Weak commodity prices have weighed on the profit of one of the world’s biggest miners, prompting BHP to slash its dividend and consider shuttering some of its coal mines.
While BHP posted a 14 per cent lift in full-year net profit to $US9 billion ($A13.9 billion), underlying net profit fell more than a quarter to $US10.6 billion, shrinking the final shareholder to 60 US cents ($A0.92) per share, down from 74 US cents the year before.
Chief executive Mike Henry said the result reflected the resilience of the Melbourne-headquartered group, which is a leading producer of iron ore, copper and coal.
“We delivered on our full-year guidance across our suite of businesses and achieved record iron ore and copper production,” he said on Tuesday.
“Our operational results have underpinned another year of sector-leading margins and strong cash flows.”
Despite record iron ore and copper production, revenue slipped by $US4.4 billion because of coal and iron ore price weakness, but this was partially offset by stronger copper prices.
Weaker revenues translated to softer earnings before interest, tax, depreciation and amortisation.
Those earnings were down 10 per cent to $US29 billion, but underlying earnings from copper swelled to 45 per cent of group earnings to a record $US12.3 billion.
Apart from sluggish commodity prices, BHP’s financial report took aim at Queensland’s royalty regime – introduced in 2022 by the state Labor government – and flagged some of the state’s five coal mines operated under the BHP Mitsubishi Alliance (BMA) could be mothballed.
“With no change to the ongoing negative impacts of extreme royalty rates, we will maintain our existing position of not investing in any further growth at BMA,” the report stated.
“If low coal prices persist, options to pause lower margin areas of our operational footprint will be considered.”
The alliance, which owns and operates the Hay Point Coal Terminal near Mackay, employs more than 10,000 full-time equivalent employees and contractors, according to Mitsubishi.
Iron ore prices have been under pressure from weaker ore demand and steel oversupply and the outlook for global economic growth was mixed, BHP’s boss said.
“While economies around the world continue to navigate policy uncertainty, China and India again demonstrated resilient economic and commodity demand growth in the first half of this year,” Mr Henry said.
“Our commodities have large markets, resilient demand and steep cost curves.
“The world is going to need a lot more steelmaking materials, a lot more copper and a lot more potash.”
As for the shrunken dividend, the CEO noted it was “well above” BHP’s minimum payout ratio and represented a full-year payout of $US5.6 billion.
“This is backed by a strong balance sheet, lower than expected capital spend and confidence in the long-term trajectory of our business,” Mr Henry said.
“This year, we contributed almost $US47 billion globally through wages, taxes, royalties, community contributions and payments to suppliers and shareholders.”
BHP held its capital guidance for exploration expenditure unchanged at $US11 billion.
It also invested $US2.1 billion for a 50 per cent interest in the Vicuna joint venture, which includes one of the largest copper deposit discoveries of the past 30 years.
Investors took the predominantly in-line report as a positive for BHP, pushing its shares 1.5 per cent higher to $42.07 in early afternoon trading.
BHP’s strong set of results highlighted the consistency of the business, RBC Capital Markets analyst Kaan Peker said.
“The company is balancing its shift toward growth (namely in copper), and is continuing to pay compelling dividends.”
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