Upside tipped amid BHP bumper profit
BHP chief executive Mike Henry hopes China’s return from Covid-19 lockdowns will boost demand for resources over the next year.
Speaking after delivering a massive $US30.9bn ($43.95bn) annual profit on Tuesday, Mr Henry said the mining giant expected China’s return to economic normality would provide a “tailwind” for the resources sector, against the backdrop of an expected slowdown in other developed economies.
Slowing demand in China has cut the value of a suite of major commodities over the past few months, with industrial metals such as copper and aluminium well down on the heights of early 2022, and iron ore prices briefly falling below $US100 a tonne in July.
But BHP rode strong pricing across its suite of commodities to deliver a bumper return to shareholders, beating analyst expectations by declaring a $US1.75 final dividend.
The record $US30.9bn net profit for the year ending June 30, was up 173 per cent from last year. The result was boosted by a $US7.3bn gain delivered through the merger of its oil and gas assets with Woodside, and the $US9.3bn turnabout in the results from its Queensland coal operations.
Excluding the gains from the merger with Woodside, and other discontinued operations, BHP’s net profit was $US20.3bn, up 76 per cent for the year.
BHP booked $US34.43bn in underlying earnings before interest and tax (EBIT) for the year, 15 per cent above last year’s restated mark of $US29.85bn. Analysts consensus estimates tipped BHP’s underlying EBIT at $US34.56bn for the past financial year.
BHP’s final dividend beat analyst expectations of a total payout for the year of $US3.12 a share. BHP paid a record $US1.50 a share half-year dividend in March.
Iron ore profits fell along with pricing, with underlying earnings before interest, tax, depreciation and amortisation of $US21.71bn, 17.7 per cent below last year’s restated mark of $US26.28bn. BHP said on Tuesday it is considering its options to eventually lift Pilbara iron ore exports to as much as 330 million tonnes, with a mediumterm target of 300Mt. BHP shipped 282.8Mt last financial year, and has said it will export 278 to 290Mt in the current year.
But Mr Henry warned analysts Chinese demand for iron ore may be nearing its peak, despite an expected recovery in demand as the country eases Covid-19 restrictions this year.
Iron ore prices have fallen this year partly due to Covid-19 restrictions in China, but also as its steel mills curtail production to meet demands from Beijing for “zero growth” in annual steel production.
“We’ve ... been saying for some time that as we progress towards the middle of this decade, that we’re moving into a plateauing phase for steel production and iron ore demand,” Mr Henry said.
“Now, exactly when you call that – and whether they’ve already plateaued or there’s a little bit further to run – who knows?”
The result came as Mr Henry reshuffled his executive deck, moving Minerals Australia boss Edgar Basto to BHP chief operating officer and former petroleum boss Geraldine Slattery to lead Australian operations.