Colombia((3)) − − − − − −
Other((4)) − (29) 9 (38) 2 7
Total Coal from Group production 5,412 2,665 420 2,245 7,856 313
Third party products − − − − − −
Total Coal 5,412 2,665 420 2,245 7,856 313 8 2
Adjustment for equity accounted investments((5)(6)) (44) (23) (13) (10) − − − −
Total Coal statutory result 5,368 2,642 407 2,235 7,856 313 8 2
Half year ended Revenue Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2020 EBITDA EBIT operating expenditure gross to profit
US$M assets
Queensland Coal((1)) 1,856 59 329 (270) 8,137 278
New South Wales Energy Coal( (2)) 358 (130) 78 (208) 288 31
Colombia 63 (13) 39 (52) 355 8
Other((4)) − (50) 7 (57) 12 11
Total Coal from Group production 2,277 (134) 453 (587) 8,792 328
Third party products − − − − − −
Total Coal 2,277 (134) 453 (587) 8,792 328 11 4
Adjustment for equity accounted investments((5)(6)) (107) (67) (53) (14) − (8) − −
Total Coal statutory result 2,170 (201) 400 (601) 8,792 320 11 4
(1) On 8th November 2021, BHP announced it has signed a Share Sale and
Purchase Agreement to divest its 80 per cent interest in BHP Mitsui Coal
(BMC). While BHP continues to report its share of profit and loss within the
Coal Segment and asset tables, BMC's assets and liabilities have been
classified as 'Held For Sale' and therefore excluded from Net Operating Assets
(US$623 million).
(2) Newcastle Coal Infrastructure Group is an equity accounted investments
and its financial information presented above with the exception of net
operating assets reflects BHP Group's share.
(3) On 11 January 2022, BHP completed the sale to Glencore of its 33.3 per
cent interest in Cerrejón. The transaction was first announced on 28 June
2021 for a total cash consideration of US$294 million with an effective
economic date of 31 December 2020. The Group's investment in Cerrejón has
subsequently been classified as 'Assets held for sale' and therefore excluded
from net operating assets. At 31 December 2021, the Group's investment in
Cerrejón continued to be classified as 'Assets held for sale' and measured at
fair value in line with the divestment consideration. During the half year
ended 31 December 2021, the Group received dividends of US$238 million from
Cerrejón, reducing completion proceeds, net of expected transaction costs,
and the value of the Group's investment in Cerrejón to US$46 million as at 31
December 2021.
(4) Predominantly comprises divisional activities and ceased operations.
(5) Total Coal statutory result revenue excludes US$ nil (H1 FY21: US$63
million) revenue related to Cerrejón. Total Coal statutory result Underlying
EBITDA includes US$ nil (H1 FY21: US$39 million) D&A and US$ nil (H1 FY21:
US$22 million) net finance costs and taxation benefits related to Cerrejón,
that are also included in Underlying EBIT. Total Coal statutory result Capital
expenditure excludes US$ nil (H1 FY21: US$8 million) related to Cerrejón.
(6) Total Coal statutory result revenue excludes US$44 million (H1 FY21:
US$44 million) revenue related to Newcastle Coal Infrastructure Group. Total
Coal statutory result excludes US$23 million (H1 FY21: US$50 million)
Underlying EBITDA, US$13 million (H1 FY21: US$14 million) D&A and US$10
million (H1 FY21: US$36 million) Underlying EBIT related to Newcastle Coal
Infrastructure Group until future profits exceed accumulated losses.
29
Greenfield minerals exploration
BHP continues to strengthen its portfolio of options in future facing
commodities including through an increased focus on exploration. A new office
has been opened in Toronto for exploration and business development, and
expenditure on minerals exploration in the December 2021 half year increased
28 per cent to US$110 million. Work continues on existing projects, joint
ventures and farm-ins as well as leveraging technology to both look deeper in
mature exploration jurisdictions and delineate new high potential search
spaces globally. We have continued to add to our early stage options in future
facing commodities. Greenfield minerals exploration is being undertaken on
advancing copper targets in Chile, Ecuador, Mexico, Peru, Canada, Australia
and the south-west United States. Nickel targets are also being advanced in
Canada and Australia. Specifically in copper, we are testing targets with
drilling in Chile, Ecuador, the United States and Australia.
In October 2021, BHP executed its farm-in agreement for the early-stage
prospective Elliott copper project covering 7,200 km2 in the Northern
Territory, Australia. Under the terms of the agreement, BHP can earn up to 75
per cent interest in Elliott by spending up to A$25 million over 10 years.
BHP is continuing resource definition drilling at Oak Dam, after commencing
the program in May 2021.
In December 2021, BHP announced it would not increase or extend its offer to
acquire Noront Resources. BHP is committed to its strict capital allocation
framework and while the Eagle's Nest deposit is a promising resource, we do
not see adequate long-term value for BHP shareholders.
In December 2021, BHP advanced its early-stage nickel interests by investing
in the Kabanga Nickel Project (Kabanga), a high-quality nickel sulphide
deposit in Tanzania. Kabanga is a joint venture between Kabanga Nickel Limited
(84 per cent interest) and the Government of Tanzania (16 per cent interest).
Group and unallocated items
Underlying EBITDA for Group and unallocated items increased by US$290 million
to US$396 million in the December 2021 half year primarily due to recovery of
higher freight costs caused by movements in the freight index on consecutive
voyage charter (CVC) voyages of US$172 million and lower demurrage costs
related to China's coal import restrictions.
Nickel West's Underlying EBITDA decreased by US$3 million to US$118 million in
the December 2021 half year. This reflects lower volumes and higher
maintenance costs following planned maintenance at the Kalgoorlie Smelter,
Kwinana Refinery and the Leinster and Kambalda concentrators in the September
2021 quarter, and planned asset integrity work to support operational
stability completed in the December 2021 quarter. This was largely offset by
higher prices and favourable exchange rate movements.
30
Discontinued Operations - Petroleum
In November 2021, BHP signed a binding Share Sale Agreement for the proposed
merger of BHP's oil and gas portfolio with Woodside to create a global top 10
independent energy company by production. On completion of the merger,
Woodside will acquire BHP Petroleum in exchange for new Woodside shares.
Completion is subject to satisfaction of conditions precedent including
regulatory and competition authority approvals and approval by Woodside's
shareholders. The process remains on track and the Australian Competition and
Consumer Commission confirmed in December 2021 that it will not oppose the
transaction. The Woodside shareholder meeting to vote on the merger as well as
completion of the merger remains targeted for the June 2022 quarter. In
addition to its primary listing on the Australian Securities Exchange,
Woodside is pursuing a standard listing on the London Stock Exchange and a
listing of American Depositary Receipts on the New York Stock Exchange. The
effective date of the merger is 1 July 2021. The half-year financial results
have been prepared on the basis that BHP Petroleum is a discontinued
operation.
Underlying EBITDA for the December 2021 half year increased by US$2.1 billion
to US$ 2.9 billion.
US$M
Underlying EBITDA for the half year ended 31 December 2020 793
Net price impact 1,767 Higher average realised prices:
Crude and condensate oil US$73.62/bbl (H1 FY21: US$41.24/bbl);
Natural gas US$5.78/Mscf (H1 FY21: US$3.83/Mscf);
LNG US$15.10/Mscf (H1 FY21: US$4.45/Mscf).
Change in volumes 170 Higher seasonal gas demand at Bass Strait, increased volumes from Ruby
following first production in May 2021 and lower impact from weather events in
the Gulf of Mexico partially offset by natural field decline across the
portfolio.
Change in controllable cash costs 52 Increased maintenance and integrity activity in Trinidad and Tobago and the
impact of expensing the Wasabi-1 well, were more than offset by the impact
from expensing the Broadside-1 well and seismic costs in the Gulf of Mexico
and Trinidad and Tobago in the prior period.
Ceased and sold operations 3
Change in other costs:
Exchange rates 40
Inflation (15)
Other 108 Other includes the contingent consideration proceeds from the Scarborough
divestment in 2016 (payable upon FID which was announced in November 2021) and
tax barrel adjustments at Trinidad and Tobago, partially offset by the
revaluation loss of embedded derivatives in the Trinidad and Tobago gas
contract of US$32 million (H1 FY21: US$1 million loss) and other items.
Underlying EBITDA for the half year ended 31 December 2021 2,918
Petroleum unit costs increased by two per cent to US$10.51 per barrel of oil
equivalent primarily driven by an increase in price-linked costs and increased
maintenance and integrity activity in Trinidad and Tobago. No further guidance
for the 2022 financial year will be provided given the Petroleum business has
been presented as a discontinued operation. The Petroleum business continues
to actively manage costs across the portfolio and improve competitiveness.
Petroleum unit costs (US$M) H1 FY22 H2 FY21 H1 FY21 FY21
Revenue 3,288 2,327 1,619 3,946
Underlying EBITDA 2,918 1,513 793 2,306
Gross costs 370 814 826 1,640
Less: exploration expense 112 115 181 296
Less: freight 65 78 29 107
Less: development and evaluation 79 90 106 196
Less: other((1)) (443) (69) (5) (74)
Net costs 557 600 515 1,115
Production (MMboe, equity share) 53 53 50 103
Cost per Boe (US$)((2)(3)) 10.51 11.32 10.30 10.83
31
(1) Other includes over/under lift and inventory movements, non-cash
profit on sales of assets, Scarborough FID consideration, foreign exchange,
discontinued operations adjustments and the impact from revaluation of
embedded derivatives in the Trinidad and Tobago gas contract.
(2) H1 FY22 based on an average exchange rate of AUD/USD 0.73.
(3) H1 FY22 includes nil COVID-19 related costs, which was reported as an
exceptional item in FY21 (H1 FY21: US$0.25 per barrel of oil; FY21: US$0.27
per barrel of oil).
On 22 November 2021, we announced the approval of US$1.5 billion in capital
expenditure for development of the Scarborough upstream project located in the
North Carnarvon Basin, Western Australia. The approved capital expenditure
represents BHP's 26.5 per cent participating interest in Phase 1 of the
upstream development. Final investment decisions have also been made by
Woodside and the Scarborough Joint Venture.
In the December 2021 quarter, we completed the Ruby project in Trinidad and
Tobago. The project was completed on schedule and within budget, and the Ruby
field is currently producing both oil and gas.
The Mad Dog Phase 2 project's semi-submersible platform, Argos, was towed to
final location in the US Gulf of Mexico and moored. Offshore execution of
construction and commissioning is in progress. First production from Mad Dog
Phase 2 is expected from the middle of the 2022 calendar year.
In December 2021, we reached a commercial milestone for the Trion project in
Mexico with the filing of a Declaration of Commerciality with the National
Hydrocarbons Commission. As announced in August 2021, we have moved Trion into
the Front End Engineering Design (FEED) phase and work is progressing to plan.
Studies are underway, focused on completion of the engineering, commercial
arrangements and execution planning required to progress readiness for a Final
Investment Decision from the middle of the 2022 calendar year.
Petroleum exploration
Petroleum exploration expenditure for the December 2021 half year was US$243
million, of which US$112 million was expensed. An approximately US$540 million
exploration and appraisal program is being executed for the 2022 financial
year.
In Trinidad and Tobago, the Calypso appraisal drilling programme concluded on
20 December 2021. All wells encountered hydrocarbons. Bongos-3 confirmed
volumes downdip of prior penetrations and Bongos-4 established volumes in a
new segment. The well results are currently under evaluation and will be
incorporated into the development plan.
In the central Gulf of Mexico, the Wasabi-1 well encountered a mechanical
difficulty and was plugged and abandoned on 13 November 2021. Wasabi-2
(GC124-002) was spud on 17 November 2021 and drilling operations continue.
In Barbados, a 3D seismic survey was acquired in November 2021 over a portion
of the Bimshire and Carlisle Bay blocks((ix)). Processed data is expected to
be delivered in the middle of the 2022 calendar year.
BHP has acquired interests in offshore exploration blocks in the Red Sea in
Egypt. In December 2021, the Minister of Energy in Egypt signed the Deed of
Assignment for Red Sea Block 1, finalising the assignment of a 45 per cent
participating interest from Chevron to BHP. The effective date of the transfer
is 12 September 2021. This follows a separate agreement with Shell in March
2021 for BHP to acquire a 30 and 25 per cent non-operated working interest in
Egypt's Red Sea Blocks 3 and 4, respectively. The effective date of BHP's
participation in Blocks 3 and 4 is pending final government approvals.
32
Financial information for Petroleum for the December 2021 and December 2020
half years is presented below.
Half year ended Revenue((1)) Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2021 EBITDA EBIT operating expenditure gross((2)) to profit((3))
US$M assets
Australia Production Unit((4)) 225 181 68 113 8 7
Bass Strait 775 621 421 200 706 14
North West Shelf 865 1,141 101 1,040 1,636 114
Atlantis 517 454 106 348 998 11
Shenzi 326 260 76 184 1,079 140
Mad Dog 157 129 23 106 1,950 109
Trinidad/Tobago 206 156 48 108 442 111
Algeria 108 94 − 94 119 6
Exploration − (112) 12 (124) 1,194 −
Other((5)) 111 (4) 28 (32) 113 44
Total Petroleum from Group production 3,290 2,920 883 2,037 8,245 556
Third party products 6 − − − − −
Total Petroleum 3,296 2,920 883 2,037 8,245 556 243 112
Adjustment for equity accounted investments((6)) (8) (2) (2) − − − − −
Total Petroleum statutory result 3,288 2,918 881 2,037 8,245 556 243 112
Inter-segment adjustment (31) − − − − − − −
Total Discontinued Operations - Petroleum 3,257 2,918 881 2,037 8,245 556 243 112
Half year ended Revenue((1)) Underlying D&A Underlying Net Capital Exploration Exploration
31 December 2020 EBITDA EBIT operating expenditure gross((2)) to profit((3))
US$M assets
(Restated)
Australia Production Unit((4)) 123 80 95 (15) 176 14
Bass Strait 478 319 396 (77) 1,407 33
North West Shelf 402 311 120 191 1,224 47
Atlantis 212 127 71 56 1,131 125
Shenzi 137 89 59 30 1,005 10
Mad Dog 88 61 26 35 1,774 164
Trinidad/Tobago 68 40 19 21 439 70
Algeria 75 54 − 54 95 1
Exploration − (181) 80 (261) 1,122 1
Other((5)) 39 (105) 37 (142) 175 33
Total Petroleum from Group production 1,622 795 903 (108) 8,548 498
Third party products 3 − − − − −
Total Petroleum 1,625 795 903 (108) 8,548 498 195 242
Adjustment for equity accounted investments((6)) (6) (2) (2) − − − − −
Total Petroleum statutory result 1,619 793 901 (108) 8,548 498 195 242
Inter-segment adjustment (24) − − − − − − −
Total Discontinued Operations - Petroleum 1,595 793 901 (108) 8,548 498 195 242
(1) Total Petroleum revenue includes: crude oil US$1,654 million (H1 FY21:
US$769 million), natural gas US$669 million (H1 FY21: US$434 million), LNG
US$743 million (H1 FY21: US$292 million), NGL US$190 million (H1 FY21: US$96
million) and other (including inter-segment adjustments) US$1 million (H1
FY21: US$4 million).
(2) Includes US$131 million of capitalised exploration (H1 FY21: US$14
million).
(3) Includes US$ nil of exploration expenditure previously capitalised,
written off as impaired (included in depreciation and amortisation) (H1 FY21:
US$61 million).
(4) Australia Production Unit includes Macedon and Pyrenees.
(5) Predominantly divisional activities, business development and Neptune
(sale finalised in May 2021). Also includes the Caesar oil pipeline and the
Cleopatra gas pipeline, which are equity accounted investments. The financial
information for the Caesar oil pipeline and the Cleopatra gas pipeline
presented above, with the exception of net operating assets, reflects BHP's
share.
33
(6) Total Petroleum revenue excludes US$8 million (H1 FY21: US$6 million)
revenue related to the Caesar oil pipeline and the Cleopatra gas pipeline.
Total Petroleum statutory result Underlying EBITDA includes US$2 million (H1
FY21: US$2 million) D&A related to the Caesar oil pipeline and the
Cleopatra gas pipeline.
The Financial Report set out on pages 33 to 55 for the half year ended 31
December 2021 has been prepared on the basis of accounting policies and
methods of computation consistent with those applied in the 30 June 2021
financial statements contained within the Annual Report of the Group. This
news release including the Financial Report is unaudited. Variance analysis
relates to the relative financial and/or production performance of BHP and/or
its operations during the December 2021 half year compared with the December
2020 half year, unless otherwise noted. Operations includes operated and
non-operated assets, unless otherwise noted. Medium term refers to our five
year plan. Numbers presented may not add up precisely to the totals provided
due to rounding.
The following abbreviations may have been used throughout this report: barrels
(bbl); billion cubic feet (bcf); barrels of oil equivalent (boe); billion
tonnes (Bt); cost and freight (CFR); cost, insurance and freight (CIF), carbon
dioxide equivalent (CO(2)-e), dry metric tonne unit (dmtu); free on board
(FOB); giga litres (GL); grams per tonne (g/t); kilograms per tonne (kg/t);
kilometre (km); metre (m); million barrels of oil equivalent (MMboe); million
barrels of oil equivalent per day (MMboe/d); thousand cubic feet equivalent
(Mcfe); million cubic feet per day (MMcf/d); million ounces per annum (Mozpa);
million pounds (Mlb); million tonnes (Mt); million tonnes per annum (Mtpa);
ounces (oz); pounds (lb); thousand barrels of oil equivalent (Mboe); thousand
ounces (koz); thousand ounces per annum (kozpa); thousand standard cubic feet
(Mscf); thousand tonnes (kt); thousand tonnes per annum (ktpa); thousand
tonnes per day (ktpd); tonnes (t); total recordable injury frequency (TRIF);
and wet metric tonnes (wmt).
The following footnotes apply to this Results Announcement:
(i) We use various alternative performance measures to reflect our
underlying performance. For further information on the reconciliations of
certain alternative performance measures to our statutory measures, reasons
for usefulness and calculation methodology, please refer to alternative
performance measures set out on pages 62 to 74.
(ii) FY22 and medium-term unit cost guidance are based on exchange rates
of AUD/USD 0.78 and USD/CLP 727.
(iii) Based on Underlying attributable profit from continuing operations.
(iv) Refer to page 8 of BHP's Climate Transition Action Plan 2021
(https://www.bhp.com/-/media/documents/investors/annual-reports/2021/210914_bhpclimatetransitionactionplan2021.pdf?sc_lang=en&hash=EB11097F5500602D2928F09D4EF081DB)
for the definitions applicable to this target.
(v) Carbon neutral is not intended to imply certification under any
standard or application of a particular methodology and includes all those
greenhouse gas emissions as defined for BHP reporting purposes.
(vi) We use various key indicators to reflect our sustainability
performance. For further information on the reasons for usefulness and
calculation methodology, please refer to "Definition and calculation of Key
Indicator terms" set out on pages 75 to 76.
(vii) US dollar amounts are calculated based on weighted average actual
transactional (historical) exchange rates related to Renova funding.
(viii) Maintenance capital includes non-discretionary spend for the following
purposes: deferred development and production stripping; risk reduction,
compliance, asset integrity, decarbonisation and social value investments.
(ix) Permission for survey granted by the Barbados Ministry of Energy.
Forward-looking statements
This release contains forward-looking statements, including statements
regarding: trends in commodity prices and currency exchange rates; demand for
commodities; production forecasts; operational performance, plans, strategies
and objectives of management; closure or divestment of certain assets,
operations or facilities (including associated costs); anticipated production
or construction commencement dates; capital costs and scheduling; operating
costs and shortages of materials and skilled employees; anticipated productive
lives of projects, mines and facilities; provisions and contingent
liabilities; and tax and regulatory developments.
Forward-looking statements may be identified by the use of terminology,
including, but not limited to, 'guidance', outlook', 'prospect', 'target',
'intend', 'aim', 'project', 'anticipate', 'estimate', 'plan', 'believe',
'expect', 'may', 'should', 'will', 'would', 'continue', 'annualised' or
similar words. These statements discuss future expectations concerning the
results of assets or financial conditions, or provide other forward-looking
information.
These forward-looking statements are based on the information available as at
the date of this release and are not guarantees or predictions of future
performance, and involve known and unknown risks, uncertainties and other
factors, many of which are beyond our control, and which may cause actual
results to differ materially from those expressed in the statements contained
in this release. BHP cautions against reliance on any forward-looking
statements or guidance, particularly in light of the current economic climate
and the significant volatility, uncertainty and disruption arising in
connection with COVID-19.
For example, our future revenues from our assets, projects or mines described
in this release will be based, in part, upon the market price of the minerals,
metals or petroleum produced, which may vary significantly from current
levels. These variations, if materially adverse, may affect the timing or the
feasibility of the development of a particular project, the expansion of
certain facilities or mines, or the continuation of existing assets.
Other factors that may affect the actual construction or production
commencement dates, costs or production output and anticipated lives of
assets, mines or facilities include our ability to profitably produce and
transport the minerals, petroleum and/or metals extracted to applicable
markets; the impact of foreign currency exchange rates on the market prices of
the minerals, petroleum or metals we produce; activities of government
authorities in the countries where we sell our products and in the countries
where we are exploring or developing projects, facilities or mines, including
increases in taxes; changes in environmental and other regulations, the
duration and severity of the COVID-19 pandemic and its impact on our business;
political uncertainty; labour unrest; and other factors identified in the risk
factors discussed in BHP's filings with the U.S. Securities and Exchange
Commission (the 'SEC') (including in Annual Reports on Form 20-F) which are
available on the SEC's website at www.sec.gov.
Except as required by applicable regulations or by law, BHP does not undertake
to publicly update or review any forward-looking statements, whether as a
result of new information or future events.
Past performance cannot be relied on as a guide to future performance.
34
No offer of securities
Nothing in this release should be construed as either an offer, or a
solicitation of an offer, to buy or sell BHP securities in any jurisdiction,
or be treated or relied upon as a recommendation or advice by BHP.
Reliance on third party information
The views expressed in this release contain information that has been derived
from publicly available sources that have not been independently verified. No
representation or warranty is made as to the accuracy, completeness or
reliability of the information. This release should not be relied upon as a
recommendation or forecast by BHP.
No financial or investment advice - South Africa
BHP does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
35
BHP and its subsidiaries
In this release, the terms 'BHP', the 'Company, the 'Group', 'BHP Group', 'our
business', 'organisation', 'we', 'us', 'our' and ourselves' refer to BHP Group
Limited, BHP Group Plc and, except where the context otherwise requires, the
respective subsidiaries as defined in note 30 'Subsidiaries' in section 3.1 of
BHP's 30 June 2021 Annual Report and Form 20-F. Those terms do not include
non-operated assets.
This release covers BHP's assets (including those under exploration, projects
in development or execution phases, sites and closed operations) that have
been wholly owned and/or operated by BHP and that have been owned as a joint
venture((1)) operated by BHP (referred to in this release as 'operated assets'
or 'operations') during the period from 1 July 2021 to 31 December 2021. Our
functions are also included.
BHP also holds interests in assets that are owned as a joint venture but not
operated by BHP (referred to in this release as 'non-operated joint ventures'
or 'non-operated assets'). Our non-operated assets include Antamina, Samarco,
Atlantis, Mad Dog, Bass Strait and North West Shelf. Notwithstanding that this
release may include production, financial and other information from
non-operated assets, non-operated assets are not included in the BHP Group
and, as a result, statements regarding our operations, assets and values apply
only to our operated assets unless stated otherwise.
((1)) References in this release to a 'joint venture' are used for convenience
to collectively describe assets that are not wholly owned by BHP. Such
references are not intended to characterise the legal relationship between the
owners of the asset.
36
Further information on BHP can be found at: bhp.com (http://www.bhp.com/)
Authorised for lodgement by:
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37
BHP
Financial Report
Half year ended
31 December 2021
38
Contents
Half Year Financial Statements Page
Consolidated Income Statement for the half year ended 31 December 2021 35
Consolidated Statement of Comprehensive Income for the half year ended 31 35
December 2021
Consolidated Balance Sheet as at 31 December 2021 36
Consolidated Cash Flow Statement for the half year ended 31 December 2021 37
Consolidated Statement of Changes in Equity for the half year ended 31 38
December 2021
Notes to the Financial Statements 39
1. Basis of preparation 39
2. Exceptional items 39
3. Interests in associates and joint venture entities 41
4. Net finance costs 41
5. Income tax expense 42
6. Earnings per share 43
7. Dividends 44
8. Financial risk management - Fair values 45
9. Share capital 47
10. Significant events - Samarco dam failure 47
11. Discontinued operations and Assets and liabilities held for sale 53
12. Subsequent events 55
Directors' Report 56
Directors' Declaration of Responsibility 58
Auditor's Independence Declaration to the Directors of BHP Group Limited 59
Independent Review Report 60
39
Consolidated Income Statement for the half year ended 31 December 2021
Half year Half year Year
Notes ended ended ended
31 Dec 31 Dec 30 June
2021 2020 2021
US$M US$M US$M
Restated Restated
Continuing operations
Revenue 30,527 24,044 56,921
Other income 414 136 380
Expenses excluding net finance costs (15,742) (13,821) (30,871)
Loss from equity accounted investments, related impairments and expenses 3 (354) (470) (915)
Profit from operations 14,845 9,889 25,515
Financial expenses (377) (922) (1,290)
Financial income 25 46 67
Net finance costs 4 (352) (876) (1,223)
Profit before taxation 14,493 9,013 24,292
Income tax expense (4,833) (3,965) (10,376)
Royalty-related taxation (net of income tax benefit) (126) (28) (240)
Total taxation expense 5 (4,959) (3,993) (10,616)
Profit after taxation from Continuing operations 9,534 5,020 13,676
Discontinued operations
Profit/(loss) after taxation from Discontinued operations 11 972 (192) (225)
Profit after taxation from Continuing and Discontinued operations 10,506 4,828 13,451
Attributable to non-controlling interests 1,063 952 2,147
Attributable to BHP shareholders 9,443 3,876 11,304
Basic earnings per ordinary share (cents) 6 186.6 76.6 223.5
Diluted earnings per ordinary share (cents) 6 186.2 76.5 223.0
Basic earnings from Continuing operations per ordinary share (cents) 6 167.4 80.4 228.0
Diluted earnings from Continuing operations per ordinary share (cents) 6 167.0 80.3 227.5
The accompanying notes form part of this half year Financial Report.
40
Consolidated Statement of Comprehensive Income for the half year ended 31
December 2021
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2021 2020 2021
US$M US$M US$M
Profit after taxation from Continuing and Discontinued operations 10,506 4,828 13,451
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Hedges:
(Losses)/gains taken to equity (302) 1,074 863
Losses/(gains) transferred to the income statement 283 (1,000) (837)
Exchange fluctuations on translation of foreign operations taken to equity (3) − 5
Tax recognised within other comprehensive income 6 (22) (8)
Total items that may be reclassified subsequently to the income statement (16) 52 23
Items that will not be reclassified to the income statement:
Re-measurement (losses)/gains on pension and medical schemes (5) (4) 58
Equity investments held at fair value − 2 (2)
Tax recognised within other comprehensive income 1 1 (20)
Total items that will not be reclassified to the income statement (4) (1) 36
Total other comprehensive (loss)/income (20) 51 59
Total comprehensive income 10,486 4,879 13,510
Attributable to non-controlling interests 1,063 953 2,158
Attributable to BHP shareholders 9,423 3,926 11,352
The accompanying notes form part of this half year Financial Report.
41
Consolidated Balance Sheet as at 31 December 2021
Notes 31 Dec 2021 30 June 2021
US$M US$M
ASSETS
Current assets
Cash and cash equivalents 12,366 15,246
Trade and other receivables 4,898 6,059
Other financial assets 264 230
Inventories 4,514 4,426
Assets held for sale 11 17,272 324
Current tax assets 240 279
Other 119 129
Total current assets 39,673 26,693
Non-current assets
Trade and other receivables 171 337
Other financial assets 1,215 1,610
Inventories 1,297 1,358
Property, plant and equipment 60,433 73,813
Intangible assets 1,332 1,437
Investments accounted for using the equity method 1,489 1,742
Deferred tax assets 94 1,912
Other 21 25
Total non-current assets 66,052 82,234
Total assets 105,725 108,927
LIABILITIES
Current liabilities
Trade and other payables 4,570 7,027
Interest bearing liabilities 3,054 2,628
Liabilities directly associated with the assets held for sale 11 7,564 17
Other financial liabilities 247 130
Current tax payable 1,836 2,800
Provisions 3,321 3,696
Deferred income 27 105
Total current liabilities 20,619 16,403
Non-current liabilities
Interest bearing liabilities 15,897 18,355
Other financial liabilities 1,313 1,146
Non-current tax payable 94 120
Deferred tax liabilities 3,808 3,314
Provisions 9,032 13,799
Deferred income 40 185
Total non-current liabilities 30,184 36,919
Total liabilities 50,803 53,322
Net assets 54,922 55,605
EQUITY
Share capital - BHP Group Limited 1,283 1,111
Share capital - BHP Group Plc 1,057 1,057
Treasury shares (7) (33)
Reserves 2,426 2,350
Retained earnings 46,028 46,779
Total equity attributable to BHP shareholders 50,787 51,264
Non-controlling interests 4,135 4,341
Total equity 54,922 55,605
The accompanying notes form part of this half year Financial Report.
42
Consolidated Cash Flow Statement for the half year ended 31 December 2021
Notes Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2021 2020 2021
US$M US$M US$M
Restated Restated
Operating activities
Profit before taxation from Continuing operations 14,493 9,013 24,292
Adjustments for:
Depreciation and amortisation expense 2,851 2,405 5,084
Impairments of property, plant and equipment, financial assets and intangibles 38 629 2,507
Net finance costs 352 876 1,223
Loss from equity accounted investments, related impairments and expenses 354 470 915
Other 273 294 573
Changes in assets and liabilities:
Trade and other receivables (18) (1,049) (2,389)
Inventories (420) (296) (405)
Trade and other payables (1,193) 45 1,149
Provisions and other assets and liabilities (553) (59) 486
Cash generated from operations 16,177 12,328 33,435
Dividends received 618 355 728
Interest received 16 60 97
Interest paid (300) (447) (766)
Proceeds/(settlements) of cash management related instruments 33 (202) (401)
Net income tax and royalty-related taxation refunded 43 47 222
Net income tax and royalty-related taxation paid (5,058) (2,993) (7,432)
Net operating cash flows from Continuing operations 11,529 9,148 25,883
Net operating cash flows from Discontinued operations 11 1,748 221 1,351
Net operating cash flows 13,277 9,369 27,234
Investing activities
Purchases of property, plant and equipment (2,768) (2,835) (5,612)
Exploration expenditure (110) (86) (192)
Exploration expenditure expensed and included in operating cash flows 80 56 134
Net investment and funding of equity accounted investments (244) (361) (553)
Proceeds from sale of assets 92 86 158
Other investing (95) (89) (260)
Net investing cash flows from Continuing operations (3,045) (3,229) (6,325)
Net investing cash flows from Discontinued operations 11 (544) (980) (1,520)
Net investing cash flows (3,589) (4,209) (7,845)
Financing activities
Proceeds from interest bearing liabilities 314 218 568
Proceeds of debt related instruments − 90 167
Repayment of interest bearing liabilities (1,499) (6,181) (8,357)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts (1) (174) (234)
Dividends paid (10,029) (2,767) (7,901)
Dividends paid to non-controlling interests (1,273) (762) (2,127)
Net financing cash flows from Continuing operations (12,488) (9,576) (17,884)
Net financing cash flows from Discontinued operations 11 (18) (19) (38)
Net financing cash flows (12,506) (9,595) (17,922)
Net (decrease)/increase in cash and cash equivalents from Continuing (4,004) (3,657) 1,674
operations
Net increase/(decrease) in cash and cash equivalents from Discontinued 1,186 (778) (207)
operations
Cash and cash equivalents, net of overdrafts, at the beginning of the period 15,246 13,426 13,426
Foreign currency exchange rate changes on cash and cash equivalents (62) 300 353
Cash and cash equivalents, net of overdrafts, at the end of the period 12,366 9,291 15,246
The accompanying notes form part of this half year Financial Report.
43
Consolidated Statement of Changes in Equity for the half year ended 31
December 2021
Attributable to BHP shareholders
Share capital Treasury shares
US$M BHP BHP BHP BHP Reserves Retained Total equity Non- controlling interests Total
Group Group Group Group earnings attributable equity
Limited Plc Limited Plc to BHP
shareholders
Balance as at 1 July 2021 1,111 1,057 (32) (1) 2,350 46,779 51,264 4,341 55,605
Total comprehensive income − − − − (16) 9,439 9,423 1,063 10,486
Transactions with owners:
BHP Group Limited shares issued 172 − (172) − − − − − −
Purchase of shares by ESOP Trusts − − − (1) − − (1) − (1)
Employee share awards exercised net of employee contributions net of tax − − 197 2 (124) (75) − − −
Vested employee share awards that have lapsed, been cancelled or forfeited − − − − (4) 4 − − −
Accrued employee entitlement for unexercised awards net of tax − − − − 67 − 67 − 67
Dividends − − − − − (10,119) (10,119) (1,273) (11,392)
Equity contributed net of tax − − − − 153 − 153 4 157
Balance as at 31 December 2021 1,283 1,057 (7) − 2,426 46,028 50,787 4,135 54,922
Balance as at 1 July 2020 1,111 1,057 (5) − 2,306 43,396 47,865 4,310 52,175
Total comprehensive income − − − − 53 3,873 3,926 953 4,879
Transactions with owners:
Purchase of shares by ESOP Trusts − − (171) (3) − − (174) − (174)
Employee share awards exercised net of employee contributions net of tax − − 147 2 (106) (43) − − −
Vested employee share awards that have lapsed, been cancelled or forfeited − − − − (2) 2 − − −
Accrued employee entitlement for unexercised awards net of tax − − − − 84 − 84 − 84
Dividends − − − − − (2,779) (2,779) (762) (3,541)
Balance as at 31 December 2020 1,111 1,057 (29) (1) 2,335 44,449 48,922 4,501 53,423
The accompanying notes form part of this half year Financial Report.
44
Notes to the Financial Statements
1. Basis of preparation
This general purpose Financial Report for the half year ended 31 December 2021
is unaudited and has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as issued by the International Accounting Standards Board
(IASB) and AASB 134 'Interim Financial Reporting' as issued by the Australian
Accounting Standards Board (AASB) and the Disclosure and Transparency Rules of
the Financial Conduct Authority in the United Kingdom and the Australian
Corporations Act 2001 as applicable to interim financial reporting.
Segment Reporting disclosures from IAS 34/AASB 134 'Interim Financial
Reporting' have been disclosed within the Segment summary on page 19 outside
of this Financial Report.
The half year Financial Statements represent a 'condensed set of Financial
Statements' as referred to in the UK Disclosure Guidance and Transparency
Rules issued by the Financial Conduct Authority. Accordingly, they do not
include all of the information required for a full annual report and are to be
read in conjunction with the most recent annual financial report. The
comparative figures for the financial year ended 30 June 2021 are not the
statutory accounts of the Group for that financial year. Those accounts, which
were prepared under IFRS, have been reported on by the Company's auditor and
delivered to the registrar of companies. The auditor has reported on those
accounts; the report was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain statements under Section 498 (2)
or (3) of the UK Companies Act 2006.
The half year Financial Statements have been prepared on a basis of accounting
policies and methods of computation consistent with those applied in the 30
June 2021 annual Financial Statements contained within the Annual Report of
the Group. A number of accounting standards and interpretations, have been
issued, and will be applicable in future periods. While these remain subject
to ongoing assessment, no significant impacts have been identified to date.
These standards have not been applied in the preparation of these half year
Financial Statements.
Comparative periods have been adjusted for the effects of applying IFRS 5
'Non-current Assets Held for Sale and Discontinued Operations' to the Group's
Petroleum business and to disclose them on the same basis as the current
period figures.
All amounts are expressed in US dollars unless otherwise stated. The Group's
presentation currency and the functional currency of the majority of its
operations is US dollars as this is the principal currency of the economic
environment in which it operates. Amounts in this Financial Report have,
unless otherwise indicated, been rounded to the nearest million dollars.
The directors have made an assessment of the Group's ability to continue as a
going concern for the 12 months from the date of this report and consider it
appropriate to adopt the going concern basis of accounting in preparing the
half year Financial Statements.
45
2. Exceptional items
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and impact is considered
material to the Financial Statements. Such items included within the Group's
profit for the half year from continuing operations are detailed below.
Exceptional items attributable to discontinued operations are detailed in note
11 'Discontinued operations and Assets and liabilities held for sale'.
Half year ended 31 December 2021 Gross Tax Net
US$M US$M US$M
Exceptional items by category
Samarco dam failure (822) 1 (821)
Impairment of US deferred tax assets − (423) (423)
Total (822) (422) (1,244)
Attributable to non-controlling interests − − −
Attributable to BHP shareholders (822) (422) (1,244)
46
Samarco Mineração SA (Samarco) dam failure
The loss of US$821 million (after tax) related to the Samarco dam failure in
November 2015 comprises the following:
Half year ended 31 December 2021 US$M
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to (27)
the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense −
Samarco Germano dam decommissioning 49
Samarco dam failure provision (539)
Fair value change on forward exchange derivatives (212)
Net finance costs (93)
Income tax benefit 1
Total ((1)) (821)
(1) Refer to note 10 'Significant events - Samarco dam failure' for
further information.
Impairment of US deferred tax assets
The Group recognised an impairment charge of US$423 million (after tax) in
relation to deferred tax assets where the recoverability has historically been
reliant on Petroleum earnings in the same tax group. On 22 November 2021, the
Group and Woodside Petroleum Ltd ('Woodside') signed a binding share sale
agreement (SSA) for the merger of the Group's oil and gas portfolio with
Woodside ('proposed merger'), and while these tax assets will remain with the
Group after the expected completion of the proposed merger, the impairment
charge reflects the status of the Petroleum business divestment and the extent
of other currently forecast future earnings against which the assets can be
recovered.
The exceptional items relating to the half year ended 31 December 2020 and the
year ended 30 June 2021 are detailed below.
Half year ended 31 December 2020 Gross Tax Net
Restated US$M US$M US$M
Exceptional items by category
Samarco dam failure (358) (19) (377)
COVID-19 related costs (267) 76 (191)
Impairment of Energy coal assets (927) (647) (1,574)
Total (1,552) (590) (2,142)
Attributable to non-controlling interests (15) 5 (10)
Attributable to BHP shareholders (1,537) (595) (2,132)
Year ended 30 June 2021 Gross Tax Net
Restated US$M US$M US$M
Exceptional items by category
Samarco dam failure (1,087) (71) (1,158)
COVID-19 related costs (499) 138 (361)
Impairment of Energy coal assets (1,523) (651) (2,174)
Impairment of Potash assets (1,314) (473) (1,787)
Total (4,423) (1,057) (5,480)
Attributable to non-controlling interests (34) 10 (24)
Attributable to BHP shareholders (4,389) (1,067) (5,456)
47
3. Interests in associates and joint venture entities
The Group's major shareholdings in associates and joint venture entities,
including their profit/(loss), are listed below:
Ownership interest at the Group's reporting date Profit/(loss) from equity accounted investments, related impairments and
expenses
31 Dec 31 Dec 30 June Half year ended Half year ended Year ended
2021 2020 2021 31 Dec 2021 31 Dec 2020 30 June 2021
% % % US$M US$M US$M
Restated Restated
Share of profit/(loss) of equity accounted investments:
Cerrejόn((1)) 33.33 33.33 33.33 − (30) (14)
Compañia Minera Antamina SA 33.75 33.75 33.75 381 275 623
Samarco Mineração SA((2)) 50.00 50.00 50.00 − − −
Other (33) (37) (68)
Share of profit/(loss) of equity accounted investments 348 208 541
Samarco impairment expense((2)) − (90) (111)
Samarco dam failure provision((2)) (539) (300) (1,000)
Samarco Germano dam decommissioning((2)) 49 − (15)
Fair value change on forward exchange derivatives((2)) (212) 92 136
Cerrejόn impairment expense − (380) (466)
Loss from equity accounted investments, related impairments and expenses (354) (470) (915)
(1) On 11 January 2022 BHP completed the sale to Glencore of its 33.3 per
cent interest in Cerrejón, a non-operated energy coal joint venture in
Colombia. The transaction was first announced on 28 June 2021 for a total cash
consideration of US$294 million with an effective economic date of 31 December
2020. The purchase price was subject to adjustments at transaction completion,
including for dividends paid by Cerrejón to the Group during the period from
signing to completion. At 31 December 2021, the Group's investment in
Cerrejón continued to be classified as 'Assets held for sale' and measured at
fair value in line with the divestment consideration. During the half year
ended 31 December 2021, the Group received dividends of US$238 million from
Cerrejón, reducing completion proceeds, net of expected transaction costs,
and the value of the Group's investment in Cerrejón to US$46 million as at 31
December 2021. Refer to note 11 'Discontinued operations and Assets and
liabilities held for sale' for further information.
(2) Refer to note 10 'Significant events - Samarco dam failure' for
further information.
4. Net finance costs
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2021 2020 2021
US$M US$M US$M
Restated Restated
Financial expenses
Interest expense using the effective interest rate method:
Interest on bank loans, overdrafts and all other borrowings 230 345 607
Interest capitalised at 2.48% (31 December 2020: 3.01%; 30 June 2021: (49) (114) (204)
2.83%)((1))
Interest on lease liabilities 63 40 102
Discounting on provisions and other liabilities 243 175 353
Other gains and losses:
Fair value change on hedged loans (245) (288) (779)
Fair value change on hedging derivatives 218 248 704
Loss on bond repurchase((2)) − 395 395
Exchange variations on net debt (83) 121 99
Other − − 13
Total financial expenses 377 922 1,290
Financial income
Interest income (25) (46) (67)
Net finance costs 352 876 1,223
(1) Interest has been capitalised at the rate of interest applicable to
the specific borrowings financing the assets under construction or, where
financed through general borrowings, at a capitalisation rate representing the
average interest rate on such borrowings.
(2) Relates to the additional cost on settlement of two multi-currency
hybrid debt repurchase programs and the unwind of the associated hedges,
included in a total cash payment of US$3,402 million disclosed in repayment of
interest bearing liabilities in the Consolidated Cash Flow Statements for half
year ended 31 December 2020 and year ended 30 June 2021.
48
5. Income tax expense
Half year ended Year
Half year ended 31 Dec ended
31 Dec 2020 30 June
2021 US$M 2021
US$M Restated US$M
Restated
Total taxation expense comprises:
Current tax expense 4,184 3,339 9,018
Deferred tax expense 775 654 1,598
4,959 3,993 10,616
Half year ended Year
Half year ended 31 Dec ended
31 Dec 2020 30 June
2021 US$M 2021
US$M Restated US$M
Restated
Factors affecting income tax expense for the period
Income tax expense differs to the standard rate of corporation tax as follows:
Profit before taxation 14,493 9,013 24,292
Tax on profit at Australian prima facie tax rate of 30 per cent 4,348 2,704 7,288
Non-tax effected operating losses and capital gains((1)) 709 1,213 2,640
Tax on remitted and unremitted foreign earnings 344 114 485
Tax effect of loss from equity accounted investments, related impairments and 42 169 315
expenses((2))
Investment and development allowance − (68) −
Tax rate changes − − (1)
Amounts over provided in prior years (17) − (57)
Foreign exchange adjustments (91) (48) (33)
Recognition of previously unrecognised tax assets (195) (5) (28)
Impact of tax rates applicable outside of Australia (411) (252) (669)
Other 104 138 436
Income tax expense 4,833 3,965 10,376
Royalty-related taxation (net of income tax benefit) 126 28 240
Total taxation expense 4,959 3,993 10,616
(1) Includes an exceptional impairment charge of US$423 million in the
half year ended 31 December 2021 related to deferred tax assets where the
recoverability has historically been reliant on Petroleum earnings as part of
a broader tax group. Includes the tax impacts related to the exceptional
impairments of NSWEC, Cerrejón and Potash in the year ended 30 June 2021.
Refer to note 2 'Exceptional Items' for further information.
(2) The loss from equity accounted investments and related expenses is net
of income tax, with the exception of the Samarco forward exchange derivatives
described in note 10 'Significant events - Samarco dam failure'. This item
removes the prima facie tax effect on such profits and related expenses,
excluding the impact of the Samarco forward exchange derivatives which are
taxable.
49
6. Earnings per share
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2021 2020 2021
US$M US$M US$M
Restated Restated
Earnings attributable to BHP shareholders (US$M)((1))
- Continuing operations 8,471 4,068 11,529
- Total 9,443 3,876 11,304
Weighted average number of shares (Million)
- Basic((2)) 5,061 5,057 5,057
- Diluted((3)) 5,072 5,069 5,068
Basic earnings per ordinary share (US cents)((4)(5))
- Continuing operations 167.4 80.4 228.0
- Total 186.6 76.6 223.5
Diluted earnings per ordinary share (US cents)((4)(5))
- Continuing operations 167.0 80.3 227.5
- Total 186.2 76.5 223.0
Headline earnings per ordinary share (US cents)((6))
- Basic 185.6 98.8 284.8
- Diluted 185.2 98.6 284.2
(1) Diluted earnings attributable to BHP shareholders are equal to
earnings attributable to BHP shareholders.
(2) Prior to unification of BHP's corporate structure, the calculation of
the number of ordinary shares used in the computation of basic earnings per
share is the aggregate of the weighted average number of ordinary shares of
BHP Group Limited and BHP Group Plc outstanding during the period after
deduction of the number of shares held by the Billiton Employee Share
Ownership Trust and the BHP Billiton Limited Employee Equity Trust. Effective
from 31 January 2022, the aggregate of the weighted average number of ordinary
shares of only BHP Group Limited will be considered in the computation of
basic earnings per share. Refer to notes 9 'Share capital' and 12 'Subsequent
events' for details on Unification.
(3) For the purposes of calculating diluted earnings per share, the effect
of 11 million dilutive shares has been taken into account for the half year
ended 31 December 2021 (31 December 2020: 12 million shares; 30 June 2021: 11
million shares). The Group's only potential dilutive ordinary shares are share
awards granted under employee share ownership plans. Diluted earnings per
share calculation excludes instruments which are considered antidilutive.
At 31 December 2021, there are no instruments which are considered
antidilutive (31 December 2020: nil; 30 June 2021: nil).
(4) Each American Depositary Share represents twice the earnings for BHP
ordinary shares.
(5) Refer to note 11 'Discontinued operations and Assets and liabilities
held for sale' for basic earnings per share and diluted earnings per share for
discontinued operations.
(6) Headline earnings is a Johannesburg Stock Exchange defined performance
measure and is reconciled from earnings attributable to ordinary shareholders
as follows:
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2021 2020 2021
US$M US$M US$M
Earnings attributable to BHP shareholders 9,443 3,876 11,304
Adjusted for:
(Gain)/loss on sales of PP&E, Investments and Operations((i)) (110) 3 (50)
Impairments of property, plant and equipment, financial assets and intangibles 38 690 2,633
Samarco impairment expense − 90 111
Cerrejόn impairment expense − 380 466
Tax effect of above adjustments 23 (41) (60)
Subtotal of adjustments (49) 1,122 3,100
Headline earnings 9,394 4,998 14,404
Diluted headline earnings 9,394 4,998 14,404
(i) Included in other income.
50
7. Dividends
Half year ended Half year ended Year ended
31 Dec 2021 31 Dec 2020 30 June 2021
Per share Total Per share Total Per share Total
US cents US$M US cents US$M US cents US$M
Dividends paid during the period
Prior year final dividend 200.0 10,119 55.0 2,779 55.0 2,779
Interim dividend N/A − N/A − 101.0 5,115
200.0 10,119 55.0 2,779 156.0 7,894
Dividends paid during the period differs from the amount of dividends paid in
the Cash Flow Statement as a result of foreign exchange gains and losses
relating to the timing of equity distributions between the record date and the
payment date. An additional derivative settlement of US$98 million was made as
part of the funding of the final dividend and is disclosed in
Proceeds/(settlements) of cash management related instruments in the Cash Flow
Statement.
On 2 December 2021, BHP announced a final Board decision to unify BHP's
corporate structure under its existing Australian parent company, BHP Group
Limited which was approved on the 20 January 2022 by BHP Group Limited and BHP
Group Plc shareholders and completed on 31 January 2022 ('Unification'). Refer
note 9 'Share capital' for further details on Unification.
Prior to the Unification, the Dual Listed Company merger terms required that
ordinary shareholders of BHP Group Limited and BHP Group Plc are paid equal
cash dividends on a per share basis.
Each American Depositary Share (ADS) represents two ordinary shares of BHP
Group Limited. Dividends determined on each ADS represent twice the dividend
determined on BHP ordinary shares.
Dividends are determined after period-end and contained within the
announcement of the results for the period. Interim dividends are determined
in February and paid in March. Final dividends are determined in August and
paid in September. Dividends determined are not recorded as a liability at the
end of the period to which they relate. Subsequent to the half year, on 15
February 2022, BHP Group Limited determined an interim ordinary dividend of
150 US cents per share (US$7,593 million), which will be paid on 28 March
2022. Prior to Unification, an ordinary dividend was determined by both BHP
Group Limited and BHP Group Plc (31 December 2020: interim dividend of 101 US
cents per share - US$5,107 million; 30 June 2021: final dividend of 200 US
cents per share - US$10,114 million).
BHP Group Limited dividends for all periods presented are, or will be, fully
franked based on a tax rate of 30 per cent.
51
8. Financial risk management - Fair values
All financial assets and financial liabilities, other than derivatives and
trade receivables, are initially recognised at the fair value of consideration
paid or received, net of transaction costs as appropriate. Financial assets
are initially recognised on their trade date.
Financial assets are subsequently carried at fair value or amortised cost
based on:
‒ the Group's purpose, or business model, for holding the financial
asset;
‒ whether the financial asset's contractual terms give rise to cash
flows that are solely payments of principal and interest.
The resulting Financial Statements classifications of financial assets can be
summarised as follows:
Contractual cash flows Business model Category
Solely principal and interest Hold in order to collect contractual cash flows Amortised cost
Solely principal and interest Hold in order to collect contractual cash flows and sell Fair value through other comprehensive income
Solely principal and interest Hold in order to sell Fair value through profit or loss
Other Any of those mentioned above Fair value through profit or loss
Solely principal and interest refers to the Group receiving returns only for
the time value of money and the credit risk of the counterparty for financial
assets held. The main exceptions for the Group are provisionally priced
receivables and derivatives which are measured at fair value through the
income statement under IFRS 9 'Financial Instruments'.
The Group has the intention of collecting payment directly from its customers
in most cases, however the Group also participates in receivables financing
programs in respect of selected customers. Receivables in these portfolios
which are classified as 'hold in order to sell', are provisionally
priced receivables and are therefore held at fair value through profit or
loss prior to sale to the financial institution.
With the exception of derivative contracts and provisionally priced trade
payables, the Group's financial liabilities are classified as subsequently
measured at amortised cost.
The Group may in addition elect to designate certain financial assets or
liabilities at fair value through profit or loss or to apply hedge accounting
where they are not mandatorily held at fair value through profit or loss.
Derivatives are initially recognised at fair value on the date the contract is
entered into and are subsequently remeasured at their fair value.
Fair value measurement
The carrying amount of financial assets and liabilities measured at fair value
is principally calculated based on inputs other than quoted prices that are
observable for these financial assets or liabilities, either directly (i.e. as
unquoted prices) or indirectly (i.e. derived from prices). Where no price
information is available from a quoted market source, alternative market
mechanisms or recent comparable transactions, fair value is estimated based on
the Group's views on relevant future prices, net of valuation allowances to
accommodate liquidity, modelling and other risks implicit in such estimates.
The inputs used in fair value calculations are determined by the relevant
segment or function. The functions support the assets and operate under a
defined set of accountabilities authorised by the Executive Leadership Team.
Movements in the fair value of financial assets and liabilities may be
recognised through the income statement or in other comprehensive income.
52
For financial assets and liabilities carried at fair value, the Group uses the
following to categorise the method used based on the lowest level input that
is significant to the fair value measurement as a whole:
IFRS 13 Fair value hierarchy
Level 1 Level 2 Level 3
Valuation method Based on quoted prices (unadjusted) in active markets for identical financial Based on inputs other than quoted prices included within Level 1 that are Based on inputs not observable in the market using appropriate valuation
assets and liabilities. observable for the financial asset or liability, either directly (i.e. as models, including discounted cash flow modelling.
unquoted prices) or indirectly (i.e. derived from prices).
The financial assets and liabilities are presented by class in the following
table at their carrying values, which generally approximate to fair value. In
the case of US$3,018 million (30 June 2021: US$3,018 million) of fixed rate
debt not swapped to floating rate, the fair value at 31 December 2021 was
US$3,945 million (30 June 2021: US$4,052 million). The fair value is
determined using a method that can be categorised as Level 2 and uses inputs
based on benchmark interest rates, alternative market mechanisms or recent
comparable transactions.
The fair value of financial instruments categorised as Level 3 uses inputs
primarily based on commodity prices and operational variables.
For financial instruments that are carried at fair value on a recurring basis,
the Group determines whether transfers have occurred between levels in the
hierarchy by reassessing categorisation at the end of each reporting period.
There were no transfers between categories during the period.
Financial assets and liabilities
IFRS 13 Fair value hierarchy Level((1)) IFRS 9 Classification 31 Dec 2021 30 June 2021
US$M US$M
Current cross currency and interest rate swaps((2)) 2 Fair value through profit or loss 30 20
Current other derivative contracts((3)) 2,3 Fair value through profit or loss 78 207
Current other financial assets((4)) 3 Fair value through profit or loss 134 −
Current other investments((5)) 1,2 Fair value through profit or loss 22 3
Non-current cross currency and interest rate swaps((2)) 2 Fair value through profit or loss 802 1,123
Non-current other derivative contracts((3)) 2,3 Fair value through profit or loss − 152
Non-current other financial assets((4)) 3 Fair value through profit or loss 131 −
Non-current investment in shares 3 Fair value through other comprehensive income 6 31
Non-current other investments((5)) 1,2 Fair value through profit or loss 276 304
Total other financial assets 1,479 1,840
Cash and cash equivalents Amortised cost 12,366 15,246
Trade and other receivables((6)) Amortised cost 1,847 2,363
Provisionally priced trade receivables 2 Fair value through profit or loss 2,854 3,547
Total financial assets 18,546 22,996
Non-financial assets 87,179 85,931
Total assets 105,725 108,927
Current cross currency and interest rate swaps((2)) 2 Fair value through profit or loss 113 −
Current other derivative contracts((3)) 2,3 Fair value through profit or loss 66 52
Current other financial liabilities((7)) Amortised cost 68 78
Non-current cross currency and interest rate swaps((2)) 2 Fair value through profit or loss 757 586
Non-current other derivative contracts((3)) 2,3 Fair value through profit or loss 57 −
Non-current other financial liabilities((7)) Amortised cost 499 560
Total other financial liabilities 1,560 1,276
Trade and other payables((8)) Amortised cost 3,813 6,277
Provisionally priced trade payables 2 Fair value through profit or loss 707 574
Bank loans((9)) Amortised cost 2,195 2,260
Notes and debentures((9)) Amortised cost 13,707 14,769
Lease liabilities 3,016 3,896
Other((9)) Amortised cost 33 58
Total financial liabilities 25,031 29,110
Non-financial liabilities 25,772 24,212
Total liabilities 50,803 53,322
53
(1) All of the Group's financial assets and financial liabilities
recognised at fair value were valued using market observable inputs
categorised as Level 2 unless specified otherwise in the following footnotes.
(2) Cross currency and interest rate swaps are valued using market data
including interest rate curves (which include the base LIBOR rate and swap
rates) and foreign exchange rates. A discounted cash flow approach is used to
derive the fair value of cross currency and interest rate swaps at the
reporting date.
(3) Includes other derivative contracts of US$ nil (30 June 2021: US$121
million) categorised as Level 3. Significant items at 30 June 2021 were
derivatives embedded in physical commodity purchase and sales contracts of gas
in Trinidad and Tobago which were classified as 'Assets held for sale' at 31
December 2021.
(4) Includes receivables contingent on outcome of future events relating
to mining and regulatory approvals of US$225 million (30 June 2021: nil).
(5) Includes investments held by BHP Foundation which are restricted and
not available for general use by the Group of US$279 million (30 June 2021:
US$260 million) of which other investments (US Treasury Notes) of US$95
million is categorised as Level 1 (30 June 2021: US$72 million).
(6) Excludes input taxes of US$368 million (30 June 2021: US$486 million)
included in other receivables.
(7) Includes the discounted settlement liability in relation to the
cancellation of power contracts at the Group's Escondida operations.
(8) Excludes input taxes of US$50 million (30 June 2021: US$176 million)
included in other payables.
(9) All interest bearing liabilities, excluding lease liabilities, are
unsecured.
9. Share capital
At 31 December 2021, BHP Group Limited had 2,950 million ordinary shares on
issue and held by the public and BHP Group Plc had 2,112 million ordinary
shares on issue and held by the public. No shares in BHP Group Limited were
held by BHP Group Plc at 31 December 2021 (31 December 2020: nil; 30 June
2021: nil).
During August 2021, BHP Group Limited issued 4,400,000 fully paid ordinary
shares to the BHP Billiton Limited Employee Equity Trust at A$52.99 per share,
to satisfy the vesting of employee share awards and related dividend
equivalent entitlements under those employee share plans.
On 3 September 2021, BHP Group Plc acquired by way of gift from J.P. Morgan
Limited the 50,000 issued 5.5 per cent cumulative preference shares of £1.00,
in the capital of BHP Group Plc. The preference shares were held by BHP Group
Plc at 31 December 2021 and cancelled on 31 January 2022.
On 2 December 2021, BHP announced a final Board decision to unify BHP's
corporate structure under its existing Australian parent company, BHP Group
Limited which was approved on 20 January 2022 by BHP Group Limited and BHP
Group Plc shareholders. On 31 January 2022, 2,112,071,796 fully paid ordinary
shares in BHP Group Limited were issued to BHP Group Plc shareholders in a one
for one exchange of their BHP Group Plc ordinary shares, resulting in BHP
Group Limited becoming the sole parent company of the BHP Group with a single
set of shareholders.
At 31 December 2021, BHP Group Plc had one Special Voting share on issue and
BHP Group Limited had one Special Voting share and one DLC dividend share on
issue to facilitate operation of the Group's dual listed structure. In
connection with Unification, these shares were bought back for nominal value
in January 2022 and subsequently cancelled.
10. Significant events - Samarco dam failure
As a result of the Samarco dam failure on 5 November 2015, BHP Billiton Brasil
Ltda (BHP Brasil) and other Group entities continue to incur costs and
maintain liabilities for future costs. The information presented in this note
should be read in conjunction with section 1.15 'Samarco' and Financial
Statements note 4 'Significant events - Samarco dam failure' in the 30 June
2021 Annual Report.
54
The financial impacts of the Samarco dam failure on the Group's income
statement, balance sheet and cash flow statement for the half year ended 31
December 2021 are shown below and have been treated as an exceptional item.
Financial impacts of Samarco dam failure Half year Half year Year ended
ended ended 30 June
31 Dec 31 Dec 2021
2021 2020 US$M
US$M US$M
Income statement
Other income((1)) − − 34
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to (27) (19) (46)
the Samarco dam failure((2))
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense((3)) − (90) (111)
Samarco Germano dam decommissioning((4)) 49 − (15)
Samarco dam failure provision((5)) (539) (300) (1,000)
Fair value change on forward exchange derivatives((6)) (212) 92 136
Loss from operations (729) (317) (1,002)
Net finance costs((7)) (93) (41) (85)
Loss before taxation (822) (358) (1,087)
Income tax benefit/(expense)((8)) 1 (19) (71)
Loss after taxation (821) (377) (1,158)
Balance sheet movement
Trade and other payables 3 6 (5)
Derivatives (202) 73 136
Tax liabilities 1 − (71)
Provisions (327) (114) (741)
Net liabilities (525) (35) (681)
Half year ended Half year ended Year ended
31 Dec 2021 31 Dec 2020 30 June 2021
US$M US$M US$M
Cash flow statement
Loss before taxation (822) (358) (1,087)
Adjustments for:
Samarco impairment expense((3)) − 90 111
Samarco Germano dam decommissioning((4)) (49) − 15
Samarco dam failure provision((5)) 539 300 1,000
Fair value change on forward exchange derivatives((6)) 212 (92) (136)
Settlements of cash management related instruments (10) − −
Net finance costs((7)) 93 41 85
Changes in assets and liabilities:
Trade and other payables (3) (6) 5
Net operating cash flows (40) (25) (7)
Net investment and funding of equity accounted investments((9)) (256) (317) (470)
Net investing cash flows (256) (317) (470)
Net decrease in cash and cash equivalents (296) (342) (477)
(1) Proceeds from insurance settlements.
(2) Includes legal and advisor costs incurred.
(3) Impairment expense from working capital funding provided during the
period.
(4) US$25 million (31 December 2020: US$12 million; 30 June 2021: US$6
million) change in estimate and US$24 million (31 December 2020: US$(12)
million; 30 June 2021: US$(21) million) exchange translation.
(5) US$(806) million (31 December 2020: US$(205) million; 30 June 2021:
US$(842) million) change in estimate and US$267 million (31 December 2020:
US$(95) million; 30 June 2021: US$(158) million) exchange translation.
55
(6) During FY2021 the Group entered into forward exchange contracts to
limit the Brazilian reais exposure on the dam failure provisions. While not
applying hedge accounting, the fair value changes in the forward exchange
instruments are recorded within Loss from equity accounted investments,
related impairments and expenses in the Income Statement.
(7) Amortisation of discounting of provision.
(8) Includes income tax benefit/(expense) on forward exchange derivatives
and other taxes incurred during the period.
(9) Includes US$ nil (31 December 2020: US$(90) million; 30 June 2021:
US$(111) million) funding provided during the period, US$(256) million (31
December 2020: US$(221) million; 30 June 2021: US$(351) million) utilisation
of the Samarco dam failure provision and US$ nil (31 December 2020: US$(6)
million; 30 June 2021: US$(8) million) utilisation of the Samarco Germano
decommissioning provision.
Equity accounted investment in Samarco
BHP Brasil's investment in Samarco remains at US$ nil. No dividends have been
received by BHP Brasil from Samarco during the period and Samarco currently
does not have profits available for distribution.
Provisions related to the Samarco dam failure
31 Dec 2021 30 June 2021
US$M US$M
At the beginning of the reporting period 2,792 2,051
Movement in provisions 327 741
Comprising:
Utilised (256) (359)
Adjustments charged to the income statement:
Change in estimate - Samarco dam failure provision 806 842
Change in estimate - Samarco Germano dam decommissioning (25) (6)
Amortisation of discounting impacting net finance costs 93 85
Exchange translation (291) 179
At the end of the reporting period 3,119 2,792
Comprising:
Current 1,561 1,206
Non-current 1,558 1,586
At the end of the reporting period 3,119 2,792
Comprising:
Samarco dam failure provision 2,928 2,560
Samarco Germano dam decommissioning provision 191 232
56
Provision for Samarco dam failure
On 2 March 2016, BHP Brasil, Samarco and Vale, entered into an agreement with
the Federal Government of Brazil, the states of Espírito Santo and Minas
Gerais and certain other public authorities to establish a foundation
(Fundação Renova) to develop and execute environmental and socio-economic
programs (Programs) to remediate and provide compensation for damage caused by
the Samarco dam failure (the Framework Agreement). Key Programs include those
for financial assistance and compensation of impacted persons, including
fisherfolk impacted by the dam failure, and those for remediation of impacted
areas and resettlement of impacted communities. A committee (Interfederative
Committee) comprising representatives from the Brazilian Federal and State
Governments, local municipalities, environmental agencies, impacted
communities and Public Defence Office oversees the activities of the
Fundação Renova in order to monitor, guide and assess the progress of
actions agreed in the Framework Agreement.
In addition, the 12th Federal Court is supervising the work of the Fundação
Renova and the Court's decisions relating to financial compensation for
impacted persons have been considered in the Samarco dam failure provision,
including a ruling in October 2021 that expanded the scope of individuals
eligible for compensation and the amount of damages for certain categories of
impacted individuals. The provision may be impacted in future reporting
periods as a result of appeals and motions for clarification on certain Court
decisions that remain outstanding.
To the extent that Samarco does not meet its funding obligations during the 15
year term of the Framework Agreement, each of BHP Brasil and Vale has funding
obligations under the Framework Agreement in proportion to its 50 per cent
shareholding in Samarco.
Samarco began to gradually recommence operations in December 2020, however,
there remains uncertainty regarding Samarco's future cash flow generation and
the outcome of the Judicial Reorganisation (outlined below). In light of these
uncertainties and based on currently available information, BHP Brasil's
provision for its obligations under the Framework Agreement Programs is US$2.9
billion before tax and after discounting at 31 December 2021 (30 June 2021:
US$2.6 billion).
Under a Governance Agreement ratified on 8 August 2018, BHP Brasil, Samarco
and Vale were to establish a process to renegotiate the Programs over two
years to progress settlement of the R$155 billion (approximately US$28
billion) Federal Public Prosecution Office claim (described below).
Pre-requisites established in the Governance Agreement, for re-negotiation of
the Framework Agreement were not implemented during the two year period and on
30 September 2020, Brazilian Federal and State prosecutors and public
defenders filed a request for the immediate resumption of the R$155 billion
(approximately US$28 billion) claim, which was suspended for two years from
the date of ratification of the Governance Agreement. The claim was suspended
again after the parties to the claim agreed to continue the suspension on 19
March 2021. Formal suspension of the claim ceased on 10 December 2021, however
no further rulings have been made and BHP Brasil, Samarco, Vale and Federal
and State prosecutors have been engaging in negotiations to seek a definitive
and substantive settlement of the obligations under the Framework Agreement
and the R$155 billion (approximately US$28 billion) Federal Public Prosecution
Office claim.
It is not possible to provide a range of outcomes or a reliable estimate of
potential settlement outcomes and there is a risk that a negotiated outcome
may be materially higher than amounts currently reflected in the Samarco dam
failure provision. Until any revisions to the Programs are agreed, Fundação
Renova will continue to implement the Programs in accordance with the terms of
the Framework Agreement and the Governance Agreement.
57
BHP Brasil, Samarco and Vale are required to maintain security of an amount
equal to the Fundação Renova's annual budget up to a limit of R$2.2 billion
(approximately US$395 million). At 31 December 2021, the security comprised
R$1.3 billion (approximately US$235 million) in insurance bonds and a charge
of R$800 million (approximately US$145 million) over Samarco's assets. A
further R$100 million (approximately US$20 million) in liquid assets
previously maintained as security was released during FY2020 for COVID-19
related response efforts in Brazil.
Samarco Germano dam decommissioning
Samarco is currently progressing plans for the accelerated decommissioning of
its upstream tailings dams (the Germano dam complex). Given the uncertainties
surrounding Samarco's future cash flow generation, BHP Brasil's provision for
a 50 per cent share of the expected Germano decommissioning costs is US$191
million at 31 December 2021 (30 June 2021: US$232 million). The
decommissioning is at an early stage and as a result, further engineering work
and required validation by Brazilian authorities could lead to changes to
estimates in future reporting periods.
Contingent liabilities
The following matters are disclosed as contingent liabilities and given the
status of proceedings it is not possible to provide a range of possible
outcomes or a reliable estimate of potential future exposures for BHP, unless
otherwise stated. Ultimately, all the legal matters disclosed as contingent
liabilities could have a material adverse impact on BHP's business,
competitive position, cash flows, prospects, liquidity and shareholder
returns.
Federal Public Prosecution Office claim
BHP Brasil is among the defendants named in a claim brought by the Federal
Public Prosecution Office on 3 May 2016, seeking R$155 billion (approximately
US$28 billion) for reparation, compensation and moral damages in relation to
the Samarco dam failure.
The 12th Federal Court previously suspended the Federal Public Prosecution
Office claim, including a R$7.7 billion (approximately US$1.4 billion)
injunction request. On 30 September 2020, Brazilian Federal and State
prosecutors and public defenders filed a request for the immediate resumption
of the R$155 billion (approximately US$28 billion) claim, which was suspended
for two years from the date of ratification of the Governance Agreement. The
claim was suspended again after the parties to the claim agreed to continue
the suspension on 19 March 2021. Formal suspension of the claim ceased on 10
December 2021, however no further rulings been made and BHP Brasil, Samarco,
Vale and Federal and State prosecutors have been engaging in negotiations to
seek a definitive and substantive settlement of the obligations under the
Framework Agreement and the R$155 billion (approximately US$28 billion)
Federal Public Prosecution Office claim.
It is not possible to provide a range of outcomes or a reliable estimate of
potential settlement outcomes and there is a risk that a negotiated outcome
may be materially higher than amounts currently reflected in the Samarco dam
failure provision.
Australian class action complaints
BHP Group Ltd is named as a defendant in a shareholder class action filed in
the Federal Court of Australia on behalf of persons who acquired shares in BHP
Group Ltd on the Australian Securities Exchange or shares in BHP Group Plc on
the London Stock Exchange and Johannesburg Stock Exchange in periods prior to
the Samarco dam failure. The amount of damages sought is unspecified.
58
United Kingdom group action complaint
BHP Group Plc and BHP Group Ltd were named as defendants in group action
claims for damages filed in the courts of England. These claims were filed on
behalf of certain individuals, governments, businesses and communities in
Brazil allegedly impacted by the Samarco dam failure. The amount of damages
sought in these claims is unspecified. The complaint and a subsequent
application for permission to appeal have been dismissed by the court, however
an application by the claimants to reopen the proceedings was granted in July
2021, allowing the claimants to appeal previous dismissals of the claim. The
appeal is scheduled to be heard in April 2022.
Criminal charges
The Federal Prosecutors' Office has filed criminal charges against BHP Brasil,
Samarco and Vale and certain employees and former employees of BHP Brasil
(Affected Individuals) in the Federal Court of Ponte Nova, Minas Gerais. On 3
March 2017, BHP Brasil filed its preliminary defences. The Federal Court
terminated the charges against eight of the Affected Individuals. The Federal
Prosecutors' Office has appealed seven of those decisions with hearings of the
appeals still pending. BHP Brasil rejects outright the charges against the
company and the Affected Individuals and will defend the charges and fully
support each of the Affected Individuals in their defence of the charges.
Other claims
BHP Brasil is among the companies named as defendants in a number of legal
proceedings initiated by individuals, non-governmental organisations (NGOs),
corporations and governmental entities in Brazilian Federal and State courts
following the Samarco dam failure. The other defendants include Vale, Samarco
and Fundação Renova. The lawsuits include claims for compensation,
environmental rehabilitation and violations of Brazilian environmental and
other laws, among other matters. The lawsuits seek various remedies including
rehabilitation costs, compensation to injured individuals and families of the
deceased, recovery of personal and property losses, moral damages and
injunctive relief. In addition, government inquiries and investigations
relating to the Samarco dam failure have been commenced by numerous agencies
of the Brazilian government and are ongoing.
Additional lawsuits and government investigations relating to the Samarco dam
failure could be brought against BHP Brasil and possibly other BHP entities in
Brazil or other jurisdictions.
BHP insurance
BHP has insurances for class action claims related to the Samarco dam failure
made directly against BHP Brasil or other BHP entities. External insurers have
been notified of the Samarco dam failure and the class actions referred to
above. As at 31 December 2021, an insurance receivable has not been recognised
for any potential recoveries in respect of ongoing matters.
Commitments
Under the terms of the Samarco joint venture agreement, BHP Brasil does not
have an existing obligation to fund Samarco, any funding provided by BHP
Brasil during the year in respect of Fundação Renova or Germano dam
decommissioning obligations will be offset against the Group's provision for
the Samarco dam failure.
59
Samarco judicial reorganisation
Samarco filed for Judicial Reorganisation (JR) in April 2021, with the
Commercial Courts of Belo Horizonte, State of Minas Gerais, Brazil (JR Court),
after multiple enforcement actions taken by certain creditors of Samarco.
Samarco's JR filing followed unsuccessful attempts to negotiate a debt
restructure with certain financial creditors and multiple legal actions filed
by those creditors which threatened Samarco's operations. The JR is an
insolvency proceeding with a means for Samarco to seek to restructure its
financial debts and establish a sustainable financial position that allows
Samarco to continue to rebuild its operations and strengthen its ability to
meet its Fundação Renova funding obligations. Samarco's operations are
expected to continue during the JR and restructure process.
According to the list of creditors filed with the JR Court by the Judicial
Administrators (who are in charge of a first review of the list of creditors
filed by Samarco), Fundação Renova's funding obligations undertaken by
Samarco are not subject to the JR, although some financial creditors of
Samarco have objected to this position. Some such creditors filed challenges
to the list of creditors filed by the Judicial Administrators, in order to,
among other things, prevent Samarco from funding Fundação Renova. In
December 2021, the 12th Federal Court granted BHP Brasil's request that
Samarco be able to fund Fundação Renova obligations, overturning a temporary
injunction against such funding previously granted by the state court in
October 2021. BHP Brasil also obtained a preliminary injunction from the
Superior Court supporting the jurisdiction of the 12th Federal Court, and not
the state court, in this matter. It is expected that there will be continuing
litigation from creditors against Samarco and its shareholders over the course
of the JR proceeding, including with respect to the treatment of Samarco's
Fundação Renova-related obligations and attempts to pierce Samarco's
corporate veil to hold BHP Brasil and Vale liable for Samarco's debts.
The JR is not expected to affect Samarco's obligation or commitment to make
full redress for the 2015 Fundão dam failure, and is not expected to impact
Fundação Renova's ability to undertake that remediation and compensation. It
is not possible to determine the outcomes of the JR or estimate any impact
that the reorganisation may have for BHP Brasil, including its share of the
Samarco dam failure provisions.
60
Key judgements and estimates
Judgements
The outcomes of litigation are inherently difficult to predict and significant
judgement has been applied in assessing the likely outcome of legal claims and
determining which legal claims require recognition of a provision or
disclosure of a contingent liability. The facts and circumstances relating to
these cases are regularly evaluated in determining whether a provision for any
specific claim is required.
Management have determined that a provision can only be recognised for
obligations under the Framework Agreement and Samarco Germano dam
decommissioning as at 31 December 2021. It is not yet possible to provide a
range of possible outcomes or a reliable estimate of potential future
exposures to BHP in connection to the contingent liabilities noted above,
given their status.
Estimates
The provisions for Samarco dam failure and Samarco Germano dam decommissioning
currently reflect the estimated remaining costs to complete Programs under the
Framework Agreement and estimated costs to complete the Germano dam
decommissioning and require the use of significant judgements, estimates and
assumptions. Based on current estimates, it is expected that approximately 90
per cent of remaining costs for Programs under the Framework Agreement will be
incurred by December 2023.
While the provisions have been measured based on information available as at
31 December 2021, likely changes in facts and circumstances in future
reporting periods may lead to revisions to these estimates. However, it is
currently not possible to determine what facts and circumstances may change,
therefore the possible revisions in future reporting periods cannot be
reliably measured.
The key estimates that may have a material impact upon the provisions in the
next and future reporting periods include:
· number of people eligible for financial assistance and
compensation and the corresponding amount of expected compensation; and
· costs to complete key infrastructure programs.
The provision may also be affected by factors including but not limited to:
· resolution of existing and potential legal claims in Brazil and
other jurisdictions, including the impact of ongoing settlement negotiations
and outcome of the United Kingdom group action complaint;
· potential changes in scope of work and funding amounts required
under the Framework Agreement including the impact of the decisions of the
Interfederative Committee along with further technical analysis and community
participation required under the Governance Agreement and rulings made by the
12(th) Federal Court;
· the outcome of ongoing negotiations with State and Federal
Prosecutors, including review of Fundação Renova's Programs as provided in
the Governance Agreement;
· actual costs incurred;
· resolution of uncertainty in respect of the nature and extent of
Samarco's long term cash generation;
· costs to complete the Germano dam decommissioning;
· updates to discount and foreign exchange rates; and
· the outcomes of Samarco's JR.
Given these factors, future actual expenditures may differ from the amounts
currently provided and changes to key assumptions and estimates could result
in a material impact to the provision in the next and future reporting
periods.
61
11. Discontinued operations and Assets and liabilities held for sale
On 22 November 2021, the Group and Woodside signed a binding SSA for the
merger of the Group's oil and gas portfolio with Woodside. Woodside will
acquire the entire share capital of BHP Petroleum International Pty Ltd ('BHP
Petroleum') in exchange for new Woodside shares. On completion of the proposed
merger, Woodside will issue new shares expected to comprise approximately 48
per cent of all Woodside shares (on a post-issue basis) as consideration for
the acquisition of BHP Petroleum.
The proposed merger, which has an effective date of 1 July 2021, is subject to
satisfaction of conditions precedent by 30 June 2022 or an agreed later date
including shareholder, regulatory and other approvals. Prior to completion,
the Group continues to control its Petroleum assets and carry on business in
the normal course. As such, the Group continued to recognise its share of
revenue, expenses, net finance costs and associated income tax expense related
to the operation.
On completion, Woodside will make a cash payment to BHP in relation to cash
dividends paid by Woodside between the effective date and completion. BHP will
make a cash payment to Woodside for the net cash flow generated by BHP
Petroleum between the effective date and completion (or, if that amount is
negative, Woodside will make a cash payment to BHP).
At 31 December 2021, the Petroleum business was classified as a disposal group
held for sale and as a discontinued operation. The proposed merger is expected
to be completed during the second half of FY2022.
The contribution of discontinued operations included within the Group's profit
and cash flows are detailed below:
Income statement - Discontinued operations
Half year ended Half year ended Year ended
31 Dec 2021 31 Dec 2020 30 June 2021
US$M US$M US$M
Revenue 3,257 1,595 3,896
Other income 172 20 130
Expenses excluding net finance costs (1,391) (1,749) (3,629)
Loss from equity accounted investments, related impairments and expenses (1) (5) (6)
Profit/(loss) from operations 2,037 (139) 391
Financial expenses (46) (50) (88)
Financial income 1 2 6
Net finance costs (45) (48) (82)
Profit/(loss) before taxation 1,992 (187) 309
Income tax expense (966) (16) (545)
Royalty-related taxation (net of income tax benefit) (54) 11 11
Total taxation expense (1,020) (5) (534)
Profit/(loss) after taxation 972 (192) (225)
Attributable to non-controlling interests − − −
Attributable to BHP shareholders 972 (192) (225)
Basic earnings/(loss) per ordinary share (cents) 19.2 (3.8) (4.5)
Diluted earnings/(loss) per ordinary share (cents) 19.2 (3.8) (4.5)
The total comprehensive income attributable to BHP shareholders from
discontinued operations was a gain of US$975 million (31 December 2020: loss
of US$192 million; 30 June 2021: loss of US$231 million).
The conversion of options and share rights would decrease the loss per share
for the half year ended 31 December 2020 and the year ended 30 June 2021,
therefore its impact has been excluded from the diluted earnings per share
calculation.
62
Cash flows from Discontinued operations
Half year ended Half year ended Year ended
31 Dec 2021 31 Dec 2020 30 June 2021
US$M US$M US$M
Net operating cash flows 1,748 221 1,351
Net investing cash flows((1)) (544) (980) (1,520)
Net financing cash flows((2)) (18) (19) (38)
Net increase/(decrease) in cash and cash equivalents from Discontinued 1,186 (778) (207)
operations
(1) Includes purchases of property, plant and equipment and capitalised
exploration of US$687 million related to drilling and development expenditure
(31 December 2020: US$512 million; 30 June 2021: US$1,020 million),
investments in subsidiaries, operations and joint operations, net of cash of
US$ nil (31 December 2020: US$482 million; 30 June 2021: US$480 million),
proceeds from sale of assets of US$(145) million (31 December 2020: US$(41)
million; 30 June 2021: US$(39) million) and other investing outflows of US$2
million (31 December 2020: US$27 million; 30 June 2021: US$59 million).
(2) Represents net repayment of interest bearing liabilities of US$18
million (31 December 2020: US$19 million; 30 June 2021: US$38 million).
Assets and liabilities held for sale
In addition to the Group's Petroleum business, the Group's investment in
Cerrejόn and interest in BHP Mitsui Coal (BMC) were classified as assets and
liabilities held for sale at 31 December 2021.The assets and liabilities
classified as current assets and liabilities held for sale are presented in
the table below:
31 Dec 2021 30 June 2021((1))
Petroleum Cerrejόn((1)) BMC((2)) Total Total
US$M US$M US$M US$M US$M
Assets
Trade and other receivables 1,431 − 210 1,641 40
Other financial assets − − 25 25 −
Inventories 278 − 86 364 −
Current tax assets 59 − 10 69 −
Property, plant and equipment 11,699 − 1,193 12,892 −
Intangible assets 66 − − 66 −
Investments accounted for using the equity method 246 46 − 292 284
Deferred tax assets 1,901 − − 1,901 −
Other 18 − 4 22 −
Total assets 15,698 46 1,528 17,272 324
Liabilities
Trade and other payables 953 − 163 1,116 17
Interest bearing liabilities 257 − 271 528 −
Other financial liabilities 22 − − 22 −
Tax payable 373 − 47 420 −
Provisions 4,462 − 413 4,875 −
Deferred income 56 − − 56 −
Deferred tax liabilities 536 − 11 547 −
Total liabilities 6,659 − 905 7,564 17
Net assets 9,039 46 623 9,708 307
(1) On 11 January 2022 BHP completed the sale to Glencore of its 33.3 per
cent interest in Cerrejón, a non-operated energy coal joint venture in
Colombia. The transaction was first announced on 28 June 2021 for a total cash
consideration of US$294 million with an effective economic date of 31 December
2020. The purchase price was subject to adjustments at transaction completion,
including for dividends paid by Cerrejón to the Group during the period from
signing to completion. At 31 December 2021, the Group's investment in
Cerrejón continued to be classified as 'Assets held for sale' and measured at
fair value in line with the divestment consideration. During the half year
ended 31 December 2021, the Group received dividends of US$238 million from
Cerrejón, reducing completion proceeds, net of expected transaction costs,
and the value of the Group's investment in Cerrejón to US$46 million as at 31
December 2021. Valuations are based primarily on Level 3 inputs as defined in
note 8 'Financial risk management'.
(2) On 8 November 2021 the Group announced it has entered into a Share
Sale and Purchase Agreement to divest its 80 per cent interest in BMC, an
operated metallurgical coal joint venture in Queensland to Stanmore SMC
Holdings Pty Ltd, a wholly owned subsidiary of Stanmore Resources Limited
(Stanmore Resources) for cash consideration of up to US$1.35 billion.
The purchase price comprises US$1.1 billion cash on completion, US$100 million
in cash six months after completion and the potential for up to US$150 million
in a commodity price-linked earnout payable in calendar year 2024. Subject to
the satisfaction of customary competition and regulatory requirements the
transaction completion is expected to occur in the middle of the 2022 calendar
year.
At 31 December 2021, the assets and liabilities of BMC have been classified as
'Assets held for sale' and 'Liabilities directly associated with the assets
held for sale'. However BMC is not considered to meet the criteria for
classification as a discontinued operation given its relative size to the
Group and the Coal segment.
63
Exceptional items - Discontinued operations
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and amount is considered
material to the financial statements.
There were no exceptional items related to discontinued operations for the
half year ended 31 December 2021.
Exceptional items related to discontinued operations included within the
Group's profit for the half year ended 31 December 2020 and year ended 30 June
2021 are detailed below:
Half year ended 31 Dec 2020 Gross Tax Net
US$M US$M US$M
Exceptional items by category
COVID-19 related costs (31) 3 (28)
Total (31) 3 (28)
Attributable to non-controlling interests − − −
Attributable to BHP shareholders (31) 3 (28)
Year ended 30 June 2021 Gross Tax Net
US$M US$M US$M
Exceptional items by category
Impairment of Potash assets((1)) − (278) (278)
COVID-19 related costs (47) 8 (39)
Total (47) (270) (317)
Attributable to non-controlling interests − − −
Attributable to BHP shareholders (47) (270) (317)
(1) The exceptional item reflects the impairment of tax losses originally
expected to be recoverable against taxable profits from the Group's Potash
assets. The impairment is included in discontinued operations as the entity
with the losses is expected to transfer to Woodside and therefore the losses
will no longer be available to the Group.
12. Subsequent events
In December 2021, BHP announced a final Board decision to unify BHP's
corporate structure under its existing Australian parent company, BHP Group
Limited. Unification was completed on 31 January 2022. Refer note 9 'Share
capital' for details. Other than the expected transaction costs of
approximately US$410 million (before tax), unification is not expected to
impact the consolidated net assets of the Group.
Other than the matters outlined elsewhere in this Financial Report, no matters
or circumstances have arisen since the end of the half year that have
significantly affected, or may significantly affect, the operations, results
of operations or state of affairs of the Group in subsequent accounting
periods.
64
Directors' Report
The Directors present their report together with the half year Financial
Statements for the half year ended 31 December 2021 and the auditor's review
report thereon.
Review of Operations
A detailed review of the Group's operated and non-operated assets, the results
of those operations during the half year ended 31 December 2021 and likely
future developments are given on pages 1 to 32. The Review of Operations has
been incorporated into, and forms part of, this Directors' Report.
Principal Risks and Uncertainties
The principal risks affecting the Group are described on pages 56 to 63 of the
Group's Annual Report for the year ended 30 June 2021 (a copy of which is
available on the Group's website at www.bhp.com
(file:///C:/Users/jakom91/AppData/Local/Temp/CDM/2D0DDCC1C01E8AC828B602984A1F00C666A3A7B39F02DD5D343DA2166C2D6218/www.bhp.com)
) and are grouped into the categories of risks listed below. Our principal
risks may occur as a result of our activities globally, including in
connection with our operated and non-operated assets, third parties engaged by
BHP or through our value chain. Our principal risks, individually or
collectively, could threaten our viability, strategy, business model, future
performance, solvency or liquidity and reputation. They could also materially
and adversely affect the health and safety of our people or members of the
public, the environment, the communities in which we or our third-party
partners operate, or the interests of our stakeholders leading to litigation
(including class actions) or a loss of stakeholder and/or investor confidence.
There are no material changes in those risk factors for the first six months
of this financial year except to the extent described in the 'Outlook'
section.
· Operational events: Risks associated with operational events in
connection with our activities globally.
· Accessing key markets: Risks associated with market concentration
and our ability to sell and deliver products into existing and future key
markets.
· Optimising portfolio returns and managing commodity price
movements: Risks associated with our ability to position our asset portfolio
to generate returns and value for shareholders (including securing growth
options in future facing commodities) and to manage adverse impacts of short-
and long-term movements in commodity prices.
· Significant social or environmental impacts: Risks associated
with significant impacts of our operations on and contributions to communities
and environments throughout the life cycle of our assets and across our value
chain.
· Low-carbon transition: Risks associated with the transition to a
low-carbon economy.
· Adopting technologies and maintaining digital security: Risks
associated with adopting and implementing new technologies, and maintaining
the effectiveness of our existing digital landscape (including cyber defences)
across our value chain.
· Ethical misconduct: Risks associated with actual or alleged
deviation from societal or business expectations of ethical behaviour
(including breaches of laws or regulations) and wider or cumulative
organisational cultural failings.
· Inadequate business resilience: Risks associated with
unanticipated or unforeseeable adverse events and a failure of planning and
preparedness to respond to, manage and recover from adverse events (including
potential physical impacts of climate change).
65
Dividend
Full details of dividends are given on page 18.
Board of Directors
The Directors of BHP at any time during or since the end of the half year
ended 31 December 2021 are:
Ken MacKenzie - Chairman since September 2017 (a Director since September
2016)
Mike Henry - an Executive Director since January 2020
Terry Bowen - a Director since October 2017
Malcolm Broomhead - a Director since March 2010
Xiaoqun Clever - a Director since October 2020
Ian Cockerill - a Director since April 2019
Anita Frew - a former Director from September 2015 to November 2021
Gary Goldberg - a Director since February 2020
Susan Kilsby - a former Director from April 2019 to November 2021
John Mogford - a Director since October 2017
Christine O'Reilly - a Director since October 2020
Dion Weisler - a Director since June 2020
Auditor's independence declaration
Ernst & Young in Australia are the auditors of BHP Group Limited. Their
auditor's independence declaration under Section 307C of the Australian
Corporations Act 2001 is set out on page 59 and forms part of this Directors'
Report.
Rounding of amounts
BHP Group Limited is an entity to which Australian Securities and Investments
Commission (ASIC) Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191 dated 24 March 2016 applies. Amounts in the Directors'
Report and half year Financial Statements have been rounded to the nearest
million dollars in accordance with ASIC Instrument 2016/191.
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie - Chairman
Mike Henry - Chief Executive Officer
Dated this 15th day of February 2022
66
Directors' Declaration of Responsibility
The half year Financial Report is the responsibility of, and has been approved
by, the Directors. In accordance with a resolution of the Directors of BHP
Group Limited, the Directors declare that:
(a) in the Directors' opinion and to the best of their knowledge, the
half year Financial Statements and notes, set out on pages 33 to 55, have been
prepared in accordance with the Australian Corporations Act 2001, including:
(i) complying with applicable accounting standards and the Australian
Corporations Regulations 2001; and
(ii) giving a true and fair view of the financial position of the Group
as at 31 December 2021 and of its performance for the half year ended on
that date;
(b) for the purposes of the Disclosure Guidance and Transparency Rules
in the United Kingdom, to the best of the Directors' knowledge, the Directors'
Report, which incorporates the Review of Operations on pages 1 to 32,
includes: (i) a fair review of the important events during the first six
months of the current financial year and their impact on the half year
Financial Statements; (ii) a description of the principal risks and
uncertainties for the remaining six months of the year; and (iii) related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the Group during that period, and changes in the
related party transactions described in the last annual report that could have
such a material effect; and
(c) in the Directors' opinion, there are reasonable grounds to believe
that BHP Group Limited and the Group will be able to pay its debts as and when
they become due and payable.
Signed on behalf of the Directors in accordance with a resolution of the Board
of Directors.
Ken MacKenzie - Chairman
Mike Henry - Chief Executive Officer
Dated this 15th day of February 2022
67
Auditor's Independence Declaration to the Directors of BHP Group Limited
As lead auditor for the review of the half year financial report of BHP Group
Limited for the half year ended 31 December 2021, I declare to the best of my
knowledge and belief, there have been:
(a) No contraventions of the auditor independence requirements of the
Corporations Act 2001 in relation to the review; and
(b) No contraventions of any applicable code of professional conduct in
relation to the review.
This declaration is in respect of BHP Group Limited and the entities it
controlled during the financial period.
Ernst & Young
Rodney Piltz
Partner
15 February 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards
Legislation
68
Independent Review Report
Conclusion
BHP ('the Group') consists of BHP Group Limited, BHP Group Plc and the
entities they controlled during the half year ended 31 December 2021.
We have reviewed the accompanying half year financial report of the Group,
which comprises the Consolidated Balance Sheet as at 31 December 2021, the
Consolidated Income Statement, Consolidated Statement of Comprehensive
Income, Consolidated Statement of Changes in Equity and Consolidated Cash
Flow Statement for the half year ended on that date, notes comprising a
summary of significant accounting policies and other explanatory information,
and the directors' declaration.
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half year financial report of the Group
does not comply with the Corporations Act 2001, including:
(a) Giving a true and fair view of the consolidated financial position
of the Group as at 31 December 2021 and of its consolidated financial
performance for the half year ended on that date; and
(b) Complying with International Accounting Standard IAS 34 Interim
Financial Reporting as issued by the International Accounting Standards Board
(IASB), Australian Accounting Standard AASB 134 Interim Financial Reporting
and the Corporations Regulations 2001.
Basis for conclusion
We conducted our review in accordance with Australian Auditing Standard on
Review Engagements ASRE 2410 Review of a Financial Report Performed by the
Independent Auditor of the Entity (ASRE 2410). Our responsibilities are
further described in the Auditor's responsibilities for the review of the
half-year financial report section of our report. We are independent of the
Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board's APES 110 Code of Ethics for
Professional Accountants (including Independence Standards) (the Code) that
are relevant to our audit of the annual financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
Directors' responsibilities for the half year financial report
The directors of the Company are responsible for the preparation of the half
year financial report that gives a true and fair view in accordance with
International Accounting Standards as issued by the IASB, Australian
Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of
the half year financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
Auditor's responsibilities for the review of the half year financial report
Our responsibility is to express a conclusion on the half year financial
report based on our review. ASRE 2410 requires us to conclude whether we have
become aware of any matter that makes us believe that the half year financial
report is not in accordance with the Corporations Act 2001 including giving a
true and fair view of the Group's financial position as at 31 December 2021
and its performance for the half year ended on that date, and complying with
International Accounting Standard IAS 34 Interim Financial Reporting as issued
by the IASB, Australian Accounting Standard AASB 134 Interim Financial
Reporting and the Corporations Regulations 2001.
A review of a half year financial report consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Australian Auditing
Standards and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
Ernst & Young
Rodney Piltz
Partner
Melbourne
15 February 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards
Legislation
69
This page is left blank intentionally.
70
BHP
Alternative Performance Measures
Half year ended
31 December 2021
71
Alternative Performance Measures
We use various alternative performance measures (APMs) to reflect our
underlying financial performance.
These APMs are not defined or specified under the requirements of IFRS, but
are derived from the Group's Financial Statements for the half year ended 31
December 2021 (Financial Report) prepared in accordance with IFRS. The APMs
and below reconciliations included in this document for the half year ended 31
December 2021 and comparative periods are unaudited. The APMs are consistent
with how management review financial performance of the Group with the Board
and the investment community.
We consider Underlying attributable profit to be a key measure that allows for
the comparability of underlying financial performance by excluding the impacts
of exceptional items, and Underlying attributable profit (Continuing
operations) is the basis on which our dividend payout ratio policy is applied.
Underlying EBITDA is a key APM that management uses internally to assess the
performance of the Group's segments and make decisions on the allocation of
resources. In the Group's view, this is a relevant measure for capital
intensive industries with long-life assets. Underlying EBITDA and Underlying
EBIT are included in the Group's Financial Report, as required by IFRS 8
'Operating Segments'.
The "Definition and calculation of alternative performance measures" section
outlines why we believe the APMs are useful and the calculation methodology.
We believe these APMs provide useful information, but they should not be
considered as an indication of, or as a substitute for, statutory measures as
an indicator of actual operating performance (such as profit or net operating
cash flow) or any other measure of financial performance or position presented
in accordance with IFRS, or as a measure of a company's profitability,
liquidity or financial position.
Comparative periods have been adjusted for the effects of applying IFRS 5
'Non-current Assets Held for Sale and Discontinued Operations' and discloses
them on the same basis as the current period figures.
The following tables provide reconciliations between the APMs and their
nearest respective IFRS measure.
Exceptional items
To improve the comparability of underlying financial performance between
reporting periods, some of our APMs adjust the relevant IFRS measures for
exceptional items. Refer to the Group's Financial Report for further
information on exceptional items.
72
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and impact is considered
material to the Group's Financial Statements. The exceptional items included
within the Group's profit for the period are detailed below.
Half year ended 31 December 2021 2020
US$M US$M
Restated
Continuing operations
Revenue − −
Other income − −
Expenses excluding net finance costs, depreciation, amortisation and (27) (286)
impairments
Depreciation and amortisation − −
Net impairments − (547)
Profit/(loss) from equity accounted investments, related impairments and (702) (678)
expenses
Profit/(loss) from operations (729) (1,511)
Financial expenses (93) (41)
Financial income − −
Net finance costs (93) (41)
Profit/(loss) before taxation (822) (1,552)
Income tax expense (422) (590)
Royalty-related taxation (net of income tax benefit) − −
Total taxation expense (422) (590)
Profit/(loss) after taxation from Continuing operations (1,244) (2,142)
Discontinued operations
Profit/(loss) after taxation from Discontinued operations − (28)
Profit/(loss) after taxation from Continuing and Discontinued operations (1,244) (2,170)
Total exceptional items attributable to non-controlling interests − (10)
Total exceptional items attributable to BHP shareholders (1,244) (2,160)
Exceptional items attributable to BHP shareholders per share (US cents) (24.6) (42.8)
Weighted basic average number of shares (Million) 5,061 5,057
73
APMs derived from Consolidated Income Statement
Underlying attributable profit
Half year ended 31 December 2021 2020
US$M US$M
Profit after taxation from Continuing and Discontinued operations attributable 9,443 3,876
to BHP shareholders
Total exceptional items attributable to BHP shareholders((1)) 1,244 2,160
Underlying attributable profit 10,687 6,036
(1) Refer to Exceptional items for further information.
Underlying basic earnings per ordinary share
Half year ended 31 December 2021 2020
US cents US cents
Basic earnings per ordinary share 186.6 76.6
Exceptional items attributable to BHP shareholders per share((1)) 24.6 42.8
Underlying basic earnings per ordinary share 211.2 119.4
(1) Refer to Exceptional items for further information.
Underlying attributable profit - Continuing operations
Half year ended 31 December 2021 2020
US$M US$M
Restated
Profit after taxation from Continuing and Discontinued operations attributable 9,443 3,876
to BHP shareholders
(Profit)/loss after taxation from Discontinued operations attributable to BHP (972) 192
shareholders
Total exceptional items attributable to BHP shareholders((1)) 1,244 2,160
Total exceptional items attributable to BHP shareholders for Discontinued − (28)
operations((2))
Underlying attributable profit - Continuing operations 9,715 6,200
(1) Refer to Exceptional items for further information.
(2) Refer to note 11 'Discontinued operations and Assets and liabilities
held for sale' for further information.
Underlying basic earnings per ordinary share - Continuing operations
Half year ended 31 December 2021 2020
US$M US$M
Restated
Underlying attributable profit - Continuing operations 9,715 6,200
Weighted basic average number of shares (Million) 5,061 5,057
Underlying basic earnings per ordinary share - Continuing operations (US 192.0 122.6
cents)
Underlying EBITDA
Half year ended 31 December 2021 2020
US$M US$M
Restated
Profit from operations 14,845 9,889
Exceptional items included in profit from operations((1)) 729 1,511
Underlying EBIT 15,574 11,400
Depreciation and amortisation expense 2,851 2,405
Net impairments 38 629
Exceptional item included in Depreciation, amortisation and impairments((1)) − (547)
Underlying EBITDA 18,463 13,887
(1) Refer to Exceptional items for further information.
74
Underlying EBITDA margin
Half year ended 31 December 2021 Copper Iron Ore Coal Group and unallocated items/ Total Group
US$M eliminations((1))
Revenue - Group production 6,857 15,809 5,368 819 28,853
Revenue - Third party products 1,637 9 − 28 1,674
Revenue 8,494 15,818 5,368 847 30,527
Underlying EBITDA - Group production 4,262 11,153 2,642 396 18,453
Underlying EBITDA - Third party products 10 − − − 10
Underlying EBITDA((2)) 4,272 11,153 2,642 396 18,463
Segment contribution to the Group's Underlying EBITDA((3)) 24% 61% 15% 100%
Underlying EBITDA margin((4)) 62% 71% 49% 64%
Half year ended 31 December 2020 Copper Iron Ore Coal Group and unallocated items/ Total Group
US$M eliminations((1))
Restated
Revenue - Group production 6,129 14,050 2,170 737 23,086
Revenue - Third party products 938 8 − 12 958
Revenue 7,067 14,058 2,170 749 24,044
Underlying EBITDA - Group production 3,683 10,241 (201) 106 13,829
Underlying EBITDA - Third party products 55 3 − − 58
Underlying EBITDA((2)) 3,738 10,244 (201) 106 13,887
Segment contribution to the Group's Underlying EBITDA((3)) 27% 74% (1%) 100%
Underlying EBITDA margin((4)) 60% 73% (9%) 60%
(1) Group and unallocated items includes functions, other unallocated
operations including Potash, Nickel West, legacy assets and consolidation
adjustments.
(2) Refer to Underlying EBITDA for further information.
(3) Percentage contribution to Group Underlying EBITDA, excluding Group
and unallocated items.
(4) Underlying EBITDA margin excludes Third party products.
APMs derived from Consolidated Cash Flow Statement
Capital and exploration expenditure
Half year ended 31 December 2021 2020
US$M US$M
Restated
Capital expenditure (purchases of property, plant and equipment) 2,768 2,835
Add: Exploration expenditure 110 86
Capital and exploration expenditure (cash basis) - Continuing operations 2,878 2,921
Capital expenditure (purchases of property, plant and equipment) - 556 498
Discontinued operations
Add: Exploration expenditure - Discontinued operations 243 195
Capital and exploration expenditure (cash basis) - Discontinued operations 799 693
Capital and exploration expenditure (cash basis) - Total operations 3,677 3,614
Free cash flow
Half year ended 31 December 2021 2020
US$M US$M
Restated
Net operating cash flows from Continuing operations 11,529 9,148
Net investing cash flows from Continuing operations (3,045) (3,229)
Free cash flow - Continuing operations 8,484 5,919
Net operating cash flows from Discontinued operations 1,748 221
Net investing cash flows from Discontinued operations (544) (980)
Free cash flow - Discontinued operations 1,204 (759)
Free cash flow - Total operations 9,688 5,160
75
APMs derived from Consolidated Balance Sheet
Net debt and gearing ratio
31 Dec 2021 31 Dec 2020 30 June 2021
US$M US$M US$M
Interest bearing liabilities - Current 3,054 3,560 2,628
Interest bearing liabilities - Non current 15,897 19,159 18,355
Total interest bearing liabilities 18,951 22,719 20,983
Comprising:
Borrowing 15,935 19,160 17,087
Lease liabilities 3,016 3,559 3,896
Less: Lease liability associated with index-linked freight contracts 540 483 1,025
Less: Cash and cash equivalents 12,366 9,291 15,246
Less: Net debt management related instruments((1)) (38) 1,216 557
Less: Net cash management related instruments((2)) (7) (110) 34
Less: Total derivatives included in net debt (45) 1,106 591
Net debt 6,090 11,839 4,121
Net assets 54,922 53,423 55,605
Gearing 10.0% 18.1% 6.9%
(1) Represents the net cross currency and interest rate swaps included
within current and non-current other financial assets and liabilities.
(2) Represents the net forward exchange contracts related to cash
management included within current and non-current other financial assets and
liabilities.
Net debt waterfall
31 Dec 2021 31 Dec 2020
US$M US$M
Net debt at the beginning of the period (4,121) (12,044)
Net operating cash flows 13,277 9,369
Net investing cash flows (3,589) (4,209)
Net financing cash flows (12,506) (9,595)
Net decrease in cash and cash equivalents from Continuing and Discontinued (2,818) (4,435)
operations
Carrying value of interest bearing liability repayments 1,185 5,587
Carrying value of debt related instruments proceeds − (90)
Carrying value of cash management related instruments settlements (123) 180
Fair value adjustment on debt (including debt related instruments) 25 39
Foreign exchange impacts on cash (including cash management related 20 24
instruments)
Lease additions (497) (909)
Transfer to liability directly associated with assets held for sale 528 −
Other (289) (191)
Non-cash movements (213) (1,037)
Net debt at the end of the period (6,090) (11,839)
76
Net operating assets
31 Dec 2021 31 Dec 2020
US$M US$M
Restated
Net assets 54,922 53,423
Less: Non-operating assets
Cash and cash equivalents (12,366) (9,291)
Trade and other receivables((1)) (217) (202)
Other financial assets((2)) (1,432) (2,225)
Current tax assets (240) (295)
Deferred tax assets (94) (3,178)
Assets held for sale (17,272) −
Petroleum discontinued operations operating assets((3)) − (13,745)
Add: Non-operating liabilities
Trade and other payables((4)) 161 218
Interest bearing liabilities 18,951 22,719
Other financial liabilities((5)) 908 752
Current tax payable 1,836 1,184
Non-current tax payable 94 173
Deferred tax liabilities 3,808 3,603
Liabilities directly associated with the assets held for sale 7,564 −
Petroleum discontinued operations operating liabilities((3)) − 5,197
Net operating assets 56,623 58,333
(1) Represents loans to associates, external finance receivable and
accrued interest receivable included within other receivables.
(2) Represents cross currency and interest rate swaps, forward exchange
contracts related to cash management and investment in shares and other
investments.
(3) Represents the Petroleum operating assets and operating liabilities as
at 31 December 2020 that are classified as held for sale as at 31 December
2021.
(4) Represents accrued interest payable included within other payables.
(5) Represents cross currency and interest rate swaps and forward exchange
contracts related to cash management.
77
Other APMs
Principal factors that affect Revenue, Profit from operations and Underlying
EBITDA
The following table describes the impact of the principal factors that
affected Revenue, Profit from operations and Underlying EBITDA for half year
ended December 2021 and relates them back to our Consolidated Income
Statement.
Revenue Total expenses, Profit from operations Depreciation, Underlying
US$M Other income US$M amortisation EBITDA
and Loss from and impairments US$M
equity and Exceptional Items
accounted investments US$M
US$M
Half year ended 31 December 2020 (Restated)
Revenue 24,044
Other income 136
Expenses excluding net finance costs (13,821)
Loss from equity accounted investments, related impairments and expenses (470)
Total other income, expenses excluding net finance costs and Loss from equity (14,155)
accounted investments, related impairments and expenses
Profit from operations 9,889
Depreciation, amortisation and impairments 3,034
Exceptional item included in Depreciation, amortisation and impairments (547)
Exceptional items 1,511
Underlying EBITDA 13,887
Change in sales prices 6,814 (566) 6,248 − 6,248
Price-linked costs − (570) (570) − (570)
Net price impact 6,814 (1,136) 5,678 − 5,678
Change in volumes (1,029) 60 (969) − (969)
Operating cash costs − (433) (433) − (433)
Exploration and business development − (32) (32) − (32)
Change in controllable cash costs − (465) (465) − (465)
Exchange rates − 591 591 − 591
Inflation on costs − (294) (294) − (294)
Fuel, energy, and consumable price movements − (305) (305) − (305)
Non-cash − 35 35 − 35
One-off items − − − − −
Change in other costs − 27 27 − 27
Asset sales − 5 5 − 5
Ceased and sold operations − (7) (7) − (7)
Other 698 (391) 307 − 307
Depreciation, amortisation and impairments − (402) (402) 402 −
Exceptional items − 782 782 (782) −
Half year ended 31 December 2021
Revenue 30,527
Other income 414
Expenses excluding net finance costs (15,742)
Loss from equity accounted investments, related impairments and expenses (354)
Total other income, expenses excluding net finance costs and Loss from equity (15,682)
accounted investments, related impairments and expenses
Profit from operations 14,845
Depreciation, amortisation and impairments 2,889
Exceptional item included in Depreciation, amortisation and impairments −
Exceptional items 729
Underlying EBITDA 18,463
78
Underlying return on capital employed (ROCE)
31 Dec 2021 31 Dec 2020
US$M US$M
Profit after taxation from Continuing and Discontinued operations 10,506 4,828
Exceptional items((1)) 1,244 2,170
Subtotal 11,750 6,998
Adjusted for:
Net finance costs 397 924
Exceptional items included within net finance costs((1)) (93) (41)
Income tax expense on net finance costs (118) (230)
Profit after taxation excluding net finance costs and exceptional items 11,936 7,651
Annualised Profit after taxation excluding net finance costs and exceptional 23,872 15,302
items
Net assets at the beginning of the period 55,605 52,175
Net debt at the beginning of the period 4,121 12,044
Capital employed at the beginning of the period 59,726 64,219
Net assets at the end of the period 54,922 53,423
Net debt at the end of the period 6,090 11,839
Capital employed at the end of the period 61,012 65,262
Average capital employed 60,369 64,741
Underlying Return on Capital Employed 39.5% 23.6%
(1) Refer to Exceptional items for further information.
Underlying return on capital employed (ROCE) by segment
Half year ended 31 December 2021 Copper Iron Ore Coal Group and unallocated items/ eliminations((1)) Total Petroleum Total Group
US$M Continuing Discontinued operations
Annualised profit after taxation excluding net finance costs and exceptional 4,208 14,428 3,160 70 21,866 2,006 23,872
items
Average capital employed 24,061 15,250 7,802 3,869 50,982 9,387 60,369
Underlying Return on Capital Employed 17% 95% 41% − 42.9% 21.4% 39.5%
Half year ended 31 December 2020 Copper Iron Ore Coal Group and unallocated items/ eliminations((1)) Total Petroleum Total Group
US$M Continuing Discontinued operations
Restated
Annualised profit after taxation excluding net finance costs and exceptional 3,918 12,454 (1,066) 256 15,562 (260) 15,302
items
Average capital employed 23,941 16,367 8,743 5,877 54,928 9,813 64,741
Underlying Return on Capital Employed 16% 76% (12%) − 28.3% (2.6%) 23.6%
(1) Group and unallocated items includes functions, other unallocated
operations including Potash, Nickel West, legacy assets and consolidation
adjustments.
79
Underlying return on capital employed (ROCE) by asset
Half year ended 31 December 2021 Western Australia Iron Ore Antamina Escondida Queensland Coal Nickel West Pampa Norte Olympic Dam Potash Cerrejόn New South Wales Energy Coal((1)) Other Total Petroleum Total Group
US$M Continuing Discontinued operations
Annualised profit after taxation excluding net finance costs and exceptional 14,672 724 3,312 2,722 128 500 (154) (108) (8) 532 (454) 21,866 2,006 23,872
items
Average capital employed 18,535 1,312 9,662 7,927 569 4,376 8,585 3,178 124 (308) (2,978) 50,982 9,387 60,369
Underlying Return on Capital Employed 79% 55% 34% 34% 22% 11% (2%) (3%) (6%) − − 42.9% 21.4% 39.5%
Half year ended 31 December 2020 Western Australia Iron Ore Antamina Escondida Queensland Coal Nickel West Pampa Norte Olympic Dam Potash Cerrejόn New South Wales Energy Coal Other Total Petroleum Total Group
US$M Continuing Discontinued operations
Restated
Annualised profit after taxation excluding net finance costs and exceptional 12,458 522 3,292 (330) 163 172 78 78 (58) (482) (331) 15,562 (260) 15,302
items
Average capital employed 18,614 1,364 10,593 7,622 260 3,752 8,028 4,468 519 557 (849) 54,928 9,813 64,741
Underlying Return on Capital Employed 67% 38% 31% (4%) 63% 5% 1% 2% (11%) (87%) − 28.3% (2.6%) 23.6%
(1) NSWEC has not been shown as ROCE is distorted by negative capital
employed due to the rehabilitation provision being the primary balance
remaining on Balance Sheet following previous impairments.
80
Definition and calculation of alternative performance measures
Alternative Performance Measures (APMs) Reasons why we believe the APMs are useful Calculation methodology
Underlying attributable profit Allows the comparability of underlying financial performance by excluding the Profit after taxation from continuing and discontinued operations attributable
impacts of exceptional items. to BHP shareholders excluding any exceptional items attributable to BHP
shareholders.
Allows the comparability of underlying financial performance by excluding the
impacts of exceptional items and the contribution of discontinued operations
and is also the basis on which our dividend payout ratio policy is applied.
Underlying attributable profit - Continuing operations Underlying attributable profit from continuing operations also excludes the
contribution of discontinued operations from the above metrics.
Underlying basic earnings per share On a per share basis, allows the comparability of underlying financial Underlying attributable profit divided by the weighted basic average number of
performance by excluding the impacts of exceptional items. shares.
On a per share basis, allows the comparability of underlying financial
performance by excluding the impacts of exceptional items and the contribution
of discontinued operations.
Underlying basic earnings per share - Continuing operations Underlying attributable profit - Continuing operations divided by the weighted
basic average number of shares.
Underlying EBITDA Used to help assess current operational profitability excluding the impacts of Earnings before net finance costs, depreciation, amortisation and impairments,
sunk costs (i.e. depreciation from initial investment). Each is a measure that taxation expense, discontinued operations and exceptional items. Underlying
management uses internally to assess the performance of the Group's segments EBITDA includes BHP's share of profit/(loss) from investments accounted for
and make decisions on the allocation of resources. using the equity method including net finance costs, depreciation,
amortisation and impairments and taxation expense/(benefit).
Underlying EBITDA margin Underlying EBITDA excluding third party product EBITDA, divided by revenue
excluding third party product revenue.
Underlying EBIT Used to help assess current operational profitability excluding net finance Earnings before net finance costs, taxation expense, discontinued operations
costs and taxation expense (each of which are managed at the Group level) as and any exceptional items. Underlying EBIT includes BHP's share of
well as discontinued operations and any exceptional items. profit/(loss) from investments accounted for using the equity method including
net finance costs and taxation expense/(benefit).
Profit from operations Earnings before net finance costs, taxation expense and discontinued
operations. Profit from operations includes Revenue, Other income, Expenses
excluding net finance costs and BHP's share of profit/(loss) from investments
accounted for using the equity method including net finance costs and taxation
expense/(benefit).
Capital and exploration expenditure Used as part of our Capital Allocation Framework to assess efficient Purchases of property, plant and equipment and exploration expenditure
deployment of capital. Represents the total outflows of our operational including the contribution of discontinued operations
investing expenditure.
Represents the total outflows of our operational investing expenditure
excluding the contribution of discontinued operations.
Capital and exploration expenditure - Continuing operations Purchases of property, plant and equipment and exploration expenditure.
81
Alternative Performance Measures (APMs) Reasons why we believe the APMs are useful Calculation methodology
Free cash flow It is a key measure used as part of our Capital Allocation Framework. Reflects Net operating cash flows less net investing cash flows.
our operational cash performance inclusive of investment expenditure, which
helps to highlight how much cash was generated in the period to be available
for the servicing of debt and distribution to shareholders.
Reflects our operational cash performance inclusive of investment expenditure,
but excluding the contribution of discontinued operations.
Free cash flow - Continuing operations Net operating cash flows from Continuing operations less net investing cash
flows from Continuing operations.
Net debt Net debt shows the position of gross debt less index-linked freight contracts Interest bearing liabilities less liability associated with index-linked
offset by cash immediately available to pay debt if required and any freight contracts less cash and cash equivalents less net cross currency and
associated derivative financial instruments. Liability associated with interest rate swaps less net cash management related instruments for the Group
index-linked freight contracts, which are required to be remeasured to the at the reporting date.
prevailing freight index at each reporting date, are excluded from the net
debt calculation due to the short-term volatility of the index they relate to
not aligning with how the Group uses net debt for decision making in relation
to the Capital Allocation Framework. Net debt includes the fair value of
derivative financial instruments used to hedge cash and borrowings to reflect
the Group's risk management strategy of reducing the volatility of net debt
caused by fluctuations in foreign exchange and interest rates.
Net debt, along with the gearing ratio, is used to monitor the Group's capital
management by relating net debt relative to equity from shareholders.
Gearing ratio Ratio of Net debt to Net debt plus Net assets.
Net operating assets Enables a clearer view of the assets deployed to generate earnings by Operating assets net of operating liabilities, including the carrying value of
highlighting the net operating assets of the business separate from the equity accounted investments and predominantly excludes cash balances, loans
financing and tax balances. This measure helps provide an indicator of the to associates, interest bearing liabilities, derivatives hedging our net debt,
underlying performance of our assets and enhances comparability between them. assets held for sale, liabilities directly associated with assets held for
sale and tax balances.
82
Underlying return on capital employed (ROCE) Indicator of the Group's capital efficiency and is provided on an underlying Profit after taxation excluding exceptional items and net finance costs (after
basis to allow comparability of underlying financial performance by excluding taxation) divided by average capital employed.
the impacts of exceptional items.
Profit after taxation excluding exceptional items and net finance costs (after
taxation) is profit after taxation from Continuing and Discontinued operations
excluding exceptional items, net finance costs and the estimated taxation
impact of net finance costs. These are annualised for a half year end
reporting period.
The estimated tax impact is calculated using a prima facie taxation rate on
net finance costs (excluding any foreign exchange impact).
Average capital employed is calculated as the average of net assets less net
debt for the last two reporting periods.
Adjusted effective tax rate Provides an underlying tax basis to allow comparability of underlying Total taxation expense/(benefit) excluding exceptional items and exchange rate
financial performance by excluding the impacts of exceptional items. movements included in taxation expense/(benefit) divided by Profit before
taxation from continuing operations excluding exceptional items.
Unit cost Used to assess the controllable financial performance of the Group's assets Ratio of net costs of the assets to the equity share of sales tonnage. Net
for each unit of production. Unit costs are adjusted for site specific non costs is defined as revenue less Underlying EBITDA and excludes freight and
controllable factors to enhance comparability between the Group's assets. other costs, depending on the nature of each asset. Freight is excluded as the
Group believes it provides a similar basis of comparison to our peer group.
Escondida unit costs exclude:
· by-product credits being the favourable impact of by-products (such as
gold or silver) to determine the directly attributable costs of copper
production.
WAIO, Queensland Coal and NSWEC unit costs exclude:
· royalties as these are costs that are not deemed to be under the
Group's control, and the Group believes exclusion provides a similar basis of
comparison to our peer group.
Petroleum unit costs exclude:
· exploration, development and evaluation expense as these costs do not
represent our cost performance in relation to current production and the Group
believes it provides a similar basis of comparison to our peer group;
· other costs that do not represent underlying cost performance of the
business.
83
Definition and calculation of principal factors
The method of calculation of the principal factors that affect the period on
period movements of Revenue, Profit from operations and Underlying EBITDA are
as follows:
Principal factor Method of calculation
Change in sales prices Change in average realised price for each operation from the prior period to
the current period, multiplied by current period sales volumes.
Price-linked costs Change in price-linked costs (mainly royalties) for each operation from the
prior period to the current period, multiplied by current period sales
volumes.
Change in volumes Change in sales volumes for each operation multiplied by the prior year
average realised price less variable unit cost.
Controllable cash costs Total of operating cash costs and exploration and business development costs.
Operating cash costs Change in total costs, other than price-linked costs, exchange rates,
inflation on costs, Fuel, energy, and consumable price movements, non-cash
costs and one-off items as defined below for each operation from the prior
period to the current period.
Exploration and business development Exploration and business development expense in the current period minus
exploration and business development expense in the prior period.
Exchange rates Change in exchange rate multiplied by current period local currency revenue
and expenses.
Inflation on costs Change in inflation rate applied to expenses, other than depreciation and
amortisation, price-linked costs, exploration and business development
expenses, expenses in ceased and sold operations and expenses in new and
acquired operations.
Fuel, energy, and consumable price movements Fuel and energy expense and price differences above inflation on consumables
in the current period minus fuel and energy expense in the prior period.
Non-cash Change in net impact of capitalisation and depletion of deferred stripping
from the prior period to the current period.
One-off items Change in costs exceeding a pre-determined threshold associated with an
unexpected event that had not occurred in the last two years and is not
reasonably likely to occur within the next two years.
Asset sales Profit/(loss) on the sale of assets or operations in the current period minus
profit/(loss) on sale of assets or operations in the prior period.
Ceased and sold operations Underlying EBITDA for operations that ceased or were sold in the current
period minus Underlying EBITDA for operations that ceased or were sold in the
prior period.
Share of profit/(loss) from equity accounted investments Share of profit/(loss) from equity accounted investments for the current
period minus share of profit/(loss) from equity accounted investments in the
prior period.
Other Variances not explained by the above factors.
84
Definition and calculation of Key Indicator terms
We use various Key Indicators to reflect our sustainability performance.
Management uses these Key Indicators to evaluate BHP's performance against
both positive and negative impacts of operational activities and our progress
against our sustainability commitments and targets.
This section outlines why we believe the Key Indicators are useful to the
Board, management, investors and other stakeholders, and the methodology
behind the metrics. A definition and explanation of each of the Key Indicators
are provided in the tables below.
Health and safety-related metrics
Our highest priority is the safety of our people and the communities in which
we operate. This is why are focussed on introducing more reliable and
effective controls across our safety risk profile and improving human and
organisational performance, enabling our people to work safely each day. Our
work in fatality elimination is underpinned by our field leadership program,
ensuring our leaders are spending quality time in field engaging with our
workforce. The health and safety Key Indicators allow the Board, management,
investors and other stakeholders to measure and track health and safety
performance at our operated assets.
Key Indicator Calculation methodology
High Potential Injury (HPI) High potential injury frequency (HPIF) is an indicator which measures the
number of injuries with fatal potential per million hours. HPIFR equals the
sum of (lost time cases + restricted work cases + medical treatment cases +
first aid cases) x 1,000,000 ÷ total hours worked.
High potential injuries remain a primary focus to assess progress against our
most important safety objective: to eliminate fatalities.
The basis of calculation for high potential injuries was revised in FY2020
from event count to injury count as part of a safety reporting methodology
improvement. In some events, multiple people are injured.
This methodology has been prepared in accordance with GRI standard 403-9.
Total Recordable Injury Frequency (TRIF) Total recordable injury frequency (TRIF) is an indicator which measures the
number of recordable injuries per million hours. TRIF equals the sum of
(fatalities + lost-time cases + restricted work cases + medical treatment
cases) x 1,000,000 ÷ total hours worked total exposure hours. BHP adopts the
US Government Occupational Safety and Health Administration (OSHA) guidelines
for the recording and reporting of occupational injury and illnesses. TRIF
statistics exclude non-operated assets.
Year-on-year improvement of TRIF is one of our five-year sustainability
targets and is one of the indicators used to assess our safety performance.
This methodology has been prepared in accordance with GRI standard 403-9 and
OSHA guidelines.
Climate change-related metrics
Information on the calculation methodologies, assumptions and key references
used in the preparation of our Scope 1, Scope 2 and Scope 3 GHG emissions data
can be found in the BHP Scope 1, 2 and 3 GHG Emissions Calculation Methodology
2021, available at bhp.com/climate (https://www.bhp.com/climate) . More
information on our strategy to support the reduction of GHG emissions,
including our investments in low-emissions technology and natural climate
solutions, is available in BHP's Climate Change Report 2020
(https://www.bhp.com/sustainability/community-sustainability-reports/climate-change-report)
and BHP's Climate Transition Action Plan 2021
(https://www.bhp.com/-/media/documents/investors/annual-reports/2021/210914_bhpclimatetransitionactionplan2021.pdf)
at bhp.com/climate (https://www.bhp.com/climate) .
85
Fresh water withdrawals
We acknowledge the nature of our operations can have significant environmental
impacts. Our water withdrawal metrics allow the Board and management to manage
and monitor the inherent risks relating to, and any adverse impacts our
operations may have on, water resources. They also allow the Board,
management, investors and other stakeholders to measure and track our
performance towards our water-use commitments. Water withdrawal metrics assist
the Board and management in understanding the significance of our water
resource use, collectively for the Group and by individual operated assets,
and to assess trends over time. It also helps inform investment in
infrastructure to reduce water withdrawals and improve efficiency of water
use.
Key Indicator Calculation methodology
Fresh water withdrawals The volume of freshwater, in megalitres (ML), received and intended for use
within the reporting period by the operated asset from the water environment
and/or a third party supplier.
Fresh water is defined as waters other than seawater, wastewater from third
parties and hypersaline groundwater. Freshwater withdrawal also excludes
entrained water that would not be available for other uses. These exclusions
have been made to align with the target's intent to reduce the use of
freshwater sources subject to competition from other users or the environment.
People-related metrics
Our global workforce is the foundation of our business and we believe that
supporting the wellbeing of our people and promoting an inclusive and diverse
culture are vital for maintaining a competitive advantage. The proportion of
the workforce that are female or Indigenous workers are key indicators, which
allow the Board, management, investors and other stakeholders to measure and
track our near and long-term progress.
Key Indicator Calculation methodology
Female workforce participation (%) The number of female employees as a proportion of the total workforce on the
last day of the respective reporting period, used in internal management
reporting for the purposes of monitoring progress against our goals.
Indigenous workforce participation (%) The number of Indigenous employees as a proportion of the total workforce in
the relevant countries on the last day of the respective reporting period,
used in internal management reporting for the purposes of monitoring progress
against our goals.
There is no significant seasonal variation in employment numbers.
These methodologies have been prepared in accordance with GRI standard 102-8
and GRI standard 405-1.
86
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