BHP hit by $1 billion on inflation, but optimistic on growth in China and India
The world’s largest mining company expects ‘increased activity’ in China to boost global commodities demand after soaring inflation and falling commodity prices hit its profits in the second half of last year. doing.
BHPAustralian miners saw revenues fall 16% to $25.7 billion and pre-tax profits fell 30% to $10.2 billion in the six months ended December 31, compared to the same period last year. I said it was.
The company cut its dividend to 90 cents per share from a record $1.50 during the same period when commodity prices brought record profits. Nevertheless, the $4.6 billion dividend was his fifth-highest half-year dividend in its 138-year history. His BHP shares fell 1% on Tuesday.
Inflation and rising labor costs are starting to take its toll globally mining Companies should consider consolidating and selling underperforming assets to improve returns.
“Commodity prices are falling. Ultimately, this is a cyclical industry,” Chief Executive Mike Henry told the Financial Times. “But the underlying performance of the business is very strong,” he added, pointing to increased copper production as an example.
Demand from China and India has boosted confidence in BHP’s prospects. The company maintained its full-year financial forecast.
Describing the market as a “stabilizing counterbalance” to the slowdown in the US and Europe, Henry said there was growing confidence that Chinese demand for commodities would improve. “This year will be the year China’s steel production exceeds 1 billion tonnes, probably more than last year,” he said.
inflation It has hit the mining sector hard, especially in countries such as Australia, which, coupled with labor shortages, are driving up costs. Inflation added about $1 billion to costs, according to BHP, due to factors such as higher diesel prices, which the company said were up 70%, and other materials, including explosives. The company said there are signs that these impacts will ease in 2023.
Iron ore prices, which typically account for more than half of BHP’s revenue, were about 25% lower year-on-year in the second half of 2022, but have risen sharply since November as activity in China rebounded following the easing of Covid. -19 limit in the country.
Henry also welcomed the recent news that China has eased an unofficial ban on Australian coal imports. “We are very encouraged by the improved trade relationship,” he said, adding that BHP is “ready to engage with our Chinese customers.”
RBC Capital Markets analyst Tyler Broda said in a note that the results were “surprisingly bad” as inflation and rising costs proved to be key factors for miners during this period.
Australia’s largest company, BHP, has put its two coal mines, Blackwater and Daunia, on the market in response to rising royalty rates in Queensland, one of the world’s largest coal mining regions. About 2,000 people work at the mine, which is jointly owned by Japan’s Mitsubishi.
Henry said a move to raise royalties triggered the decision to sell. “It’s very clear,” he said. “There are options to invest elsewhere.”
He warned the Australian government that aggressive intervention and tax increases could undermine the country’s ambitions to capitalize on investment in critical minerals.
“The world is really on Australia’s feet, but we need the right policy settings,” he said.
https://www.ft.com/content/4e086aac-82ce-4052-bf7d-cb947ca3cfda BHP hit by $1 billion on inflation, but optimistic on growth in China and India