BHP 1st Half Net Profit Falls by 32% on Weaker Commodity Prices

By Rhiannon Hoyle

BHP Group Ltd. reported a 32% fall in first-half net profit and pared its interim dividend from a record-high level, mostly because of weaker prices for some of the commodities it sells including steel ingredient iron ore and industrial metal copper.

The world's largest miner by market value said it made a net profit of $6.46 billion in the six months through December. It made a profit of $9.44 billion in the same period a year earlier, when strong commodity prices boosted its bottom line.

BHP said its underlying attributable profit--a closely watched measure that strips out exceptional items to illustrate the underlying performance of the business--totaled $6.60 billion, down 32% on the year-prior period. The market expected an underlying profit of roughly $6.82 billion, according to 15 analyst forecasts compiled by Vuma Financial.

"Significant wet weather in our coal assets impacted production and unit costs, as did challenges in securing sufficient labor," Chief Executive Mike Henry said.

Directors declared an interim dividend of $0.90 a share, compared to a record midyear payout of $1.50 a share a year ago.

The earnings decline mainly reflected a downswing in commodity prices during the six-month period, he said.

Prices for iron ore, BHP's most lucrative commodity, tumbled to a three-year low late last year amid concerns about the state of China's property market and the outlook for the global economy. The average price the miner got for its iron ore was 25% below the year-prior period.

For its copper, another core business, the miner was paid 19% less than the same period in 2021.

In recent months, prices for those commodities have been rising once more, as China has sought to stabilize its real-estate market and emerge from almost three years of strict Covid-19 controls.

"We are positive about the demand outlook in the second half of FY23 and into FY24, with strengthening activity in China on the back of recent policy decisions the major driver," Mr. Henry said. "We expect domestic demand in China and India to provide stabilizing counterweights to the ongoing slowdown in global trade and in the economies of the U.S., Japan and Europe."

BHP has been seeking to increase its exposure to commodities such as copper that it expects to be in high demand as the world decarbonizes and electrifies.

The company in December signed an agreement to buy Australian copper miner OZ Minerals Ltd. in what would be its biggest acquisition in more than a decade. The OZ Minerals board has unanimously recommended shareholders vote in favor of the deal, which gives the company an enterprise value of 9.6 billion Australian dollars, or roughly $6.6 billion.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

February 20, 2023 16:57 ET (21:57 GMT)

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