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BHP has reported its lowest full-year profit in five years owing to lower iron ore and coal prices and pointed to a “mixed” outlook for the global economy.
The Australian mining company on Tuesday said underlying attributable profit fell 26 per cent to $10.2bn, the lowest since the 2020 financial year at the start of the Covid-19 pandemic.
Revenue dropped 8 per cent to $51.3bn in the year to June owing to the impact of lower iron ore prices and weakness in steelmaking coal markets.
BHP paid its lowest dividend in eight years, although the final dividend of 60 cents a share, down from 74 cents a year earlier, was higher than had been anticipated by analysts. It reflected lower debt and the disposal of non-core assets in Brazil, according to the company.
Its production of copper, which BHP has targeted as a growth metal, helped offset weakness in other commodities, accounting for 45 per cent of the company’s underlying earnings. BHP’s copper output has increased 28 per cent over the past three years.
Mike Henry, chief executive, said BHP set new production records for iron ore and copper during the year. He said the demand for metals and minerals from key Asian export markets would help offset a less stable overall trading environment.
“The global economic outlook is mixed,” he said. “Growth is expected to ease to 3 per cent or slightly below in the near term amid shifting trade policies, yet demand for commodities remains strong, particularly in China and India.”
In a separate Financial Times interview, Henry said there was still robust commodities demand in China, the biggest customer for iron ore. “Overall growth in China remains relatively healthy,” he said. He added that exports of steel into south-east Asia were also robust.
“The Big Australian,” as BHP is colloquially known, raised its debt ceiling from $15bn to $20bn, but Henry said the move was not a signal regarding its dealmaking plans. “I can categorically say it’s not code for that at all.”
BHP pulled out of an attempt to acquire London-listed rival Anglo American last year after being rebuffed.
Henry said any deal had to offer BHP access to a high-quality asset with ample synergies to unlock value, but that valuations remained “elevated”.
BHP said it could pare back its steelmaking coal operations in Queensland after being hit with “extreme” royalty rates that would eat into future profits if the coal price rebounded.
“If low coal prices persist, options to pause lower margin areas of our operational footprint will be considered,” the company said.
Australian oil company Woodside, which absorbed BHP’s oil and gas assets in 2022, also felt the impact of lower commodity prices.
On Tuesday, it reported a 24 per cent decline in underlying net profit to $1.3bn in the six months to June, citing weaker oil prices and higher depreciation costs. It lowered its interim dividend to 53 cents a share from 69 cents a year earlier.
Paul McTaggart, an analyst with Citi, said Woodside’s operating performance was strong, but net debt, at $8.6bn, was much higher than market expectations of $7.6bn.
Woodside shares fell more than 2 per cent, while those of BHP rose 1.6 per cent on Tuesday.
BHP also reduced its provision for the Mariana dam disaster in Brazil — which has led to litigation in Brazil and the UK — to $5.8bn, from $6.5bn the previous year. The company said this reflected funds spent over the past year, including $1.8bn on remediation, settlement and compensation.
Chief financial officer Vandita Pant said in an earnings call that the provision related entirely to the Brazilian case, which has settled. A ruling to determine BHP’s liability in the London High Court case is imminent.
This article has been amended since first publication to reflect that lower coal, not copper, prices drove BHP’s profit decline