BHP blamed inflation and weak commodity prices for a drop in profits during the second half of last year but said that “strengthening activity” in China provided room for optimism in the year ahead.
The Australian miner’s revenue fell 16 per cent to $25.7bn, and attributable profit was down 32 per cent, during the six months to December 31 compared to the same period a year before.
“Commodity prices are down — this is a cyclical industry after all,” chief executive Mike Henry told the Financial Times. “But the underlying performance of the business is really strong,” he added, pointing to increased copper production as an example.
Inflation added about $1bn to its costs through factors such as higher diesel prices.
At the same time, prices for iron ore, which typically accounts for more than half of BHP’s earnings, were about 25 per cent lower during the period compared to a year before.
Inflation and labour shortages pushed up the price of mining Western Australian iron ore to $18.30 a tonne, up from $16.15 in 2021.
However, the company struck a note of optimism in its outlook for China, pointing to strengthening activity there now that pandemic restrictions had ended.
Demand from China and India will be “stabilising counterweights” to the slowdown in the US and Europe, Henry said.
“This will be another year of a billion tonnes plus, for Chinese steel production, possibly an increase on last year,” he added.
Iron ore prices have risen nearly 30 per cent since November as Chinese mills have started to restock and as activity picks up.
Henry also welcomed the recent news that China had relaxed an unofficial ban on imports of Australian coal. “We are very encouraged by the improvement in trade relations,” he said, adding that BHP was “ready to engage with Chinese customers”.
BHP announced a dividend of US$0.90 per share, or $4.6bn, the fifth-highest half-yearly dividend in its 138-year history.