BHP's big copper bets support returns for investors, says Joe Wright

Lower iron ore and coal prices led to mining giant BHP (ASX: BHP) slicing its dividends in FY 2026 as its net operating cash flow fell 10% for the year. 

The Big Australian is lifting its capital expenditure plans to bet on copper as a key metal in the transition to carbon free energy, with management forecasting rising demand and limited supply for the metal over the next 10 years. 

For FY 2025, the miner posted free cashflow down 55% to $US5.3 billion in a result it attributed to a $US4.5 billion capital expenditure on copper, with another $US3.2 billion invested in steelmaking materials. 

Chief executive Mike Henry said the group delivered a record operating performance, despite geopolitical uncertainty and cost inflation. 

“Growth is expected to ease to 3 per cent or slightly below in the near-term amid shifting trade policies, yet demand for commodities remains strong, particularly in China and India," Henry said. “We remain confident in the long-term fundamentals of steelmaking materials, copper and fertilisers, which are critical to global growth, urbanisation and the energy transition.”

A final dividend of US60c per share, equivalent to a 60 per cent payout ratio, will be paid on September 25. Total dividends in FY 2025 equalled $US1.10, compared to a $US1.46 payout in FY 2024.

Livewire spoke to Joe Wright, a deputy portfolio manager at Airlie Funds Management about his views on the result and outlook for the miner.

• Revenue down 8% to $US51.3b
• Underlying EBITDA down 10% to $US25.98b versus FactSet consensus $US25.93b 
• Underlying EBITDA margin 53%, versus 54% in FY 2024
• Free cash flow down 55% to $US5.34b, versus FactSet consensus $US5.78b
• Capex up 6% to $US9.8 billion, FY 2026 guided to $US11 billion capex
• Net debt grew by $US3.8 billion to $US12.9 billion
• Total dividends down 21% to $US1.10 per share, versus $US1.46 per share in FY 2026
• FY 2026 production guidance  iron ore 258-269Mt
• FY 2026 production guidance  copper 1,800-2,000k

For more information and market data on BHP please visit Market Index. 

What was the key takeaway from BHP's result in one sentence?

Very resilient business from an operational perspective and it's executing incredibly well. 

Were there any surprises in this result that you think investors need to be aware of?

Yes, the dividend was better than expected, which reflects strength of balance sheet and BHP lowered its medium-term capex guidance which we think is prudent. 

Other than that costs are best in class, and the business is underpinned by a really high quality group of assets. That was evident in the numbers. 

Would you buy, hold, or sell BHP off the back of this result?

RATING: HOLD

It's a hold for us on valuation. We think it stands out versus other resources companies, but at the same time it's not a screaming buy, given where the iron ore price is at today. 

Are there any risks investors need to be aware of?

I think with all commodity stocks you've got to be wary of the price cycle. For BHP most of its cashflow comes from iron ore and you have to have a view on how the market will digest the tonnes [of iron ore] that come out of Rio's Simandou asset [in Africa].

And you also need to have a view on the medium-term outlook for Chinese demand for iron ore. 

Copper we're structurally positive on demand and structurally negative on the market's ability to supply copper consistently. 

And you would've seen in the result that BHP's shifting its portfolio towards copper, which is positive. 

From 1 to 5, where 1 is cheap and 5 is expensive, how much value are you seeing on the ASX today?

RATING: 4

There's a lot of good companies that look very expensive to us, but we're still finding value whether that's in unloved cyclicals or elsewhere. 

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