BHP's profit falls on one-off charges, dividend trimmed as miner pursues growth

By Rhiannon Hoyle

BHP Group reported a 39% fall in annual profit because of one-off charges and dialed back its payout to investors as the company spends more to expand in commodities that it bets will be in demand for the energy transition and a rising world population.

Australia-based BHP (AU:BHP), the world's most valuable miner, reported a net profit of $7.90 billion for the 12 months through June, down from $12.92 billion the year prior. Its bottom line was weighed by a $2.7 billion writedown of the value of the Australian nickel operations it is suspending due to a market glut, and an increase in the money it has set aside for costs related to a dam disaster in Brazil nearly nine years ago.

Annual earnings were slightly higher year over year, as higher copper and iron-ore prices offset lower prices for coal and nickel. BHP reported an underlying profit of $13.66 billion for the year. That compared to a $13.42 billion profit a year ago and analyst expectations of $13.52 billion according to a consensus compiled by Visible Alpha from 15 forecasts.

Directors declared a final dividend of 74 U.S. cents a share, taking the company's full-year payout to $1.46 a share. Its final dividend represented 53% of underlying profit, down from 59% a year ago. BHP said it is the fourth-largest full-year ordinary dividend it has declared.

Analysts had widely forecast the company to rein in its spending on dividends as it saves more cash for projects and deals.

BHP wants to be bigger in copper, an industrial metal that's arguably the most critical for the energy transition, and plans to start producing fertilizer ingredient potash, which it says will be needed for more efficient and sustainable farming.

Today, the company makes most of its profits from steelmaking commodity iron ore. It is also the world's biggest exporter of steelmaking coal.

BHP is already one of the world's top copper miners. It sought to cement a No. 1 position in the industry with a bid for London-based Anglo American, but was rebuffed.

BHP's $50 billion takeover plan for Anglo American, which it abandoned in May after failing to convince its rival to further engage in talks, would have added some of the world's most prized copper mines to its business. Copper represents about 30% of the output of Anglo American.

BHP says the world will need twice as much copper over the next 30 years as it did over the past three decades.

Copper, an efficient conductor of electricity, is used in electric cars at much higher quantities than in gasoline-powered ones. The same is true for renewable energy versus conventional coal-fired plants, while a huge expansion of copper-intensive electricity grids is also expected in the shift to clean energy.

In July, BHP struck a deal with Lundin Mining to jointly acquire Canadian exploration company Filo for roughly 4.10 billion Canadian dollars (US$3.0 billion). Filo's Filo del Sol project, which straddles the Argentina-Chile border, is considered to be one of the most significant copper discoveries globally in recent decades, the mining giant said.

A year earlier, it bought Australian copper-and-gold miner Oz Minerals for roughly $6 billion - its biggest acquisition since 2011.

As well as pursuing deals, BHP has been advancing its own projects in both copper and potash.

The company reported $9.27 billion in capital and exploration expenditure for fiscal 2024, up 31% year over year. "We increased capital investment in copper and potash by $1.5 billion and we expect that circa 65% of our medium-term capital will be allocated to these future-facing commodities," BHP said.

Construction of its Jansen potash project in Canada is ahead of its original schedule and first production just over two years away, the miner said. The company is spending $5.7 billion on the first stage of the development and has already begun work on a $4.9-billion second stage.

BHP estimates the Jansen mine will represent roughly 10% of the market once it is producing at capacity.

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08-26-24 1927ET

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