Analyst Note| Mathew Hodge, CFA |
No-moat BHP Group’s third-quarter fiscal 2021 update was in line with our expectations. Iron ore production slowed relative to the previous quarters with the normal wet season. Nonetheless, BHP is on track to meet guidance for record output amidst booming prices fuelled by disrupted supply and China’s significant fixed asset investment. We maintain our fiscal 2021 forecast for BHP to ship 254 million tonnes of iron ore, 1% up on last year. Stronger performance at Escondida, with costs and volumes tracking better than expected, offset some weakness elsewhere. The change drives a 1% increase in our fiscal 2021 adjusted earnings forecast to USD 3.60 per share but is not sufficient to change our AUD 37 per share fair value estimate. BHP lowered its metallurgical coal guidance, though we had already anticipated lower volumes.