BHP Group Ltd (BHP) NPV (DI)

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BHP delivered first-half revenue growth of 11% to $27.9bn ($25.9bn expected), with underlying cash profit (EBITDA) rising 25% to $15.5bn. Performance was driven by higher copper and iron ore prices, offsetting a small drop in volumes.

Free cash flow rose 10% to $2.9bn, supported by improved earnings despite $5.3bn of capex and exploration spend.

Net debt rose to $14.7bn, within the revised $10–20bn target range.

The group declared an interim dividend of $0.73 per share, ahead of last year and above expectations.

The shares rose 2.5% in early trading.

Our view

Mining giant BHP delivered an impressive set of first-half results, with higher copper and iron ore prices supporting a 25% jump in underlying cash profits (EBITDA).

The medium-term strategy involves a push into areas like copper, which has, for the first time, become the main driver of profits. With the AI infrastructure buildout driving strong demand, the company has raised its full-year copper production guidance.

We’re supportive of the move to cash in when demand is strong. But keep in mind that commodity prices are out of the group’s control. Riding the commodity price wave is part and parcel of being a global miner, and considering the volatile trade and tariff landscape, performance has been strong.

Iron ore is still a key area for BHP, and margins are holding up well. Demand's been robust in China and India, but the longer-term outlook for the former remains a question mark. The Chinese government has put forward a pro-growth mandate, but there’s not expected to be any material change to the demand picture in the near term.

BHP has some aces up its sleeve on the cost side of things. Western Australia Iron Ore, which produces the bulk of the group's iron ore, has some of the world's lowest production costs. The same can be said for the Escondida copper mine in Chile. That feeds into margins that tend to be higher than its peers.

Future investment is weighted toward growth projects in copper and potash (fertiliser). BHP’s copper reserves are some of the largest in the world, and production has been steadily ramping up over the past couple of years.

The Jansen project is set to deliver one of the world's largest potash mines. Potash is a little different to the group's other assets - since farmers need it regardless of the economic climate. Unfortunately, first production has been pushed back to mid-2027, and cost estimates have increased. We are supportive of the project and the diversification it's set to bring, but remain wary that execution risk is high.

Nickel was once a growth lever, but a global oversupply means BHP has written down the value of its operations, and production has been cut back. This shows how quickly a market can change and the risks that miners face when it does.

All in, we think BHP’s low-cost, high-margin assets are attractive and there are several medium-term growth drivers in the mix. But Chinese demand remains a question mark and BHP's premium valuation puts it first in the firing line if economic conditions, and commodity prices, end up worse than expected.

Environmental, social and governance (ESG) risk

Mining companies tend to come with relatively high ESG risk. Emissions, effluences and waste and community relations are key risk drivers in this sector. Carbon emissions, resource use, health and safety and bribery and corruption are also contributors to ESG risk.

According to Sustainalytics, BHP’s management of material ESG issues is strong.

BHP demonstrates strong ESG commitment with a dedicated board committee overseeing sustainability goals. They are notably aiming for a 40% female workforce by 2025. BHP is positioning itself for a low-carbon future by actively seeking out copper and nickel deposits, which are crucial metals for green technologies.

BHP recently settled with Brazilian authorities over a 2015 dam spill, bringing an end to most of the uncertainty - but there are still ongoing lawsuits in other regions to monitor. BHP still owns and operates a small thermal coal business, with plans to wind down operations by 2030.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.

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