BHP | Financial results for the half year ended 31 December 2023

Exchange rates

The following exchange rates relative to the US dollar have been applied in the financial information:

	Average	Average
	Half year ended	Half year ended	As at	As at	As at
	31 December	31 December	31 December	31 December	30 June
	2023	2022	2023	2022	2023
Australian dollar1	0.65	0.67	0.68	0.68	0.66
Chilean peso	874	920	877	860	803

1       Displayed as US$ to A$1 based on common convention.

Capital and exploration expenditure

Historical capital and exploration expenditure and guidance are summarised below:

	FY24e	HY24	HY23	FY23
	US$ bn	US$M	US$M	US$M
Maintenance and decarbonisation1	3.1	1,350	1,128	2,981
Development - Minerals	6.5	3,195	1,743	3,752
Capital expenditure (purchases of property, plant and equipment)	9.6	4,545	2,871	6,733
Add: exploration expenditure	0.4	199	156	350
Capital and exploration expenditure	~10	4,744	3,027	7,083

1       Includes capitalised deferred stripping of US$441 m for HY24 (HY23: US$432 m) and US$0.9 bn estimated for FY24.

Major Projects

Commodity	Project and ownership	Project scope / capacity	Capital expenditure US$M	First production target date	Progress
Potash	Jansen Stage 1 (Canada) 100%	Design, engineering and construction of an underground potash mine and surface infrastructure, with capacity to produce 4.15 Mtpa.	5,723	End-CY26	Project is 38% complete
Potash	Jansen Stage 2 (Canada) 100%	Development of additional mining districts, completion of the second shaft hoist infrastructure, expansion of processing facilities and addition of rail cars to facilitate production of an incremental 4.36 Mtpa.	4,859	FY29	Approval announced October 2023.

Production and unit cost guidance

Historical production and production guidance are summarised below:

Production	Medium-term guidance	FY24 guidance		HY24	HY23	HY24 vs HY23
Copper (kt)		1,720 - 1,910		894.4	834.4	7%
Escondida (kt)	1,200 - 1,3001	1,080 - 1,180	Unchanged	527.9	510.7	3%
Pampa Norte (kt)	~2502	210 - 2502	Unchanged	138.1	147.3	(6%)
Copper South Australia (kt)		310 - 340	Unchanged	153.7	104.1	48%
Antamina (kt)		120 - 140	Unchanged	71.7	72.3	(1%)
Carajás (kt)		-	Unchanged	3.0
Iron ore (Mt)		254 - 264.5		129.0	132.0	(2%)
WAIO (Mt)		250 - 260	Unchanged	126.5	129.7	(3%)
WAIO (100% basis) (Mt)	>305	282 - 294	Unchanged	142.1	146.4	(3%)
Samarco (Mt)		4 - 4.5	Unchanged	2.5	2.2	13%
Metallurgical coal - BMA (Mt)		23 - 253	Lowered	11.3	13.6	(17%)
BMA (100% basis) (Mt)		46 - 503	Lowered	22.6	27.2	(17%)
Energy coal - NSWEC (Mt)		13 - 15	Top end	7.5	5.5	36%
Nickel (kt)		77 - 87	Unchanged	39.8	38.4	4%

1       Medium term refers to FY25 and FY26.

2       Production guidance is provided for Spence only. Average of 250 ktpa over five years on the basis that remediation of the previously identified TSF anomalies does not impact operations. Cerro Colorado produced 11 kt before ceasing production on 9 November 2023.

3       Excludes production from Blackwater and Daunia mines from the expected date of sale completion, 2 April 2024.

 

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BHP | Financial results for the half year ended 31 December 2023

Historical costs¹ and cost guidance for our major assets are summarised below:

				HY24 at
				guidance	realised		HY243
	Medium-term		FY24	exchange	exchange		Vs
		guidance2	guidance2	rates2	rates3	HY233	HY23
Escondida unit cost (US$/lb)4,5		1.30 - 1.60	1.40 - 1.70	1.59	1.51	1.44	5%
Spence unit cost (US$/lb)			2.00 - 2.30	2.10	1.98	2.19	-10%
WAIO unit cost (US$/t)6		<17	17.40 - 18.90	18.43	18.46	18.30	1%
BMA unit cost (US$/t)			110 - 116	128.76	129.00	100.23	29%

1       Refer to Non-IFRS financial information for detailed unit cost reconciliations and definitions.

2       FY24 and medium-term unit cost guidance are based on exchange rates of AUD/USD 0.67 and USD/CLP 810.

3       Based on average exchange rates of: HY24 AUD/USD 0.65 USD/CLP 874 (realised); HY23 AUD/USD 0.67 USD/CLP 920 (realised).

4       Escondida unit costs for FY24 onwards exclude revenue based government royalties.

5       Medium term refers to FY25 and FY26.

6       The breakdown of C1 unit costs, excluding third party royalties, are detailed on page 12.

Health, safety and social value

Key safety indicators¹

	Target/Goal	HY24	FY23	HY23
Fatalities2	Zero work-related fatalities	0	2	0
High-potential injury (HPI) frequency2	Year-on-year improvement in HPI frequency	0.10	0.18	0.13
Total recordable injury frequency (TRIF)2	Year-on-year improvement in TRIF	4.3	4.4	4.1

A fatal incident occurred subsequent to the reporting period at our BMA operations in January.

Social value: key indicators scorecard^1,3

	Target/Goal	HY24	FY23	HY23
Operational greenhouse gas (GHG) emissions (Mt CO2-e)4	Reduce operational GHG emissions by at least 30 per cent from FY20 levels5 by FY30	5.2	9.8	4.9
Value chain emissions:  Financial value committed in steelmaking partnerships and ventures to date (US$ m)	Steelmaking: 2030 goal to support industry to develop technologies and pathways capable of 30 per cent GHG emissions intensity reduction in integrated steelmaking, with widespread adoption expected post-2030		114	
Value chain emissions: Reduction6 in emissions intensity of BHP-chartered shipping of our products (%)	Maritime transportation: 2030 goal to support 40 per cent GHG emissions intensity reduction of BHP-chartered shipping of BHP products	43	41	42
Social investment (US$M BHP equity share)	Voluntary social investment aligned to the six pillars of our Social Value Framework	36.1	149.6	41.1
Indigenous procurement spend (US$M)	Purchases from Indigenous vendors target of US$297 million in FY24	289	332.6	141.1
Female employee representation (%)7	Aspirational goal for gender balance8 by the end of FY25	36.29	35.2	33.6
Indigenous employee representation (%)7	Australia10: aim to achieve 9.7 per cent by the end of FY27	8.411	8.6	8.3
	Chile12: aim to achieve 10.0 per cent by the end of FY25	10.2	9.7	8.9
	Canada13: aim to achieve 20.0 per cent by the end of FY26	9.4	7.7	6.7
Area under nature-positive management practices14 (hectares)	2030 goal of having at least 30 per cent of the land and water we steward15 under conservation, restoration or regenerative practices	-	82,132	-

1       All data points are presented on a total operations basis, unless otherwise noted, and are indicative and subject to non-financial assurance reviews. Excludes former OZL, unless otherwise noted.

2       Former OZL is included in HY24 fatalities and HPI frequency. HY24 TRIF includes former OZL Exploration from 1 December 2023, reflecting progressive migration of employee data onto the BHP systems (updated data will be provided in the full year results for FY24). HPI frequency and TRIF is combined employee and contractor frequency per 1 million hours worked.

3       Includes selection of key social value framework metrics. Additional metrics are included in OFR 6 in the Annual Report 2023.

4       HY24 operational GHG emissions includes emissions from former OZL. HY23 operational GHG emissions have been restated after data finalisation for Annual Report 2023 and do not include former OZL emissions.

5       Our operational GHG emissions are the Scope 1 and Scope 2 GHG emissions from our operated assets. For our baseline year of FY20, our operational GHG emissions were 14.5 Mt CO2-e. FY20 baseline has been adjusted for divestment of our Petroleum business (merger with Woodside completed on 1 June 2022) and our interest in BMC (completed on 3 May 2022), and for methodological changes (use of Intergovernmental Panel on Climate Change (IPCC) Assessment Report 5 (AR5) Global Warming Potentials and the transition to a facility-specific GHG emission calculation methodology for fugitives at Caval Ridge). Our FY20 baseline year emissions will be updated to include the acquisition of OZL.

6       Against CY08. CY08 was selected as the baseline year for this goal to align with the base year for the International Maritime Organisation's 2030 emissions intensity goal and its corresponding reasoning and strategy.

7       Based on a 'point in time' snapshot of employees as at the end of the relevant reporting period.

8       We define gender balance as a minimum 40% women and 40% men in line with the definitions used by entities such as the International Labour Organisation.

9       Includes some but not all former OZL reflecting progressive migration of employee data onto BHP systems. Updated data will be provided in the full year results for FY24.

10     Indigenous employee representation at Minerals Australia operations.

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BHP | Financial results for the half year ended 31 December 2023

 

11     Indigenous employee representation in Australia, including Minerals Australia operations and some but not all former OZL (operational and non-operational roles) reflecting progressive migration of employee data onto BHP systems. Updated data will be provided in the full year results for FY24.

12     Indigenous employee representation at Minerals Americas operations in Chile.

13     Indigenous employee representation at the Jansen Potash project and operations in Canada.

14     Area under our stewardship that has a formal management plan including conservation, restoration or regenerative practices. 82,132 hectares is the area as at 30 June 2023. This metric (which was previously reported as a percentage of the areas of land and water that we stewarded at 30 June 2023) is measured on an annual basis and an update, including restatement of the FY23 percentage to reflect a correction to underlying data, will be provided in the full year results for FY24.

15     Excluding greenfield exploration licences (or equivalent tenements), which are outside the area of influence of our existing mine operations. 30% will be calculated based on the areas of land and water that we steward at the end of FY30.

The Financial Report for the half year ended 31 December 2023 has been prepared on the basis of accounting policies and methods of computation consistent with those applied in the 30 June 2023 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 2023 half year compared with the December 2022 half year, unless otherwise noted. Medium term refers to a five-year horizon, unless otherwise noted. Numbers presented may not add up precisely to the totals provided due to rounding.

The following abbreviations may have been used throughout this report: billion tonnes (Bt); cost and freight (CFR); cost, insurance and freight (CIF); carbon dioxide equivalent (CO2-e); dry metric tonne unit (dmtu); free on board (FOB); giga litres (GL); greenhouse gas (GHG); grams per tonne (g/t); high-potential injury (HPI); kilograms per tonne (kg/t); kilometre (km); million ounces per annum (Mozpa); million pounds (Mlb); million tonnes (Mt); million tonnes per annum (Mtpa); ounces (oz); OZ Minerals Ltd (OZL); pounds (lb); thousand ounces (koz); thousand ounces per annum (kozpa); 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        Based on a 'point in time' snapshot of employees as at 31 December 2023, including employees on extended absence, as used in internal management reporting for the purposes of monitoring progress against our goals. We define gender balance as a minimum 40% women and 40% men in line with the definitions used by entities such as the International Labour Organization. This includes some but not all former OZL reflecting progressive migration of employee data onto BHP systems. Updated data will be provided in the full year results for FY24. 'People leaders' are defined as employees with one or more direct reports.

ii       We use various non-IFRS financial information to reflect our underlying performance. For further information on the reconciliations of certain non-IFRS financial information measures to our statutory measures, reasons for usefulness and calculation methodology, please refer to non-IFRS financial information.

iii     Calculated on a copper equivalent production weighted average basis.

iv      Data sourced from the most recent published financial statements of the ASX50 companies and excludes companies that recorded an accounting loss.

v       Maintenance capital includes non-discretionary spend for the following purposes: deferred development and production stripping; risk reduction; compliance and asset integrity.

vi      Subject to movements in exchange rates; +/- 50% in any given year.

vii    Average for FY26-FY28.

viii   The information in this section is based on BHP data, analysis and desk top research on public data sources.

ix      There may be differences in the manner that third parties calculate or report unit costs data compared to BHP, which means that third-party data may not be comparable to our data. WAIO C1 unit costs exclude third party royalties, net inventory movements, depletion of production stripping, exploration expenses, marketing purchases, demurrage, exchange rate gains/losses, and other income.

x       Resettlement cases completed includes completed construction (families either moved in or handover to families in progress) or cash payment made. Overall figures calculated considering total of 727 cases, which is the total of known cases as at 31 December 2023.

xi      Relates to refined nickel metal only. Excludes intermediate products and nickel sulphate.

xii    Expected capital intensity for Jansen Stage 2, US$/product tonne, Real 1 July 2023

Forward-looking statements

This release contains forward-looking statements, which involve risks and uncertainties. Forward-looking statements include all statements other than statements of historical or present facts, including: statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; global market conditions, guidance; reserves and resources and production forecasts; expectations, plans, strategies and objectives of management; our expectations, commitments, targets, goals and objectives with respect to social value or sustainability; climate scenarios; approval of certain projects and consummation of certain transactions; closure, divestment, acquisition or integration of certain assets, operations or facilities (including associated costs or benefits); anticipated production or construction commencement dates; capital expenditure or costs and scheduling; operating costs, and supply of materials and skilled employees; anticipated productive lives of projects, mines and facilities; the availability, implementation and adoption of new technologies; provisions and contingent liabilities; and tax, legal and other regulatory developments.

Forward-looking statements may be identified by the use of terminology, including, but not limited to, 'intend', 'aim', 'ambition', 'aspiration', 'goal', 'target', 'prospect', 'project', 'see', 'anticipate', 'estimate', 'plan', 'objective', 'believe', 'expect', 'commit', 'may', 'should', 'need', 'must', 'will', 'would', 'continue', 'forecast', 'guidance', 'outlook', 'trend' or similar words. These statements discuss future expectations or performance, or provide other forward-looking information.

Forward-looking statements are based on management's expectations and reflect judgements, assumptions, estimates and other information available, as at the date made. BHP cautions against reliance on any forward-looking statements. These statements do not represent guarantees or predictions of future financial or operational 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.

For example, our future revenues from our assets, projects or mines described in this release will be based, in part, on the market price of the commodities 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.

In addition, there are limitations with respect to scenario analysis, including any climate-related scenario analysis, and it is difficult to predict which, if any, of the scenarios might eventuate. Scenario analysis is not an indication of probable outcomes and relies on assumptions that may or may not prove to be correct or eventuate.

Other factors that may affect the actual construction or production commencement dates, revenues, costs or production output and anticipated lives of assets, mines or facilities include our ability to profitably produce and deliver the products extracted to applicable markets; the impact of economic and geopolitical factors, including foreign currency exchange rates on the market prices of the commodities we produce and competition in the markets in which we operate; 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 and royalties or implementation of trade or export restrictions; changes in environmental and other regulations, political or geopolitical uncertainty; labour unrest; weather, climate variability or other manifestations of climate change; and other factors identified in the risk factors discussed in OFR 8.1 in the Annual Report and 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.

 

 

 

 

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BHP | Financial results for the half year ended 31 December 2023

 

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.

Emissions and energy consumption data

Due to the inherent uncertainty and limitations in measuring greenhouse gas (GHG) emissions and operational energy consumption under the calculation methodologies used in the preparation of such data, all GHG emissions and operational energy consumption data or references to GHG emissions and operational energy consumption volumes (including ratios or percentages) in this Report are estimates. There may also be differences in the manner that third parties calculate or report GHG emissions or operational energy consumption data compared to BHP, which means third-party data may not be comparable to our data. For information on how we calculate our GHG emissions and operational energy consumption data refer to the BHP Scopes 1, 2 and 3 GHG Emissions Calculation Methodology 2023 available at bhp.com/climate.

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 and, except where the context otherwise requires, our subsidiaries. Refer to note 30 'Subsidiaries' of the Financial Statements in the Annual Report for a list of our significant subsidiaries. Those terms do not include non-operated assets.

This release covers BHP's functions and 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 or that have been owned as a joint venture¹ operated by BHP (referred to in this release as 'operated assets' or 'operations') during the period from 1 July 2023 to 31 December 2023.

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'). 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.

 

 

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BHP | Financial results for the half year ended 31 December 2023

 

Further information on BHP can be found at bhp.com

 

Authorised for lodgement by:

The Board of BHP Group Limited

 

Media Relations   Email: [email protected]		Investor Relations   Email: [email protected]
Australia and Asia   Gabrielle Notley Tel: +61 3 9609 3830  Mobile: +61 411 071 715   Europe, Middle East and Africa   Neil Burrows Tel: +44 20 7802 7484  Mobile: +44 7786 661 683   Americas   Renata Fernandez Mobile: +56 9 8229 5357		Australia and Asia   John-Paul Santamaria Mobile: +61 499 006 018   Europe, Middle East and Africa   James Bell Tel: +44 20 7802 7144  Mobile: +44 7961 636 432   Americas   Monica Nettleton Mobile: +1 416 518 6293
BHP Group Limited ABN 49 004 028 077 LEI WZE1WSENV6JSZFK0JC28 Registered in Australia Registered Office: Level 18, 171 Collins Street Melbourne Victoria 3000 Australia Tel +61 1300 55 4757 Fax +61 3 9609 3015
BHP Group is headquartered in Australia Follow us on social media

 

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Financial Report Half year ended 31 December 2023   28

 Contents

Half Year Financial Statements                                                                                                                    Page                                                                                                                                                            

 

Consolidated Income Statement for the half year ended 31 December 2023                                               29    

Consolidated Statement of Comprehensive Income for the half year ended 31 December 2023                 29

Consolidated Balance Sheet as at 31 December 2023                                                                                   30

Consolidated Cash Flow Statement for the half year ended 31 December 2023                                           31

Consolidated Statement of Changes in Equity for the half year ended 31 December 2023                          32

Notes to the Financial Statements                                                                                                                  33  

1.     Basis of preparation                                                                                                                                33

2.     Exceptional items                                                                                                                                   33      

3.     Interests in associates and joint venture entities                                                                                     34

4.     Net finance costs                                                                                                                                     35

5.     Income tax expense                                                                                                                                 36

6.     Earnings per share                                                                                                                                   37

7.     Dividends                                                                                                                                                38

8.     Financial risk management - Fair values                                                                                                39

9.     Significant events - Samarco dam failure                                                                                               41

10.   Business combinations                                                                                                                            48

11.   Assets and liabilities directly associated with assets held for sale                                                          48

12.   Subsequent events                                                                                                                                   48

Directors' Report                                                                                                                                             49

Directors' Declaration of Responsibility                                                                                                         51

Auditor's Independence Declaration to the Directors of BHP Group Limited                                               52

Independent Review Report                                                                                                                            53

 

 

 

29

 

Consolidated Income Statement for the half year ended 31 December 2023

	Notes	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Revenue		27,232	25,713	53,817
Other income		261	269	394
Expenses excluding net finance costs		(19,982)	(15,429)	(31,873)
(Loss)/profit from equity accounted investments, related impairments and expenses	3	(2,708)	280	594
Profit from operations		4,803	10,833	22,932
Financial expenses		(1,164)	(863)	(2,060)
Financial income		343	211	529
Net finance costs	4	(821)	(652)	(1,531)
Profit before taxation		3,982	10,181	21,401
Income tax expense		(2,215)	(3,038)	(6,691)
Royalty-related taxation (net of income tax benefit)		(61)	(17)	(386)
Total taxation expense	5	(2,276)	(3,055)	(7,077)
Profit after taxation		1,706	7,126	14,324
Attributable to non-controlling interests		779	669	1,403
Attributable to BHP shareholders		927	6,457	12,921
Basic earnings per ordinary share (cents)	6	18.3	127.5	255.2
Diluted earnings per ordinary share (cents)	6	18.3	127.3	254.7

The accompanying notes form part of this half year Financial Report.

 

Consolidated Statement of Comprehensive Income for the half year ended 31 December 2023

		Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Profit after taxation		1,706	7,126	14,324
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Hedges:
Gains/(losses) taken to equity		114	100	95
(Gains)/losses transferred to the income statement		(92)	(125)	(148)
Loss transferred to initial carrying amount of hedged item		−	−	35
Tax recognised within other comprehensive income		(7)	8	5
Total items that may be reclassified subsequently to the income statement		15	(17)	(13)
Items that will not be reclassified to the income statement:
Re-measurement gains/(losses) on pension and medical schemes		2	6	(18)
Equity investments held at fair value		(47)	(7)	17
Tax recognised within other comprehensive income		−	−	7
Total items that will not be reclassified to the income statement		(45)	(1)	6
Total other comprehensive (loss)/income		(30)	(18)	(7)
Total comprehensive income		1,676	7,108	14,317
Attributable to non-controlling interests		779	669	1,400
Attributable to BHP shareholders		897	6,439	12,917

The accompanying notes form part of this half year Financial Report.

30

 

Consolidated Balance Sheet as at 31 December 2023

		31 Dec 2023 US$M	30 June 2023 US$M
ASSETS
Current assets
Cash and cash equivalents		10,319	12,428
Trade and other receivables		5,352	4,594
Other financial assets		607	470
Inventories		5,313	5,220
Assets held for sale	11	1,570	−
Current tax assets		446	508
Other		193	131
Total current assets		23,800	23,351
Non-current assets
Trade and other receivables		169	148
Other financial assets		1,050	1,115
Inventories		1,426	1,403
Property, plant and equipment		69,994	71,818
Intangible assets		1,615	1,610
Investments accounted for using the equity method		1,618	1,620
Deferred tax assets		76	56
Other		240	175
Total non-current assets		76,188	77,945
Total assets		99,988	101,296
LIABILITIES
Current liabilities
Trade and other payables		6,092	6,296
Interest bearing liabilities		2,839	7,173
Liabilities directly associated with the assets held for sale	11	752	−
Other financial liabilities		712	402
Current tax payable		290	611
Provisions		4,405	4,514
Deferred income		85	47
Total current liabilities		15,175	19,043
Non-current liabilities
Trade and other payables		42	4
Interest bearing liabilities		19,565	15,172
Other financial liabilities		1,607	2,157
Non-current tax payable		39	68
Deferred tax liabilities		3,325	4,299
Provisions		14,594	11,973
Deferred income		50	50
Total non-current liabilities		39,222	33,723
Total liabilities		54,397	52,766
Net assets		45,591	48,530
EQUITY
Share capital		4,819	4,737
Treasury shares		(33)	(41)
Reserves		(26)	13
Retained earnings		36,632	39,787
Total equity attributable to BHP shareholders		41,392	44,496
Non-controlling interests		4,199	4,034
Total equity		45,591	48,530

The accompanying notes form part of this half year Financial Report.

31

Consolidated Cash Flow Statement for the half year ended 31 December 2023

	Notes	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Operating activities
Profit before taxation		3,982	10,181	21,401
Adjustments for:
Depreciation and amortisation expense		2,629	2,456	5,061
Impairments of property, plant and equipment, financial assets and intangibles		3,513	21	75
Net finance costs		821	652	1,531
Loss/(profit) from equity accounted investments, related impairments and expenses		2,708	(280)	(594)
Other		290	258	546
Changes in assets and liabilities:
Trade and other receivables		(763)	888	867
Inventories		(255)	(53)	(44)
Trade and other payables		(33)	(1,598)	(1,086)
Provisions and other assets and liabilities		(519)	(399)	131
Cash generated from operations		12,373	12,126	27,888
Dividends received		199	75	347
Interest received		352	218	545
Interest paid		(800)	(434)	(1,090)
Proceeds from cash management related instruments		311	274	331
Net income tax and royalty-related taxation refunded		175	55	232
Net income tax and royalty-related taxation paid		(3,726)	(5,544)	(9,552)
Net operating cash flows		8,884	6,770	18,701
Investing activities
Purchases of property, plant and equipment		(4,545)	(2,871)	(6,733)
Exploration and evaluation expenditure		(199)	(156)	(350)
Exploration and evaluation expenditure expensed and included in operating cash flows		170	127	294
Investment in subsidiaries, operations and joint operations, net of cash		−	−	(5,868)
Net investment and funding of equity accounted investments		(474)	(369)	(557)
Proceeds from sale of assets		59	81	444
Proceeds from sale of subsidiaries, operations and joint operations net of their cash		55	74	82
Other investing		(145)	(175)	(377)
Net investing cash flows		(5,079)	(3,289)	(13,065)
Financing activities
Proceeds from interest bearing liabilities		4,991	350	8,182
Settlements of debt related instruments	A	−	(383)	(677)
Repayment of interest bearing liabilities	A	(6,315)	(1,690)	(3,289)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts		−	(1)	(88)
Dividends paid		(4,045)	(8,660)	(13,268)
Dividends paid to non-controlling interests		(614)	(527)	(1,175)
Net financing cash flows		(5,983)	(10,911)	(10,315)
Net (decrease)/increase in cash and cash equivalents		(2,178)	(7,430)	(4,679)
Cash and cash equivalents, net of overdrafts, at the beginning of the period		12,423	17,236	17,236
Foreign currency exchange rate changes on cash and cash equivalents		74	(201)	(134)
Cash and cash equivalents, net of overdrafts, at the end of the period		10,319	9,605	12,423

The accompanying notes form part of this half year Financial Report.

32

 

Consolidated Statement of Changes in Equity for the half year ended 31 December 2023

			Attributable to BHP shareholders
US$M			Share capital	Treasury shares	Reserves	Retained earnings	Total equity attributable to BHP shareholders	Non- controlling interests	Total equity
Balance as at 1 July 2023			4,737	(41)	13	39,787	44,496	4,034	48,530
Total comprehensive income			−	−	(32)	929	897	779	1,676
Transactions with owners:
BHP Group Limited shares issued1			82	(82)	−	−	−	−	−
Purchase of shares by ESOP Trusts			−	−	−	−	−	−	−
Employee share awards exercised net of employee contributions net of tax			−	90	(71)	(19)	−	−	−
Vested employee share awards that have lapsed, been cancelled or forfeited			−	−	−	−	−	−	−
Accrued employee entitlement for unexercised awards net of tax			−	−	64	−	64	−	64
Dividends			−	−	−	(4,065)	(4,065)	(614)	(4,679)
Balance as at 31 December 2023			4,819	(33)	(26)	36,632	41,392	4,199	45,591
Balance as at 1 July 2022			4,638	(31)	12	40,338	44,957	3,809	48,766
Total comprehensive income			−	−	(24)	6,463	6,439	669	7,108
Transactions with owners:
BHP Group Limited shares issued1			99	(99)	−	−	−	−	−
Purchase of shares by ESOP Trusts			−	(1)	−	−	(1)	−	(1)
Employee share awards exercised net of employee contributions net of tax			−	111	(80)	(31)	−	−	−
Vested employee share awards that have lapsed, been cancelled or forfeited			−	−	−	−	−	−	−
Accrued employee entitlement for unexercised awards net of tax			−	−	64	−	64	−	64
Dividends			−	−	−	(8,858)	(8,858)	(527)	(9,385)
Balance as at 31 December 2022			4,737	(20)	(28)	37,912	42,601	3,951	46,552

1    During the period, BHP Group Limited issued 2,919,231 fully paid ordinary shares to the BHP Group Limited Employee Equity Trust and to Solium Capital (Australia) Pty Ltd at A$43.52 per share (31 December 2022: 3,497,366 fully paid ordinary shares at A$40.51 per share), to satisfy the vesting of employee share awards and related dividend equivalent entitlements under those employee share plans.

 

The accompanying notes form part of this half year Financial Report.

33

 

Notes to the Financial Statements

1.     Basis of preparation

This general purpose Financial Report for the half year ended 31 December 2023 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 Australian Corporations Act 2001 as applicable to interim financial reporting. The general purpose Financial Report for the half year ended 31 December 2023 does not include all of the notes of the type normally included in an annual report. Accordingly, this report should be read in conjunction with the annual consolidated Financial Statements for the year ended 30 June 2023 and any public announcements made by the Group in accordance with the continuous disclosure obligations of the ASX Listing Rules.

Segment Reporting disclosures from IAS 34/AASB 134 'Interim Financial Reporting' have been disclosed within the Financial performance summary on pages 20 and 21 outside of this Financial Report.

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 2023 annual consolidated Financial Statements contained within the Annual Report of the Group, with the exception of new accounting standards that became effective for the Group from 1 July 2023. The adoption of these new accounting standards has not had a significant impact on 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.

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.

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 are detailed below.

Half year ended 31 December 2023	Gross US$M	Tax US$M	Net US$M
Exceptional items by category
Samarco dam failure	(3,120)	(53)	(3,173)
Impairment of Western Australia Nickel assets	(3,500)	1,031	(2,469)
Total	(6,620)	978	(5,642)
Attributable to non-controlling interests	−	−	−
Attributable to BHP shareholders	(6,620)	978	(5,642)

Samarco Mineração SA (Samarco) dam failure

The loss of US$3,173 million (after tax) relates to the Samarco dam failure, which occurred in November 2015, and comprises the following:

Half year ended 31 December 2023			US$M
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure			(54)
(Loss)/profit from equity accounted investments, related impairments and expenses:
Samarco dam failure provision			(2,982)
Fair value change on forward exchange derivatives			106
Net finance costs			(190)
Income tax expense			(53)
Total1			(3,173)

1          Refer to note 9 'Significant events - Samarco dam failure' for further information.

34

Western Australia Nickel impairment

The Group determined that the overall recoverable amount of the Western Australia Nickel cash generating unit (CGU) to be approximately negative US$700 million including closure provisions, resulting in an impairment to property, plant and equipment of US$3,437 million and intangible assets of US$63 million. The impairment is predominantly driven by lower nickel price assumptions, uncertainty in the short-term and medium-term outlook for nickel, escalation in capital costs for Western Australia Nickel, and changes to the development plans for Western Australia Nickel. The Western Australia Nickel CGU is part of the 'Group and unallocated items' reportable segment.

The post-impairment carrying value of Western Australia Nickel property, plant and equipment is not material.

Recoverable amount used for the impairment assessment was determined using a fair value less costs of disposal (FVLCD) methodology, applying discounted cash flow techniques utilising a post-tax real discount rate of 7.5% per cent. FVLCD may take into consideration market-based indicators of fair value. FVLCD is based primarily on Level 3 inputs as defined in note 8 'Financial risk management - Fair values'.

The exceptional items relating to the half year ended 31 December 2022 and the year ended 30 June 2023 are detailed below.

Half year ended 31 December 2022	Gross US$M	Tax US$M	Net US$M
Exceptional items by category
Samarco dam failure	(142)	2	(140)
Total	(142)	2	(140)
Attributable to non-controlling interests	−	−	−
Attributable to BHP shareholders	(142)	2	(140)

 

Year ended 30 June 2023	Gross US$M	Tax US$M	Net US$M
Exceptional items by category
Samarco dam failure	(340)	17	(323)
Chilean tax reform	−	(283)	(283)
Total	(340)	(266)	(606)
Attributable to non-controlling interests	−	(107)	(107)
Attributable to BHP shareholders	(340)	(159)	(499)

 

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			(Loss)/profit from equity accounted investments, related impairments and expenses
	31 Dec 2023 %	31 Dec 2022 %	30 June 2023 %	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Share of profit/(loss) of equity accounted investments:
Compañia Minera Antamina SA	33.75	33.75	33.75	224	185	451
Samarco Mineração SA1	50.00	50.00	50.00	−	−	−
Other				(56)	(32)	(72)
Share of profit of equity accounted investments				168	153	379
Samarco dam failure provision1				(2,982)	18	(256)
Fair value change on forward exchange derivatives1				106	109	471
(Loss)/profit from equity accounted investments, related impairments and expenses				(2,708)	280	594

1       Refer to note 9 'Significant events - Samarco dam failure' for further information.

 

35

4.     Net finance costs

	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Financial expenses
Interest expense using the effective interest rate method:
Interest on bank loans, overdrafts and all other borrowings	764	487	997
Interest capitalised at 6.79% (31 December 2022: 5.20%; 30 June 2023: 5.71%)1	(217)	(114)	(271)
Interest on lease liabilities	81	62	130
Discounting on provisions and other liabilities	479	613	1,293
Other gains and losses:
Fair value change on hedged loans	345	(754)	(803)
Fair value change on hedging derivatives	(323)	659	691
Exchange variations on net debt	35	(90)	9
Other	−	−	14
Total financial expenses	1,164	863	2,060
Financial income
Interest income	(343)	(211)	(529)
Net finance costs	821	652	1,531

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.

 

36

5.     Income tax expense

	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Total taxation expense comprises:
Current tax expense	3,271	2,738	6,690
Deferred tax (benefit)/expense	(995)	317	387
Total taxation expense	2,276	3,055	7,077

 

	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Factors affecting income tax expense for the year
Income tax expense differs to the standard rate of corporation tax as follows:
Profit before taxation	3,982	10,181	21,401
Tax on profit at Australian prima facie tax rate of 30 per cent	1,195	3,054	6,420
Tax effect of (loss)/profit from equity accounted investments, related impairments and expenses1	844	(52)	(37)
Derecognition of deferred tax assets and current year tax losses	237	162	526
Tax on remitted and unremitted foreign earnings	96	37	137
Amounts over provided in prior years	(8)	(5)	(18)
Foreign exchange adjustments	(29)	11	94
Recognition of previously unrecognised tax assets	(73)	(28)	(109)
Impact of tax rates applicable outside of Australia	(244)	(189)	(558)
Other	197	48	236
Income tax expense	2,215	3,038	6,691
Royalty-related taxation (net of income tax benefit)2	61	17	386
Total taxation expense	2,276	3,055	7,077

1       This item removes the prima facie tax effect on (loss)/profit from equity accounted investments, related impairments and expenses that are net of tax, with the exception of the Samarco forward exchange derivatives described in note 3 'Interests in associates and joint venture entities' which are taxable.

2       Includes the revaluation of deferred tax balances in the year ended 30 June 2023, following the substantive enactment of the Chilean Royalty Bill, as presented in note 2 'Exceptional items'.

37

6.     Earnings per share

	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Earnings attributable to BHP shareholders (US$M)1	927	6,457	12,921
Weighted average number of shares (Million)
- Basic2	5,067	5,064	5,064
- Diluted3	5,078	5,073	5,073
Earnings per ordinary share (US cents)4
- Basic	18.3	127.5	255.2
- Diluted	18.3	127.3	254.7
Headline earnings per ordinary share (US cents)5
- Basic	67.0	127.9	256.1
- Diluted	66.9	127.7	255.7

1       Diluted earnings attributable to BHP shareholders are equal to earnings attributable to BHP shareholders.

2       The calculation of the number of ordinary shares used in the computation of basic earnings per share is the weighted average number of ordinary shares of BHP Group Limited outstanding during the period after deduction of the number of shares held by the BHP Group Limited Employee Equity Trust.

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 2023 (31 December 2022: 9 million shares; 30 June 2023: 9 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 2023, there are no instruments which are considered antidilutive (31 December 2022: nil; 30 June 2023: nil).

4       Each American Depositary Share (ADS) represents twice the earnings for BHP Group Limited ordinary share.

5       Headline earnings is a Johannesburg Stock Exchange defined performance measure and is reconciled from earnings attributable to ordinary shareholders as follows:

	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Earnings attributable to BHP shareholders	927	6,457	12,921
Adjusted for:
(Gain)/loss on sales of PP&E, Investments and Operationsi	(37)	2	(9)
Impairments of property, plant and equipment, financial assets and intangibles	3,530	21	75
Tax effect of above adjustments	(1,023)	(1)	(17)
Subtotal of adjustments	2,470	22	49
Headline earnings	3,397	6,479	12,970
Diluted headline earnings	3,397	6,479	12,970

i         Included in other income.

38

7.     Dividends

		Half year ended 31 Dec 2023		Half year ended 31 Dec 2022		Year ended 30 June 2023
		Per share US cents	Total US$M	Per share US cents	Total US$M	Per share US cents	Total US$M
Dividends paid during the period
Prior year final dividend		80.0	4,065	175.0	8,858	175.0	8,858
Interim dividend		N/A	−	N/A	−	90.0	4,562
		80.0	4,065	175.0	8,858	265.0	13,420

Dividends paid during the period differs from the amount of dividends paid in the Consolidated 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$23 million was made as part of the funding of the final dividend paid during the period and is disclosed in 'Proceeds from cash management related instruments' in the Consolidated Cash Flow Statement.

Each American Depositary Share (ADS) represents two ordinary shares of BHP Group Limited. Dividends determined on each ADS represent twice the dividend determined on each BHP Group Limited ordinary share.

Dividends are determined after period-end and announced with 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 20 February 2024, BHP Group Limited determined an interim ordinary dividend of 72 US cents per share (US$3,649 million), which will be paid on 28 March 2024 (31 December 2022: interim dividend of 90 US cents per share - US$4,559 million; 30 June 2023: final dividend of 80 US cents per share - US$4,052 million).

BHP Group Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent.

39

8.     Financial risk management - Fair values

Recognition and measurement

All financial assets and 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 profit or loss under IFRS 9/AASB 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 which are carried at fair value through profit or loss, 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.

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 according to the designation of the underlying instrument.

For financial assets and liabilities carried at fair value, the Group uses the following to categorise the inputs to the valuation 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 inputs	Based on quoted prices (unadjusted) in active markets for identical financial assets and liabilities.	Based on inputs other than quoted prices included within Level 1 that are observable for the financial asset or liability, either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices).	Based on inputs not observable in the market using appropriate valuation models, including discounted cash flow modelling.

40

Financial assets and liabilities

The financial assets and liabilities are presented by class in the table below at their carrying amounts.

	IFRS 13 Fair value hierarchy level1	IFRS 9 Classification			31 Dec 2023 US$M	30 June 2023 US$M
Current cross currency and interest rate swaps2	2	Fair value through profit or loss			40	34
Current other derivative contracts3	2,3	Fair value through profit or loss			281	407
Current other financial assets4	3	Fair value through profit or loss			251	−
Current other investments5	1,2	Fair value through profit or loss			35	29
Non-current cross currency and interest rate swaps2	2	Fair value through profit or loss			318	149
Non-current other derivative contracts3	2,3	Fair value through profit or loss			179	228
Non-current other financial assets4	3	Fair value through profit or loss			−	246
Non-current other financial assets6		Amortised cost			130	−
Non-current investment in shares	1,3	Fair value through other comprehensive income			181	224
Non-current other investments5	1,2	Fair value through profit or loss			242	268
Total other financial assets					1,657	1,585
Cash and cash equivalents		Amortised cost			10,319	12,428
Trade and other receivables7		Amortised cost			1,919	1,506
Provisionally priced trade receivables	2	Fair value through profit or loss			3,007	2,705
Total financial assets					16,902	18,224
Non-financial assets					83,086	83,072
Total assets					99,988	101,296
Current cross currency and interest rate swaps2	2	Fair value through profit or loss			316	147
Current other derivative contracts	2	Fair value through profit or loss			325	176
Current other financial liabilities8		Amortised cost			71	79
Non-current cross currency and interest rate swaps2	2	Fair value through profit or loss			1,225	1,608
Non-current other derivative contracts3	2,3	Fair value through profit or loss			14	82
Non-current other financial liabilities8		Amortised cost			368	467
Total other financial liabilities					2,319	2,559
Trade and other payables9		Amortised cost			5,429	5,338
Provisionally priced trade payables	2	Fair value through profit or loss			591	841
Bank overdrafts and short-term borrowings10		Amortised cost			−	5
Bank loans10		Amortised cost			2,543	7,502
Notes and debentures10		Amortised cost			16,209	11,819
Lease liabilities11					3,578	3,019
Other10		Amortised cost			74	−
Total financial liabilities					30,743	31,083
Non-financial liabilities					23,654	21,683
Total liabilities					54,397	52,766

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 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 net other derivative assets of US$90 million related to power purchase contract agreements that are categorised as Level 3 (30 June 2023: US$46 million).

4       Includes receivables contingent on future coal price and on outcome of future events relating to mining and regulatory approvals of US$251 million (30 June 2023: US$246 million).

5       Includes investments held by BHP Foundation which are restricted and not available for general use by the Group of US$271 million (30 June 2023: US$290 million) of which other investments (mainly US Treasury Notes) of US$133 million is categorised as Level 1 (30 June 2023: US$138 million).

6       Includes Senior notes relating to Samarco with a maturity date of 30 June 2031. Refer to note 9 'Significant events - Samarco dam failure' for further information.

7       Excludes input taxes of US$595 million (30 June 2023: US$531 million) included in other receivables.

8       Includes the discounted settlement liability in relation to the cancellation of power contracts at the Group's Escondida operations. 

9       Excludes input taxes of US$114 million (30 June 2023: US$121 million) included in other payables.

10     All interest bearing liabilities, excluding lease liabilities, are unsecured.

11     Lease liabilities are measured in accordance with IFRS 16/AASB 16 'Leases'.

41

The carrying amounts in the table above generally approximate to fair value. In the case of US$533 million (30 June 2023: US$534 million) of fixed rate debt not swapped to floating rate, the fair value at 31 December 2023 was US$550 million    (30 June 2023: US$538 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.

For financial instruments that are carried at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the fair value hierarchy by reassessing categorisation at the end of each reporting period.    There were no transfers between categories during the period.

 

9.     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 7 'Samarco', Financial Statements note 4 'Significant events - Samarco dam failure' and Additional information section 8 'Legal proceedings' in the 30 June 2023 Annual Report.

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 2023 are shown below and have been treated as an exceptional item.

Financial impacts of Samarco dam failure	Half year ended 31 Dec 2023 US$M	Half year ended 31 Dec 2022 US$M	Year ended 30 June 2023 US$M
Income statement
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure1	(54)	(47)	(103)
(Loss)/profit from equity accounted investments, related impairments and expenses:
Samarco dam failure provision2	(2,982)	18	(256)
Fair value change on forward exchange derivatives3	106	109	471
(Loss)/profit from operations	(2,930)	80	112
Net finance costs4	(190)	(222)	(452)
Loss before taxation	(3,120)	(142)	(340)
Income tax (expense)/benefit5	(53)	2	17
Loss after taxation	(3,173)	(140)	(323)
Balance sheet movement
Other financial assets6	130	−	−
Trade and other payables	(12)	−	(6)
Derivatives	(36)	83	337
Tax liabilities	(53)	2	17
Provisions	(2,851)	135	(260)
Net (increase)/decrease in liabilities	(2,822)	220	88

 

42

	Half year ended 31 Dec 2023 US$M		Half year ended 31 Dec 2022 US$M		Year ended 30 June 2023 US$M
Cash flow statement
Loss before taxation		(3,120)		(142)		(340)
Adjustments for:
Samarco dam failure provision2	2,982		(18)		256
Fair value change on forward exchange derivatives3	(106)		(109)		(471)
Proceeds from cash management related instruments	142		26		134
Net finance costs4	190		222		452
Changes in assets and liabilities:
Trade and other payables	12		−		6
Net operating cash flows		100		(21)		37
Net investment and funding of equity accounted investments7		(446)		(339)		(448)
Net investing cash flows		(446)		(339)		(448)
Net decrease in cash and cash equivalents		(346)		(360)		(411)

1       Includes legal and advisor costs incurred.

2       US$3,000 million (31 December 2022: US$(33) million; 30 June 2023: US$(33) million) change in estimate and US$(18) million (31 December 2022: US$15 million; 30 June 2023: US$289 million) exchange translation.

3       The Group enters 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)/profit from equity accounted investments, related impairments and expenses in the Income Statement.

4       Amortisation of discounting of provision.

5       Includes tax on forward exchange derivatives and other taxes incurred during the period.

6       Senior notes relating to the Judicial Reorganisation (JR), described below, with a maturity date of 30 June 2031.

7       Includes US$(321) million (31 December 2022: US$(339) million; 30 June 2023: US$(448) million) utilisation of the Samarco dam failure provision and US$(125) million provided to Samarco following approval of the JR (31 Dec 2022: US$ nil; 30 June 2023: US$ nil) which subsequently converted into the Senior notes referred to in footnote 6, inclusive of accrued interest.

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.

Provision related to the Samarco dam failure

				31 Dec 2023 US$M		30 June 2023 US$M
At the beginning of the reporting period					3,681		3,421
Movement in provisions					2,851		260
Comprising:
Utilised				(321)		(448)
Adjustments charged to the income statement:
Change in cost estimate				3,000		(33)
Amortisation of discounting impacting net finance costs				190		452
Exchange translation				(18)		289
At the end of the reporting period					6,532		3,681
Comprising:
Current					1,871		1,876
Non-current					4,661		1,805
At the end of the reporting period					6,532		3,681

Samarco dam failure provision and contingencies

As at 31 December 2023, BHP Brasil has identified a provision and certain contingent liabilities arising as a consequence of the Samarco dam failure. The provision related to the Samarco dam failure recognised as at 31 December 2023 is US$6,532 million and reflects the Group's best estimate of the potential outflows necessary to resolve all aspects of the Federal Public Prosecution Office BRL$155 billion claim and Framework Agreement obligations (see below).

Contingent liabilities will only be resolved when one or more uncertain future events occur or related impacts become capable of reliable measurement and, as such, determination of contingent liabilities disclosed in the financial statements requires significant judgement regarding the outcome of future events. A number of the claims below do not specify the amount of damages sought and, where this is specified, amounts could change as the matter progresses.

Ultimately, future changes in all those matters for which a provision has been recognised or contingent liability disclosed could have a material adverse impact on BHP's business, competitive position, cash flows, prospects, liquidity and shareholder returns.

43

The following table summarises the current status of significant ongoing matters relating to the Samarco dam failure, along with developments during the period, and the associated treatment in the Financial Statements:

Item	Provision	Contingent liability
Samarco dam failure - Framework Agreement On 2 March 2016, BHP Brasil, Samarco and Vale S.A. (Vale) entered into a Framework Agreement with the Federal Government of Brazil, the states of Espirito Santo and Minas Gerais, and certain other public authorities to establish a foundation (Fundação Renova) that is developing and executing 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 and those for remediation of impacted areas and resettlement of impacted communities. Samarco has primary responsibility for funding Fundação Renova with each of BHP Brasil and Vale having secondary funding obligations in proportion to their 50 per cent shareholding in Samarco. While Samarco has recommenced operations, Samarco's long-term cash flow generation remains highly sensitive to factors including returning to full production capacity, commodity prices and foreign exchange rates. Further, under the Samarco Judicial Reorganisation (refer to Samarco Judicial Reorganisation (JR) below), Samarco's funding of obligations to remediate and compensate the damages resulting from the dam failure, including funding Fundação Renova, is capped at US$1 billion for the period CY2024 to CY2030. Notwithstanding this cap, and subject to certain conditions, to the extent that Samarco each year has a positive cash balance after meeting its various obligations, during this period Samarco's shareholders are able to direct 50 per cent of Samarco's year end excess cash balance to fund remediation and compensation obligations. Execution of the Programs is a key component in the resolution of the Federal Public Prosecution Office claim (outlined below). Therefore, the expected cost of completion of the Programs and Samarco's potential ability to contribute to remediation and compensation obligations have been considered when determining BHP Brasil's provision in relation to the Samarco dam failure at 31 December 2023. Uncertainty exists around the scope and cost of the Programs, including as a result of ongoing legal actions in relation to the number of individuals eligible for compensation and the amount of damages to which they are entitled. Further information on the key areas of estimation uncertainty is provided in the 'Key judgements and estimates' section below.	ü	û
Federal Public Prosecution Office claim BHP Brasil is among the defendants named in a claim brought by the Brazilian Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion (approximately US$32 billion) for reparation, compensation and moral damages in relation to the Samarco dam failure. Since early CY2021, BHP Brasil, Samarco and, Vale have been engaging in negotiations with the Brazilian State and Federal Government and other public entities to seek a settlement of obligations under the Framework Agreement, the Federal Public Prosecution Office Claim, and other claims by government entities relating to the Samarco dam failure. On 25 January 2024, the Federal Court of Brazil issued a decision in relation to the Federal Public Prosecution Office Claim quantifying collective moral damages arising from the Samarco dam failure. The decision found that Samarco, Vale and BHP Brasil are jointly and severally liable to pay collective moral damages in the amount of R$47.6 billion (US$9.75 billion) (to be adjusted for interest and inflation) when any and all appeals are finally determined.  On 1 February 2024, Samarco, Vale and BHP Brasil filed a clarification motion with the Federal Court of Brazil in respect of certain factual inaccuracies in the decision, including the calculation of damages. A decision remains pending. BHP Brasil also intends to appeal the decision, challenging the merits and amount of damages. The appeal process is estimated to take approximately two to five years. As at 30 June 2023, the Group disclosed a contingent liability in relation to the Federal Public Prosecution Office claim as, given the status of the claim and ongoing settlement negotiations, it was not possible to reliably estimate the potential outcomes of the claim beyond the estimated costs of completing the programs under the Framework Agreement, which are being executed in relation to  financial assistance and compensation of impacted persons, remediation of impacted areas and resettlement of impacted communities. The Group has considered the additional information available from the status of settlement negotiations, the judicial decision regarding collective moral damages, updates to the estimated costs of executing the Framework Agreement programs, and the extent to which Samarco may be in a position to fund any future outflows to increase the provision related to the Samarco dam failure to US$6,532 million at 31 December 2023.    44 The provision at 31 December 2023 reflects the Group's best estimate of outflows required to resolve all aspects of the Federal Public Prosecution Office claim, being reparation, compensation and moral damages. Significant uncertainty remains around the resolution of the Federal Public Prosecution Office Claim and the Framework Agreement obligations, and there is a risk that outcomes may be materially higher or lower than amounts reflected in BHP Brasil's provision for the Samarco dam failure.  Key areas of uncertainty include the outcomes of appeals relating to the judicial decision regarding collective moral damages, the terms of any potential future settlement agreement in respect of the Federal Public Prosecution Office claim and the extent to which Samarco is able to directly fund any future obligations relating to reparation, compensation and moral damages. Further information on the key areas of estimation uncertainty is provided in the 'Key judgements and estimates' section below.  BHP Brasil, Samarco and Vale continue to maintain security, as required by a Governance Agreement, ratified on 8 August 2018, with the security currently comprising insurance bonds and a charge over certain Samarco assets.	ü	û
Australian class action claim BHP Group Limited 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 Limited on the Australian Securities Exchange (ASX) or shares in BHP Group Plc (now BHP Group (UK) Ltd) on the London Stock Exchange (LSE) and Johannesburg Stock Exchange (JSE) in periods prior to the Samarco dam failure. The amount of damages sought is unspecified.	û	ü
United Kingdom group action claims BHP Group (UK) Ltd (formerly BHP Group Plc) and BHP Group Limited (BHP Defendants) are named as defendants in group action claims for damages filed in the courts of England. These claims were filed on behalf of certain individuals, municipalities, businesses, faith-based institutions and communities in Brazil allegedly impacted by the Samarco dam failure. The amount of damages sought in these claims is unspecified. A trial in relation to the BHP Defendant's liability for the dam failure is listed for October 2024. In December 2022, the BHP Defendants filed their defence and a contribution claim against Vale. The contribution claim contends that if the BHP Defendant's defence is not successful and the BHP Defendants are ordered to pay damages to the claimants, Vale should contribute to any amount payable. Vale contested the jurisdiction of the English courts to determine this contribution claim on the basis that the Brazilian courts are a more appropriate forum, with the court dismissing Vale's application on 7 August 2023. In November 2023, the English courts refused Vale's request for permission to appeal that decision. Vale also challenged the jurisdiction of the English courts on the basis that the claims are covered by an arbitration clause and should be submitted to arbitration in Brazil. In December 2023, the English courts dismissed Vale's arbitration challenge, and Vale has not sought permission to appeal from that decision. Accordingly, the contribution claim will proceed in the UK. In January 2024, the BHP Defendants were served with a new group action filed in the courts of England on behalf of additional individuals and businesses in Brazil allegedly impacted by the Samarco dam failure. The new action makes broadly the same claims as the original action and the amount of damages sought in these claims is unspecified.	û	ü
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.  BHP Brasil rejects outright the charges against the company and the Affected Individuals and is defending itself from all charges while fully supporting each of the Affected Individuals in their defence of the charges.	û	ü
Civil public action commenced by Associations concerning the use of TANFLOC for water treatment The Vila Lenira Residents Association, State of Espirito Santo Rural Producers and Artisans Association, Colatina Velha Neighbourhood Residents Association, and United for the Progress of Palmeiras Neighbourhood Association have filed a lawsuit against Samarco, BHP Brasil and Vale and others, including the State of Minas Gerais, the State of Espirito Santo and the Federal Government. The plaintiffs allege that the defendants carried out a clandestine study on the citizens of the locations affected by the Fundão Dam Failure, using TANFLOC - a tannin-based flocculant/coagulant - that is currently used for wastewater treatment applications. The plaintiffs claim that this product allegedly put the population at risk due to its alleged experimental qualities.   45 The plaintiffs are seeking multiple kinds of relief - material damages, moral damages, loss of profits - and that the defendants should pay for water supply in all locations where there is no water source other than the Doce River. On 17 November 2023, the Court dismissed the case without prejudice on the basis of a lack of standing by the Associations to sue and procedural deficiencies in the complaint filed. The plaintiffs filed a motion for clarification and a decision is pending.	û	ü
Other claims BHP Brasil is among the companies named as defendants in a number of legal proceedings initiated by individuals, non-governmental organisations, 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 reparation and violations of Brazilian environmental and other laws, among other matters. The lawsuits seek various remedies including reparation 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, studies and investigations relating to the Samarco dam failure have been commenced by numerous agencies and individuals 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 other Group entities in Brazil or other jurisdictions. The outcomes of these claims, investigations and proceedings remain uncertain and continue to be disclosed as contingent liabilities.	û	ü

Commitments

Under the terms of the Samarco joint venture agreement, BHP Brasil does not have an existing obligation to fund Samarco.

However, BHP Brasil has agreed to fund a total of up to US$925 million for the Fundação Renova programs during calendar year 2024. Any additional requests for funding or future investment provided would be subject to a future decision by BHP Brasil, accounted for at that time.

46

Samarco judicial reorganisation

Samarco filed for Judicial Reorganisation (JR) in April 2021, with the Second Business State Court for the Belo Horizonte District of Minas Gerais, State of Minas Gerais, Brazil (JR Court), following enforcement actions taken by certain financial creditors of Samarco which threatened Samarco's operations.

The JR was an insolvency proceeding that provided a means for Samarco to restructure its financial debts and establish a stable financial position to allow Samarco to continue to rebuild its operations and strengthen its ability to meet obligations in relation to reparation, compensation and moral damages in relation to the Samarco dam failure. Samarco's operations continued during the JR proceeding.

On 28 July 2023, Samarco and one of the financial creditors jointly filed a consensual Judicial Reorganisation Plan (Consensual Plan) with the JR Court. The parties also filed terms of adhesion that demonstrate approval of the Consensual Plan by the majority of Samarco's creditors as required under Brazilian Bankruptcy Law.

On 1 September 2023, the JR Court ratified the Consensual Plan. Following the ratification, Samarco entered into definitive debt restructure agreements with its financial creditors to implement the debt restructure, including the exchange of Samarco's existing financial debt for US$3.6 billion of long-term unsecured debt that matures in June 2031 and remains non-recourse to Samarco's shareholders. Further, as part of the agreement Samarco issued Senior notes to its Shareholders which also mature in June 2031.

The debt restructure does not impact Fundação Renova's ability to undertake the Programs under the Framework Agreement. Samarco continues to have primary responsibility for funding Fundação Renova and each of BHP Brasil and Vale will continue to have secondary responsibility to fund 50% of Fundação Renova if Samarco does not meet its funding obligations under the Framework Agreement. Under the Consensual Plan, Samarco's funding obligation to remediate and compensate the damages resulting from the dam failure, including funding Fundação Renova, is capped at US$1 billion for the period CY2024 to CY2030 (Renova Cap). Notwithstanding the Renova Cap, and subject to certain conditions, to the extent that Samarco each year has a positive cash balance after meeting its various obligations including operating capital requirements, debt service and Renova Cap requirements, Samarco's shareholders are able to direct 50% of Samarco's year end excess cash balance to fund remediation and compensation obligations.

BHP Brasil has considered the extent to which Samarco may be in a position to fund any future outflows, when determining the dam failure related provision at 31 December 2023.

47

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 has determined that a provision can be recognised at 31 December 2023 to reflect the estimated costs to resolve all aspects of the Federal Public Prosecution Office claim and the Framework Agreement. 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 provision for the Samarco dam failure reflects the Group's estimate of the costs to resolve all aspects of the Federal Public Prosecution Office claim and Framework Agreement and requires the use of significant judgements, estimates and assumptions. While the provision has been measured based on the latest information available, changes in facts and circumstances are likely in future reporting periods and may lead to material revisions to these estimates and there is a risk that outcomes may be materially higher or lower than amounts currently reflected in the provision. However, it is currently not possible to determine what facts and circumstances may change, therefore revisions in future reporting periods due to the key estimates and factors outlined below cannot be reliably measured. The key estimates that may have a material impact upon the provision in the next and future reporting periods include the: ·    the scope and cost of completing the programs under the Framework Agreement, including as a result of ongoing legal actions in relation to the number of people eligible for compensation and the amount of damages to which they are entitled;  ·    the outcomes of appeals relating to the judicial decision regarding collective moral damages, including any appeals that may be lodged by the Brazilian Federal Public Prosecution Office;  ·    the terms of any potential future settlement agreement in respect of the Federal Public Prosecution Office Claim, including amounts payable, obligations of the parties to perform ongoing programs of work in relation to reparation and compensation, and the period of time over which any settlement amounts may be payable; and ·    the extent to which Samarco is able to directly fund any future obligations relating to reparation, compensation or moral damages. Samarco's long-term cash flow generation remains highly sensitive to factors including its ability to return to full production capacity, commodity prices and foreign exchange rates. The provision may also be affected by factors including but not limited to updates to discount and foreign exchange rates. In addition, the provision may be impacted by decisions in, or resolution of, existing and potential legal claims in Brazil and other jurisdictions, including the outcome of the United Kingdom group action claims and the Australian class action. Given these factors, future actual cash outflows may differ from the amounts currently provided and changes to any of the key assumptions and estimates outlined above could result in a material impact to the provision in the next and future reporting periods.

48

10.   Business combinations

On 2 May 2023 (Acquisition Date), the Group acquired 100 per cent of the issued share capital of OZ Minerals Limited (OZL) for a net cash consideration of US$5.9 billion. The terms of the acquisition did not include any contingent consideration.

There have been no significant adjustments to the provisional fair values as at 31 December 2023. Due to the size, complexity and timing of the acquisition, the valuation process is ongoing and will be completed within 12 months of the acquisition.

Refer to note 29 of the 30 June 2023 annual consolidated Financial Statements contained within the Annual Report of the Group for details of the acquisition.

 

11.   Assets and liabilities directly associated with assets held for sale

On 18 October 2023, the Group announced that BHP and Mitsubishi Development Pty Ltd (MDP) had entered into an Asset Sale Agreement to divest the Blackwater and Daunia mines (which are part of the BHP Mitsubishi Alliance (BMA) metallurgical coal joint venture in Queensland) to Whitehaven Coal (Buyer). Each of BHP and MDP hold a 50% interest in BMA.

The purchase price comprises US$2.1 billion cash on completion, US$1.1 billion in cash over 3 years after completion and the potential for up to US$0.9 billion in a price-linked earnout payable over 3 years on a 100% interest basis. Subject to the satisfaction of certain conditions, including customary competition and regulatory requirements, transaction completion is expected to occur in the June 2024 quarter. The Buyer has paid a US$100 million deposit (US$50 million BHP share) on signing which BHP and MDP are entitled to retain in certain limited circumstances if the proposed divestment is terminated.

BMA will continue to operate the assets until completion. The Buyer will assume economic and operating control of the Blackwater and Daunia mines on completion of the sale, including all current and future environmental liabilities and rehabilitation obligations.

At 31 December 2023, the Group's share of assets and liabilities have been classified as 'Assets held for sale' and 'Liabilities directly associated with the assets held for sale'. Blackwater and Daunia mines are not considered to meet the criteria for classification as a discontinued operation given their relative size to the Group and the Coal segment.

The assets and liabilities classified as current assets and liabilities held for sale are presented in the table below:

		31 Dec 2023 US$M
Assets
Inventories		140
Property, plant and equipment		1,382
Intangible assets		45
Other		3
Total assets		1,570
Liabilities
Interest bearing liabilities		69
Other financial liabilities		45
Provisions		638
Total liabilities		752
Net assets		818

 

12.   Subsequent events

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.

49

Directors' Report

The Directors present their report together with the half year Financial Statements for the half year ended 31 December 2023 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 2023 and likely future developments are given on pages 1 to 26. 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 73 to 81 of the Group's Annual Report for the year ended 30 June 2023 (a copy of which is available on the Group's website at 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 where we or our third-party partners operate, or the interests of our stakeholders, which could in each case, lead to litigation, regulatory investigation or enforcement action (including class actions or actions arising from contractual, legacy or other liabilities associated with divested assets), 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, resulting in significant adverse impacts on our people, communities, the environment or our business.

·  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, resulting in significant reputational impacts.

·  Optimising growth and portfolio returns: Risks associated with our ability to position our asset portfolio to generate returns and value for shareholders, including through acquisitions, mergers and divestments. Long-term price volatility, sustained low prices or increases in costs may adversely affect BHP's financial performance as our products are usually sold at prevailing market prices and generally BHP does not have the ability to offset costs through price increases.

·  Accessing key markets: Risks associated with market concentration and our ability to sell and deliver products into existing and future key markets, impacting our economic efficiency.

·  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 climate-related impacts).

 

Dividend

Full details of dividends are given on page 4.

50

Board of Directors

The Directors of BHP at any time during or since the end of the half year ended 31 December 2023 are:

Ken MacKenzie - Chairman since 1 September 2017 (a Director since 22 September 2016)

Mike Henry - an Executive Director since 1 January 2020

Terry Bowen - a former Director from 1 October 2017 to 1 November 2023

Xiaoqun Clever-Steg - a Director since 1 October 2020

Ian Cockerill - a Director since 1 April 2019

Gary Goldberg - a Director since 1 February 2020

Michelle Hinchliffe - a Director since 1 March 2022

Christine O'Reilly - a Director since 12 October 2020

Catherine Tanna - a Director since 4 April 2022

Dion Weisler - a Director since 1 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 52 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 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 20th day of February 2024

51

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 27 to 48, 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 assets, liabilities, financial position and profit or loss of the Group as at 31 December 2023 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 26, includes: a fair review of (i) 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 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 20th day of February 2024

52

Auditor's Independence Declaration to the Directors of BHP Group Limited

 

As lead auditor for the review of the financial report of BHP Group Limited for the half year ended 31 December 2023, 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;

b. No contraventions of any applicable code of professional conduct in relation to the review; and

c. No non-audit services provided that contravene 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

20 February 2024

 

 

 

53

Independent auditor's review report to the members of BHP Group Limited

Conclusion

We have reviewed the accompanying half year financial report of BHP Group Limited and its subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 31 December 2023, 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 2023 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 2023 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

 

20 February 2024

 

54

Non-IFRS Financial Information Half year ended 31 December 2023     55

Non-IFRS financial information

We use various non-IFRS financial information to reflect our underlying financial performance.

Non-IFRS financial information is not defined or specified under the requirements of IFRS, but is derived from the Group's Consolidated Financial Statements prepared in accordance with IFRS. The non-IFRS financial information and the below reconciliations included in this document are unaudited. The non-IFRS financial information presented is consistent with how management review financial performance of the Group with the Board and the investment community.

The "Definition and calculation of non-IFRS financial information" section outlines why we believe non-IFRS financial information is useful and the calculation methodology. We believe non-IFRS financial information provides useful information, however 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.

The following tables provide reconciliations between non-IFRS financial information and their nearest respective IFRS measure.

Exceptional items

To improve the comparability of underlying financial performance between reporting periods, some of our non-IFRS financial information adjusts the relevant IFRS measures for exceptional items. Refer to the Group's Financial Report for further information on 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 Group's Consolidated Financial Statements. The exceptional items included within the Group's profit for the financial periods are detailed below.

 

Half year ended 31 December	2023 US$M	2022 US$M
Revenue	−	−
Other income	−	−
Expenses excluding net finance costs, depreciation, amortisation and impairments	(54)	(47)
Depreciation and amortisation	−	−
Net impairments	(3,500)	−
(Loss)/profit from equity accounted investments, related impairments and expenses	(2,876)	127
Profit/(loss) from operations	(6,430)	80
Financial expenses	(190)	(222)
Financial income	−	−
Net finance costs	(190)	(222)
Profit/(loss) before taxation	(6,620)	(142)
Income tax (expense)/benefit	978	2
Royalty-related taxation (net of income tax benefit)	−	−
Total taxation (expense)/benefit	978	2
Profit/(loss) after taxation	(5,642)	(140)
Total exceptional items attributable to non-controlling interests	−	−
Total exceptional items attributable to BHP shareholders	(5,642)	(140)
Exceptional items attributable to BHP shareholders per share (US cents)	(111.3)	(2.8)
Weighted basic average number of shares (Million)	5,067	5,064

56

Non-IFRS financial information derived from Consolidated Income Statement

Underlying attributable profit

Half year ended 31 December	2023 US$M	2022 US$M
Profit after taxation attributable to BHP shareholders	927	6,457
Total exceptional items attributable to BHP shareholders1	5,642	140
Underlying attributable profit	6,569	6,597

1       Refer to Exceptional items for further information.

 

Underlying basic earnings per ordinary share

Half year ended 31 December	2023 US cents	2022 US cents
Basic earnings per ordinary share	18.3	127.5
Exceptional items attributable to BHP shareholders per share1	111.3	2.8
Underlying basic earnings per ordinary share	129.6	130.3

1       Refer to Exceptional items for further information.

 

Underlying EBITDA

Half year ended 31 December	2023 US$M	2022 US$M
Profit from operations	4,803	10,833
Exceptional items included in profit from operations1	6,430	(80)
Underlying EBIT	11,233	10,753
Depreciation and amortisation expense	2,629	2,456
Net impairments	3,513	21
Exceptional items included in Depreciation, amortisation and impairments1	(3,500)	−
Underlying EBITDA	13,875	13,230

1       Refer to Exceptional items for further information.

 

57

Underlying EBITDA - Segment

Half year ended 31 December 2023 US$M	Copper	Iron Ore	Coal	Group and unallocated items/ eliminations2	Total Group
Profit from operations	2,438	5,788	652	(4,075)	4,803
Exceptional items included in profit from operations1	−	2,899	−	3,531	6,430
Depreciation and amortisation expense	1,031	971	322	305	2,629
Net impairments	4	8	1	3,500	3,513
Exceptional items included in Depreciation, amortisation and impairments1	−	−	−	(3,500)	(3,500)
Underlying EBITDA	3,473	9,666	975	(239)	13,875
Half year ended 31 December 2022 US$M	Copper	Iron Ore	Coal	Group and unallocated items/ eliminations2	Total Group
Profit from operations	1,938	6,768	2,294	(167)	10,833
Exceptional items included in profit from operations1	−	(111)	−	31	(80)
Depreciation and amortisation expense	875	980	336	265	2,456
Net impairments	1	4	1	15	21
Exceptional items included in Depreciation, amortisation and impairments1	−	−	−	−	−
Underlying EBITDA	2,814	7,641	2,631	144	13,230

1       Refer to Exceptional items for further information.

2       Group and unallocated items includes functions, other unallocated operations, including Potash, Western Australia Nickel (which is made up of Nickel West and West Musgrave which was acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd), legacy assets and consolidation adjustments.

 

Underlying EBITDA - Group and unallocated items

Half year ended 31 December 2023 US$M	Profit from operations	Exceptional items included in profit from operations1	Depreciation and amortisation	Net impairments	Exceptional items included in Depreciation, amortisation and impairments1	Underlying EBITDA
Potash	(130)	−	1	−	−	(129)
Western Australia Nickel2	(3,740)	3,500	66	3,500	(3,500)	(174)
Other3	(205)	31	238	−	−	64
Total	(4,075)	3,531	305	3,500	(3,500)	(239)
Half year ended 31 December 2022 US$M	Profit from operations	Exceptional items included in profit from operations1	Depreciation and amortisation	Net impairments	Exceptional items included in Depreciation, amortisation and impairments1	Underlying EBITDA
Potash	(88)	−	1	−	−	(87)
Western Australia Nickel2	50	−	49	−	−	99
Other3	(129)	31	215	15	−	132
Total	(167)	31	265	15	−	144

1       Refer to Exceptional items for further information.

2       Western Australia Nickel includes Nickel West and West Musgrave (acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd).

3       Other includes functions, other unallocated operations, legacy assets and consolidation adjustments.

58

Underlying EBITDA margin

Half year ended 31 December 2023 US$M	Copper	Iron Ore	Coal	Group and unallocated items/ eliminations1	Total Group
Revenue - Group production	7,435	14,050	3,786	726	25,997
Revenue - Third-party products	1,223	12	−	−	1,235
Revenue	8,658	14,062	3,786	726	27,232
Underlying EBITDA - Group production	3,445	9,667	975	(239)	13,848
Underlying EBITDA - Third-party products	28	(1)	−	−	27
Underlying EBITDA2	3,473	9,666	975	(239)	13,875
Segment contribution to the Group's Underlying EBITDA3	25%	68%	7%		100%
Underlying EBITDA margin4	46%	69%	26%		53.3%
Half year ended 31 December 2022 US$M	Copper	Iron Ore	Coal	Group and unallocated items/ eliminations1	Total Group
Revenue - Group production	6,317	11,813	5,566	1,010	24,706
Revenue - Third-party products	988	9	−	10	1,007
Revenue	7,305	11,822	5,566	1,020	25,713
Underlying EBITDA - Group production	2,806	7,641	2,631	144	13,222
Underlying EBITDA - Third-party products	8	−	−	−	8
Underlying EBITDA2	2,814	7,641	2,631	144	13,230
Segment contribution to the Group's Underlying EBITDA3	22%	58%	20%		100%
Underlying EBITDA margin4	44%	65%	47%		53.5%

1       Group and unallocated items includes functions, other unallocated operations, including Potash, Western Australia Nickel (which is made up of Nickel West and West Musgrave which was acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd), legacy assets and consolidation adjustments.

2       We differentiate sales of our production (which may include third-party product feed) from direct sales of third-party products to better measure our operational profitability as a percentage of revenue. We may buy and sell third-party products to ensure a steady supply of product to our customers where there is occasional production variability or shortfalls from our assets.

3       Percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items.

4       Underlying EBITDA margin excludes third-party products.

 

Effective tax rate

	2023				2022
Half year ended 31 December	Profit before taxation US$M	Income tax expense US$M	%		Profit before taxation US$M	Income tax expense US$M	%
Statutory effective tax rate	3,982	(2,276)	57.2		10,181	(3,055)	30.0
Adjusted for:
Exchange rate movements	−	(29)			−	11
Exceptional items1	6,620	(978)			142	(2)
Adjusted effective tax rate	10,602	(3,283)	31.0		10,323	(3,046)	29.5

1       Refer to Exceptional items for further information.

59

Non-IFRS financial information derived from Consolidated Cash Flow Statement

Capital and exploration expenditure

Half year ended 31 December	2023 US$M	2022 US$M
Capital expenditure (purchases of property, plant and equipment)	4,545	2,871
Add: Exploration and evaluation expenditure	199	156
Capital and exploration expenditure (cash basis)	4,744	3,027

 

Free cash flow

Half year ended 31 December	2023 US$M	2022 US$M
Net operating cash flows	8,884	6,770
Net investing cash flows	(5,079)	(3,289)
Free cash flow	3,805	3,481

 

Non-IFRS financial information derived from Consolidated Balance Sheet

Net debt and gearing ratio

	31 Dec 2023 US$M	31 Dec 2022 US$M	30 June 2023 US$M
Interest bearing liabilities - Current	2,839	2,015	7,173
Interest bearing liabilities - Non-current	19,565	12,686	15,172
Total interest bearing liabilities	22,404	14,701	22,345
Comprising:
Borrowing	18,826	12,007	19,326
Lease liabilities	3,578	2,694	3,019
Less: Lease liability associated with index-linked freight contracts	840	247	287
Less: Cash and cash equivalents	10,319	9,605	12,428
Less: Net debt management related instruments1	(1,183)	(2,063)	(1,572)
Less: Net cash management related instruments2	(220)	2	36
Less: Total derivatives included in net debt	(1,403)	(2,061)	(1,536)
Net debt	12,648	6,910	11,166
Net assets	45,591	46,552	48,530
Gearing	21.7%	12.9%	18.7%

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.

60

Net debt waterfall

	31 Dec 2023 US$M	31 Dec 2022 US$M
Net debt at the beginning of the period	(11,166)	(333)
Net operating cash flows	8,884	6,770
Net investing cash flows	(5,079)	(3,289)
Net financing cash flows	(5,983)	(10,911)
Net (decrease)/increase in cash and cash equivalents	(2,178)	(7,430)
Carrying value of interest bearing liability net repayments/(proceeds)	1,324	1,340
Carrying value of debt related instruments settlements/(proceeds)	−	383
Carrying value of cash management related instruments (proceeds)/settlements	(311)	(274)
Fair value change on hedged loans	(345)	754
Fair value change on hedging derivatives	323	(659)
Foreign currency exchange rate changes on cash and cash equivalents	74	(201)
Lease additions (excluding leases associated with index-linked freight contracts)	(298)	(320)
Transfer to liability directly associated with assets held for sale	69	−
Other	(140)	(170)
Non-cash movements	(317)	(596)
Net debt at the end of the period	(12,648)	(6,910)

 

Net operating assets

	31 Dec 2023 US$M	31 Dec 2022 US$M
Net assets	45,591	46,552
Less: Non-operating assets
Cash and cash equivalents	(10,319)	(9,605)
Trade and other receivables1	(12)	(22)
Other financial assets2	(1,197)	(1,219)
Current tax assets	(446)	(444)
Deferred tax assets	(76)	(54)
Assets held for sale3	(1,570)	−
Add: Non-operating liabilities
Trade and other payables4	272	149
Interest bearing liabilities	22,404	14,701
Other financial liabilities5	1,761	2,276
Current tax payable	290	469
Non-current tax payable	39	65
Deferred tax liabilities	3,325	3,367
Liabilities directly associated with the assets held for sale3	752	−
Net operating assets	60,814	56,235

1       Represents 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, other investments and receivables contingent on outcome of future events relating to mining and regulatory approvals.

3       Represents Blackwater and Daunia coal assets and liabilities classified as held for sale as at 31 December 2023.

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.

61

Other non-IFRS financial information

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 31 December 2023 and relates them back to our Consolidated Income Statement.

	Revenue US$M	Total expenses, Other income and Profit/(loss)  from equity accounted investments US$M	Profit from operations US$M	Depreciation, amortisation and impairments and Exceptional Items US$M	Underlying EBITDA US$M
Half year ended 31 December 2022
Revenue	25,713
Other income		269
Expenses excluding net finance costs		(15,429)
Profit/(loss) from equity accounted investments, related impairments and expenses		280
Total other income, expenses excluding net finance costs and Profit/(loss) from equity accounted investments, related impairments and expenses		(14,880)
Profit from operations			10,833
Depreciation, amortisation and impairments				2,477
Exceptional item included in Depreciation, amortisation and impairments				−
Exceptional items				(80)
Underlying EBITDA					13,230
Change in sales prices	629	−	629	−	629
Price-linked costs	−	147	147	−	147
Net price impact	629	147	776	−	776
Change in volumes	228	32	260	−	260
Operating cash costs	−	(372)	(372)	−	(372)
Exploration and business development	−	(64)	(64)	−	(64)
Change in controllable cash costs1	−	(436)	(436)	−	(436)
Exchange rates	(1)	81	80	−	80
Inflation on costs	−	(507)	(507)	−	(507)
Fuel, energy, and consumable price movements	−	340	340	−	340
Non-cash	−	(119)	(119)	−	(119)
One-off items	−	−	−	−	−
Change in other costs	(1)	(205)	(206)	−	(206)
Asset sales	−	38	38	−	38
Ceased and sold operations	(98)	75	(23)	−	(23)
New and acquired operations	610	(370)	240	−	240
Other	151	(155)	(4)	−	(4)
Depreciation, amortisation and impairments	−	(165)	(165)	165	−
Exceptional items	−	(6,510)	(6,510)	6,510	−
Half year ended 31 December 2023
Revenue	27,232
Other income		261
Expenses excluding net finance costs		(19,982)
(Loss)/profit from equity accounted investments, related impairments and expenses		(2,708)
Total other income, expenses excluding net finance costs and Profit/(loss) from equity accounted investments, related impairments and expenses		(22,429)
Profit from operations			4,803
Depreciation, amortisation and impairments				6,142
Exceptional item included in Depreciation, amortisation and impairments				(3,500)
Exceptional items				6,430
Underlying EBITDA					13,875

1       Collectively, we refer to the change in operating cash costs and change in exploration and business development as Change in controllable cash costs. Operating cash costs by definition do not include non-cash costs. The change in operating cash costs also excludes the impact of exchange rates and inflation, changes in fuel, energy costs and consumable costs, changes in exploration and evaluation and business development costs and one-off items. These items are excluded so as to provide a consistent measurement of changes in costs across all segments, based on the factors that are within the control and responsibility of the segment.

62

Underlying return on capital employed (ROCE)

	31 Dec 2023 US$M	31 Dec 2022 US$M
Profit after taxation	1,706	7,126
Exceptional items1	5,642	140
Subtotal	7,348	7,266
Adjusted for:
Net finance costs	821	652
Exceptional items included within net finance costs1	(190)	(222)
Income tax expense on net finance costs	(187)	(166)
Profit after taxation excluding net finance costs and exceptional items	7,792	7,530
Annualised Profit after taxation excluding net finance costs and exceptional items	15,584	15,060
Net assets at the beginning of the period	48,530	48,766
Net debt at the beginning of the period	11,166	333
Capital employed at the beginning of the period	59,696	49,099
Net assets at the end of the period	45,591	46,552
Net debt at the end of the period	12,648	6,910
Capital employed at the end of the period	58,239	53,462
Average capital employed	58,968	51,281
Underlying Return on Capital Employed	26.4%	29.4%

1       Refer to Exceptional items for further information.

 

Underlying return on capital employed (ROCE) by segment

Half year ended 31 December 2023 US$M	Copper	Iron Ore	Coal	Group and unallocated items/ eliminations1	Total Group
Annualised profit after taxation excluding net finance costs and exceptional items	3,242	12,180	1,032	(870)	15,584
Average capital employed	31,029	14,406	6,743	6,790	58,968
Underlying Return on Capital Employed	10%	85%	15%	−	26.4%
Half year ended 31 December 2022 US$M	Copper	Iron Ore	Coal	Group and unallocated items/ eliminations1	Total Group
Annualised profit after taxation excluding net finance costs and exceptional items	2,776	9,352	3,250	(318)	15,060
Average capital employed	25,184	15,273	5,934	4,890	51,281
Underlying Return on Capital Employed	11%	61%	55%	−	29.4%

1       Group and unallocated items includes functions, other unallocated operations including Potash, Western Australia Nickel (which is made up of Nickel West and West Musgrave which was acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd), legacy assets and consolidation adjustments.

 

63

Underlying return on capital employed (ROCE) by asset

Half year ended 31 December 2023 US$M	Western Australia Iron Ore	Antamina	Escondida	BHP Mitsubishi Alliance	Pampa Norte	Copper South Australia1	Western Australia Nickel2	Potash3	New South Wales Energy Coal4	Other	Total Group
Annualised profit after taxation excluding net finance costs and exceptional items	12,184	426	2,484	822	258	372	(514)	(258)	300	(490)	15,584
Average capital employed	19,718	1,382	10,693	6,903	4,221	14,462	1,648	4,859	(338)	(4,580)	58,968
Underlying Return on Capital Employed	62%	31%	23%	12%	6%	3%	(31%)	−	−	−	26.4%
Half year ended 31 December 2022 US$M	Western Australia Iron Ore	Antamina	Escondida	BHP Mitsubishi Alliance	Pampa Norte	Copper South Australia1	Western Australia Nickel2	Potash3	New South Wales Energy Coal4	Other	Total Group
Annualised profit after taxation excluding net finance costs and exceptional items	9,362	346	2,464	1,626	86	98	(2)	(114)	1,706	(512)	15,060
Average capital employed	19,123	1,308	10,209	6,250	4,498	9,189	1,089	3,789	(546)	(3,628)	51,281
Underlying Return on Capital Employed	49%	26%	24%	26%	2%	1%	(0%)	−	−	−	29.4%

1       Includes Olympic Dam as well as Prominent Hill and Carrapateena which were acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd.

2       Western Australia Nickel includes Nickel West and West Musgrave (acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd).

3       Potash ROCE has not been shown because it is distorted as the asset is non-producing and in its development phase.

4       NSWEC ROCE has not been shown as it is distorted by negative capital employed due to the rehabilitation provision being the primary balance remaining on Balance Sheet following previous impairments.

64

Unit costs

Unit costs do not include the re-allocation to Assets in FY2024 of the costs associated with the employee entitlements and allowances review conducted in FY2023, which were reported in Group and Unallocated in that period.

The calculation of Escondida and Spence unit costs is set out in the table below.

	Escondida unit costs		Spence unit costs
US$M	H1 FY2024	H1 FY2023	H1 FY2024	H1 FY2023
Revenue	4,427	4,089	1,029	892
Underlying EBITDA	2,347	2,160	428	295
Gross costs	2,080	1,929	601	597
Less: by-product credits	248	190	49	40
Less: freight	89	110	22	23
Net costs	1,743	1,629	530	534
Sales (kt)	522.6	512.1	121.4	110.5
Sales (Mlb)	1,152.1	1,129.0	267.6	243.6
Cost per pound (US$)1	1.51	1.44	1.98	2.19

1       H1 FY24 based on average realised exchange rates of USD/CLP 874 (H1 FY23 USD/CLP 920).

 

The calculation of WAIO unit costs is set out in the table below.

	WAIO unit costs
US$M	H1 FY2024	H1 FY2023
Revenue	13,991	11,756
Underlying EBITDA	9,646	7,623
Gross costs	4,345	4,133
Less: freight	979	1,020
Less: re-allocation of costs associated with the employee entitlements and allowances review	33	−
Less: royalties	992	793
Net costs	2,341	2,320
Sales (kt, equity share)	126,786	126,753
Cost per tonne (US$)1	18.46	18.30

1       H1 FY24 based on an average realised exchange rate of AUD/USD 0.65 (H1 FY23 AUD/USD 0.67).

 

The calculation of BMA unit costs is set out in the table below.

	BMA unit costs
US$M	H1 FY2024	H1 FY2023
Revenue	2,882	3,598
Underlying EBITDA	810	1,426
Gross costs	2,072	2,172
Less: freight	14	19
Less: re-allocation of costs associated with the employee entitlements and allowances review	4	−
Less: royalties	631	799
Net costs	1,423	1,354
Sales (kt, equity share)	11,031	13,509
Cost per tonne (US$)1	129.00	100.23

1       H1 FY24 based on an average realised exchange rate of AUD/USD 0.65 (H1 FY23 AUD/USD 0.67).

65

Definition and calculation of Non-IFRS financial information

Non-IFRS financial information	Reasons why we believe the non-IFRS financial information are useful	Calculation methodology
Underlying attributable profit	Allows the comparability of underlying financial performance by excluding the impacts of exceptional items and is also the basis on which our dividend payout ratio policy is applied.	Profit after taxation attributable to BHP shareholders excluding any exceptional items attributable to BHP shareholders.
Underlying basic earnings per share	On a per share basis, allows the comparability of underlying financial performance by excluding the impacts of exceptional items.	Underlying attributable profit divided by the weighted basic average number of shares.
Underlying EBITDA	Used to help assess current operational profitability excluding the impacts of sunk costs (i.e. depreciation from initial investment). Each is a measure that management uses internally to assess the performance of the Group's segments and make decisions on the allocation of resources.	Earnings before net finance costs, depreciation, amortisation and impairments, taxation expense, Discontinued operations and exceptional items. Underlying EBITDA includes BHP's share of profit/(loss) from investments accounted for 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 costs and taxation expense (each of which are managed at the Group level) as well as Discontinued operations and any exceptional items.	Earnings before net finance costs, taxation expense, Discontinued operations and any exceptional items. Underlying EBIT includes BHP's share of 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 deployment of capital. Represents the total outflows of our operational investing expenditure.	Purchases of property, plant and equipment and exploration and evaluation expenditure.
Free cash flow	It is a key measure used as part of our Capital Allocation Framework. Reflects 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.	Net operating cash flows less net investing cash flows.
Net debt	Net debt shows the position of gross debt less index-linked freight contracts offset by cash immediately available to pay debt if required and any associated derivative financial instruments. Liability associated with index-linked freight contracts, which are required to be remeasured to the 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.	Interest bearing liabilities less liability associated with index-linked freight contracts less cash and cash equivalents less net cross currency and interest rate swaps less net cash management related instruments for the Group at the reporting date.
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 highlighting the net operating assets of the business separate from the financing and tax balances.   66 This measure helps provide an indicator of the underlying performance of our assets and enhances comparability between them.	Operating assets net of operating liabilities, including the carrying value of equity accounted investments and predominantly excludes cash balances, loans to associates, interest bearing liabilities, derivatives hedging our net debt, assets held for sale, liabilities directly associated with assets held for sale and tax balances.
Underlying return on capital employed (ROCE)	Indicator of the Group's capital efficiency and is provided on an underlying basis to allow comparability of underlying financial performance by excluding the impacts of exceptional items.	Profit after taxation excluding exceptional items and net finance costs (after taxation) divided by average capital employed. Profit after taxation excluding exceptional items and net finance costs (after taxation) is profit after taxation 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 financial performance by excluding the impacts of exceptional items.	Total taxation expense/(benefit) excluding exceptional items and exchange rate movements included in taxation expense/(benefit) divided by Profit before taxation excluding exceptional items.
Unit cost	Used to assess the controllable financial performance of the Group's assets for each unit of production. Unit costs are adjusted for site specific non-controllable factors to enhance comparability between the Group's assets.	Ratio of net costs of the assets to the equity share of sales tonnage. Net costs is defined as revenue less Underlying EBITDA and excludes freight, re-allocation of the costs associated with the employee entitlements and allowance review in FY2023, and 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. The re-allocation to Assets in FY2024 of the costs associated with the employee entitlements and allowances review in FY2023 are excluded in Asset unit costs as these costs were already recognised in Group and Unallocated in FY2023. Escondida and Spence 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 and BMA 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.

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. 67
Exploration and evaluation and business development	Exploration and evaluation 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.
New and acquired operations	Underlying EBITDA for operations that were acquired in the current period minus Underlying EBITDA for operations that were acquired 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.

 

 

 

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