BHP cuts dividend as profit slashed by nickel and Samarco impairments
\nBut it does not indicate whether it will close its Nickel West business in WA
\nStronger earnings in iron ore and copper offset hits in nickel and coal<\/p>\n
US$5.6 billion of after tax impairments on BHP\u2019s (ASX:BHP)<\/a> nickel business and its Samarco liabilities has obliterated the world\u2019s biggest miner\u2019s profit, down 86% in the first half to US$927 million.<\/p>\n It came despite steady underlying profit of US$6.6b and a 6% rise in revenue to US$27.232b, powered by stronger iron ore and copper prices and the integration of OZ Minerals\u2019 Carrapateena and Prominent Hill mines in South Australia.<\/p>\n BHP cut its dividend from 90c a share in the 2023 half-year to 72c, the US$3.6b ($5.5b) payout representing 56% of underlying profit.<\/p>\n That was also impacted by a 57% lift in Capex to US$4.7b in line with spending at the Jansen potash mine and South Australian copper mines.<\/p>\n Still in a game of cat and mouse with the Federal Government over proposed IR law changes specifically targeted at the contractor arrangements used at its Queensland coal mines, CEO Mike Henry said the mining industry was still facing cost and labour challenges in Australia at the same time as demand from China and India counteracted waning commodity demand across the OECD.<\/p>\n \u201cThe period also had its challenges, with adjustments relating to Nickel West, West Musgrave and Samarco offsetting an otherwise solid operational performance and overall healthy commodity prices,\u201d he said.<\/p>\n \u201cAt our Western Australia Iron Ore operations, we remain the lowest cost major producer globally and in copper we set new production records at our operations in South Australia and Chile. In South Australia, our consolidated copper province has performed strongly and we are pursuing future growth options. In Canada, we\u2019ve sanctioned Jansen Stage 2, which will almost double our planned potash production capacity.<\/p>\n \u201cWe\u2019ve seen volatility in global commodity prices and demand in the developed world has been softer than expected. That said, China demand is healthy despite weakness in housing and India remains a bright spot. <\/p>\n \u201cIn Australia, the mining industry is facing near-term headwinds in developing resources and it\u2019s essential that the right industrial relations and fiscal settings are in place to support the sector\u2019s ability to compete and win in global markets.<\/p>\n \u201cLong term, the mega-trends playing out in the world around us continue to underline our confidence in future demand for steel, non-ferrous metals and fertilisers.\u201d<\/p>\n BHP said economy-wide inflation was coming under control with input costs falling, but that wage inflation was \u201cespecially problematic\u201d, citing what it claimed was \u201chistorically poor productivity performance across the resources industry\u201d.<\/p>\n Henry also said an investigation was under way into the death of sub-contractor Luke O\u2019Brien at the Saraji mine, part of the BMA coal business.<\/p>\n \u00a0<\/p>\n BHP\u2019s flagship iron ore division delivered a stellar set of numbers in H1 FY24, with underlying EBITDA up 27% to US$9.7b, 68% of its overall earnings.<\/p>\n That came despite a 2% fall in production to 129Mt (on a BHP owned basis), with average realised prices surging 21% YoY to US$103.70\/wmt.<\/p>\n BHP sees steel production rising slightly in the coming two years as India and Southeast Asia counteract a stagnant growth rate in China, which is expected to remain between 1-1.1Bt of output in crude steel through the first half of the 2020s.<\/p>\n \u201cOver the next two years we expect a small further improvement in global steel production with growth led by India, Southeast Asia and to a lesser extent China,\u201d BHP said.<\/p>\n \u201cWe expect that reduced drag from developed regions will also help.<\/p>\n In China, steel production was resilient at high levels in CY23, making it the 5th consecutive year the country produced more than 1 Bt of steel. <\/p>\n \u201cWeakness in the real estate sector was more than offset by healthy growth in infrastructure, machinery and autos, as well as net steel exports reaching a seven-year high. <\/p>\n \u201cIn CY24 we expect modest growth in steel production in line with our long-held view that China\u2019s steel production would sit at a plateau in the 1.0 to 1.1 Btpa range in the first half of the 2020s.\u201d<\/p>\n Studies on an expansion of BHP\u2019s WA Iron Ore division to a capacity of 330Mtpa are expected to be delivered in 2025, with the company planning to creep production incrementally to 305Mtpa before then.<\/p>\n BHP approved a US$943m investment (on a 100% basis) in the Western Ridge Crusher project, to deliver 25Mtpa to replace depleting orebodies around Newman from 2028.<\/p>\n Unit costs rose slightly at WAIO to US$18.46\/t, within its target range of US$17.40-18.90\/t.<\/p>\n Underlying EBITDA in BHP\u2019s copper business rose 23% to US$3.5b, with production up 7% to 894,000t and prices 5% higher at US$3.66\/lb.<\/p>\n Unit costs at the BMA coal operations surged 29% to US$129\/t, ending underlying EBITDA 43% down to US$0.8b despite prices rising 1% YoY to US$266.43\/t, with production also down 17%.<\/p>\n Earnings from BHP\u2019s Mt Arthur thermal coal mine dropped 84% to US$200m despite production rising 36% to 7.5Mt, with prices falling 65%.<\/p>\n Meanwhile, BHP says 50% of global nickel production is lossmaking as it booked a flagged $200m loss on its Nickel West business, saying its base case was for the nickel market to remain in a significant surplus until the late 2020s.<\/p>\n \u201cThe conversion of Indonesian-origin nickel products into cathode, which the London Metal Exchange (LME) chose to allow onto its platforms, saw the significant non-Class-I surplus spill over into visible Class-I inventory, and then LME pricing. LME prices had fallen deep into the cost curve by the end of CY23,\u201d BHP said.<\/p>\n \u201cWhilst voluntary curtailments have been publicly announced by various operators, we estimate that we are in a multi\u2013year run of surpluses that are likely to average out well over 5% of annual demand.\u201d<\/p>\n But there were no additional indications on whether BHP would close its WA nickel business and cancel its West Musgrave mine development, flagged last week, after Indonesia ramped up output 3.6 times over since 2019.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post BHP Results: No clarity on nickel future as impairments obliterate 86 PER CENT of the Big Australian\u2019s profit<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Iron ore and copper offset nickel woes<\/h2>\n
BHP (ASX:BHP) share prices today<\/h2>\n\n
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