BHP BHP Group Limited

By Rhiannon Hoyle

Mining giant BHP said its annual profit more than halved on a year earlier, reflecting a pullback in commodity prices that has squeezed profits across the industry as China's economy stumbles and big markets like the U.S. grapple with sharply higher interest rates.

BHP, the world's biggest miner by market value, reported a net profit of $12.92 billion for the 12 months through June, down from a profit of $30.90 billion a year earlier when it had benefited from the sale of its oil-and-gas business and when commodity prices were at or near record highs.

Analysts expected a profit of roughly $13.30 billion, according to a Visible Alpha consensus compiled from 15 forecasts.

The miner cut its final dividend to 80 U.S. cents a share, less than half the $1.75 paid a year ago.

Still, BHP said its full-year cash payout of $1.70 a share is its third-largest ordinary dividend on record. Analysts had forecast a total dividend around $1.72 a share, according to Visible Alpha.

"BHP's external operating environment in FY23 was volatile," BHP said. "Our key commodity prices were materially weaker leading to lower revenue generation, while we also managed significant cost inflation across the business."

BHP said its underlying profit, a closely watched measure that strips out some one-time items, totaled $13.42 billion, down from $23.82 billion a year ago.

Commodity prices fell on concerns about economic growth in China, the largest buyer of many metals and minerals, and the outlook for developed countries after sharp increases in interest rates.

The miner was paid 12% less for its copper last fiscal year versus the year-prior period, and 18% less for iron ore, the key ingredient in steel.

The average price for its metallurgical coal, also used to make steel, was down by 22% year-on-year, after surging in 2022 in big part due to supply concerns after Russia's invasion of Ukraine disrupted trade flows.

Its own production was mostly higher. BHP produced more copper, iron ore, nickel and thermal coal than the year-earlier period. Its output of steelmaking coal was flat year-on-year.

A drawn-out real estate crunch in China is especially worrying for miners, given the importance of the sector to the country's economy and metals demand. Another batch of disappointing economic data for July, and a policy response that has so-far underwhelmed, has prompted a number of global investment banks to lower forecasts on China's full-year growth rate.

"The authorities have acknowledged that more policy support is needed to fully embed the recovery," said BHP. "For FY 2024, the key question is how effective this latest policy push will be."

The miner said demand in China has, however, held up relatively well and that it expects both China and India to be sources of stability for commodity demand in the near term.

By contrast, it took a more cautious tone on developed economies, where demand for commodities has slowed substantially in big part due to anti-inflation policies, it said. "We anticipate that these competing forces may have a variable impact on commodity prices in the period" ahead, said BHP.

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

(END) Dow Jones Newswires

August 21, 2023 19:48 ET (23:48 GMT)

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