Page 16 - Annual Report 2020

1.4.5 Managing performance

Corporate planning Capital discipline
Our corporate planning process is designed to deliver on our We use our Capital Allocation Framework (CAF) to assess the most
strategy. It guides the development of plans, targets and budgets effective and efficient way to deploy capital. This helps us:
to help us decide where to deploy our capital and resources. • maintain our plant and equipment to support safe and efficient
We evaluate the range of investment opportunities and aim operations over the long term
to optimise the portfolio based on our assessment of risk, returns • keep our balance sheet strong to give us stability and flexibility
and future optionality. We then develop a long-term capital plan through the business cycle
and guidance for the Group. • reward our shareholders by paying out at least 50 per cent
Assessment and monitoring of our Underlying attributable profit in dividends
We review our portfolio against a constantly changing external We then look at what would be the most valuable risk-adjusted
environment, to capture and manage emerging opportunities use for any excess capital and decide whether to:
and risks. Long-term scenario planning is used to identify the • further reduce our debt
strategic capabilities we need to be successful and to evaluate • return more cash to shareholders through additional dividends
our preferred commodities and assets. We seek to identify potential or share buy-backs
new business opportunities and test the robustness of our portfolio • invest in growth, either through projects within our asset portfolio
over a range of possible outcomes. We use signals tracking to or through exploration or acquisitions, provided the investment
monitor key trends and events that inform our strategic choices will create more value, based on our assessment of its return,
and identify actions to manage emerging risks. risk and optionality, than a share buy-back

Our Capital Allocation Framework promotes discipline in all capital decisions

Operating productivity Capital productivity
Net operating cash low

Maintenance capital (1) Strong balance sheet Minimum 50% payout ratio dividend

50

Excess cash low

Debt reduction Additional dividends Buy-backs Organic development Acquisitions/divestments
Maximise value and returns

(1) Maintenance capital includes spend on asset integrity, risk reduction, compliance, sustaining capacity/cost, transformation initiatives and climate change.

14 BHP Annual Report 2020