BHP’s 2025 Playbook: Turning Profit Dips into Strategic Wins

TradingKey - On August 18, 2025, BHP Group announced its full-year results for the 2025 fiscal year. Despite an 8% year-on-year revenue decline to $51.3 billion and a 26% significant drop in underlying attributable profit, which reflects core business performance, to $10.2 billion, its share price rose against the trend following the earnings release. This seemingly contradictory market reaction is driven by investor recognition of BHP’s operational efficiency, capital allocation, and long-term strategic transformation. Below is a detailed analysis of the earnings report:

 Earnings Highlight

· Revenue: The company’s revenue for FY2025 was $51.3 billion, down 8% from $55.7 billion in FY2024.

· Earnings：The underlying attributable profit, which reflects the company’s core operational profitability, plummeted 26% from $13.7 billion in the previous fiscal year to $10.2 billion, primarily driven by weak prices for key commodities (especially iron ore and coal).

Core Product Performance

Iron Ore Business

As BHP’s largest and cornerstone profit driver, the iron ore business in FY2025 addressed market challenges through a “volume-over-price” strategy. Despite global iron ore oversupply and a 19% year-on-year price decline, the company achieved record production growth through operational excellence, with Western Australia Iron Ore (WAIO) maintaining the world’s lowest extraction costs. However, the price drop led to a 24% decline in iron ore underlying EBITDA to $14.4 billion. CEO Mike Henry stated that China’s infrastructure construction, steel exports, and renewable energy-related production provided resilience for exports. In comparison, Vale’s sales volume fell by 3.1%, while Rio Tinto’s shipments remained flat. BHP, leveraging operational efficiency and cost advantages, expanded its market share, consolidating its position as the global lowest-cost producer.

Copper Business

BHP’s copper business performed outstandingly in FY2025, with an 8% production increase setting a historical record. Influenced by potential U.S. copper tariffs, LME copper prices rose by 7%, driving a 44% surge in copper underlying EBITDA to $12.3 billion, accounting for 45% of the group’s total EBITDA. This reflects not only short-term market tailwinds but also the results of long-term strategic transformation. The company projects an additional 10 million tonnes of global copper demand over the next decade. Through the establishment of the Vicuña joint venture with Lundin Mining to develop large-scale copper mines and the acquisition of a 45% stake in the Resolution copper project, BHP has secured growth potential. The copper business has evolved from a significant profit source to a core growth engine for addressing energy transition and electrification.

Coal Business

BHP’s coal business in FY2025 saw underlying EBITDA plummet 75% to $0.6 billion due to falling coal prices and asset divestitures. The company adopted a “phased closure” strategy, selling the Daunia and Blackwater mines while retaining the Mt Arthur mine until its closure in 2030, with $0.7 billion invested to support employee transitions and site rehabilitation. This move aligns with a “just transition,” outperforming the sale of high-carbon assets, earning support from investors like Fidelity, demonstrating ESG leadership, and attracting long-term investment.

Potash and Other Businesses

BHP’s potash business performed strongly in FY2025, with underlying EBITDA rising 45% to $1.6 billion, driven by demand from India and Southeast Asia. The Jansen potash project, a core future growth driver, is expected to supply 10% of global potash upon full production. However, it faces challenges: Phase 1 costs have increased from $5.7 billion to $7.0-$7.4 billion, with production delayed from late 2026 to mid-2027, reflecting constraints from global inflation, supply chain pressures, and rising labor costs impacting large-scale mining projects.

Future Outlook

BHP’s FY2025 attributable profit grew 14% to $9.0 billion, but the decline in underlying attributable profit reflects the cyclical downturn impacting core business profitability. The profit divergence stems from adjustments to underlying profit excluding non-recurring items (such as Samarco incident expenses). The company’s underlying EBITDA fell 10% to $26.0 billion, but the profit margin remained stable at 53%. Net operating cash flow decreased 10% to $18.7 billion, free cash flow dropped sharply by 55% to $5.3 billion, and net debt rose to $12.9 billion, reflecting pressures from reduced revenue and increased capital expenditure. Dividends were cut to $1.10 per share (from $1.46 last year), reflecting strategic financial adjustments.

Overall, BHP’s FY2025 earnings report highlights its competitive advantage in the commodities market. The iron ore business, with its cost advantage and record production, outperformed Vale and Rio Tinto, consolidating its market position. The copper business, driven by energy transition demand and strategic investments, has secured a leading position, with a diversified asset portfolio enhancing risk resilience.

CEO Mike Henry believes that short-term trade protectionism may affect prices, but long-term seaborne iron ore trade will diversify due to emerging market demand. Through investments in copper, potash, and global asset allocation, the company is enhancing business resilience. BHP projects stable WAIO production of 280-300 million tonnes in FY2026, with capital expenditure increasing to $11.0 billion (from $9.8 billion in FY2025), underscoring BHP’s strategic priority of “investing for growth” over short-term returns. These funds will primarily support the development of future assets like copper and potash, ensuring the company’s advantageous position in meeting long-term demand driven by global energy transition and population growth.

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