BHP Group Ltd (ASX: ASX:BHP) shares have hit a 52-week low of $41.57 this morning, reflecting a 0.4% decline compared to a 0.8% drop in the S&P/ASX 200 Index (ASX: XJO). The ASX mining giant is contending with weakened market sentiment around some of its key commodities, including nickel.
The recent operational update from BHP did not significantly uplift market sentiment. The company has experienced notable challenges, including a temporary halt in nickel production and impairment charges totaling US$3.8 billion. BHP has announced that it will review the decision to halt nickel production by February 2027.
In the latest quarterly report, ASX: BHP noted a 6% increase in both copper and iron ore production. Despite these increases, the broader market reaction has been cautious.
Production Expectations for FY25
For the fiscal year 2025 (FY25), BHP has provided production guidance that reflects a range of potential outcomes. The company expects to produce between 1,845kt and 2,045kt of copper, indicating a possible 1% decline or up to a 10% increase. Iron ore production is anticipated to be between 255mt and 265.5mt, which could reflect either a 2% decline or a 2% increase.
Metallurgical coal production is projected to decrease between 15% and 25%, while energy coal production is expected to fall between 2% and 15%.
Financial Projections
Given these production expectations, estimates for BHP’s revenue and profit in FY25 have been formulated. Revenue is projected to be around US$55.6 billion, a slight decrease compared to the anticipated US$55.8 billion in FY24. Earnings before interest and tax (EBIT) are expected to be approximately US$23.5 billion, with net profit after tax (NPAT) estimated at US$12.7 billion. This represents a minor reduction from the forecasted profit of US$12.9 billion for FY24.
BHP is anticipated to adopt a conservative approach to its dividend payout ratio, given the expected increase in capital expenditure for FY25 and FY26.
Investment Considerations
While the current share price of BHP reflects a significant drop, it presents a potential opportunity for investors. However, the stock's future performance will largely depend on the broader market conditions and commodity prices. With the iron ore price remaining robust above US$100 per tonne, BHP's share price might be poised for gradual recovery.
Investors might consider waiting for further declines or more pronounced market conditions before making investment decisions. The current lower share price could present a cyclical opportunity, particularly if further market uncertainties impact commodity prices.