Iron Prices Lift BHP's Profit and Dividend -- WSJ
By David Winning
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 19, 2020).
SYDNEY -- BHP Group Ltd. reported a 29% rise in half-year net
profit and lifted its dividend, after strong prices of iron ore
more than offset weakness among almost all other commodities that
BHP, the world's largest listed miner by market value, said it
made a net profit of $4.87 billion in the six months through
December, up from $3.76 billion a year earlier. Earnings improved
despite a $318 million drag from canceled power contracts at two
copper mines in Chile as BHP shifts toward running the operations
fully on renewable energy, and costs tied to the Samarco dam
failure in Brazil several years ago.
Underlying profit from continuing operations was up 29% at $5.19
billion, broadly in line with the $5.22 billion median estimate
compiled by FactSet and The Wall Street Journal.
Tuesday's result was the first delivered by Mike Henry since he
succeeded Andrew Mackenzie as BHP's chief executive at the start of
January. Mr. Henry, a veteran BHP executive who ran the Australian
minerals division for more than three years, took the helm at a
time when major resources companies are being pressed by investors
to map out clearer strategies for growth while balancing benefits
to shareholders through dividends and other forms of capital
Directors of BHP declared an interim dividend of 65 cents a
share, up from an ordinary payout of 55 cents a share a year ago,
but opted against using surplus cash to pay a special dividend as
well. Net debt rose to $12.84 billion at the end of December.
"The dividend reflects the solid cash flow generated in the
period, caution due to near-term market volatility driven by the
2019 coronavirus disease outbreak, trade policy and geopolitics,
and our preference for net debt to be at the bottom end of the
US$12 to US$17 billion target range," BHP said.
BHP has benefited from a tailwind of high iron-ore prices as the
market responded to reduced supply in Brazil following a deadly
spill of mining waste at an operation owned by Vale SA early last
year. BHP last month said its iron ore fetched an average price of
$78.30 a metric ton in the six months through December, up 41% from
a year earlier.
However, the coronavirus outbreak in recent weeks has weighed on
iron-ore prices, as China idled manufacturing as part of a strategy
to contain its spread. Morgan Stanley estimated that more than 40
blast furnaces have been taken offline temporarily with the
potential loss of 80 million tons of annualized iron-ore demand --
enough to tip the market into surplus.
Mining executives and investors will be watchful for any new
moves by Beijing to stimulate the national economy once the virus
is contained, as this could stoke demand for resources. China is
the world's top buyer of many commodities, accounting for around
60% of the trade in iron ore by sea.
"Despite near-term uncertainty -- due to the coronavirus
outbreak, trade policy and geopolitics -- we remain convinced about
the positive underlying fundamentals of our commodities," Mr. Henry
BHP dug up 121 million tons of iron ore in the six months
through December and expects its share of production to total
between 242 million tons and 253 million tons in the 2020 fiscal
year. Copper output has also been rising, although oil and gas
production in the half-year period was affected by the impact of
Tropical Storm Barry in the Gulf of Mexico along with some fields
becoming less productive as they approach the end of their
Write to David Winning at email@example.com
(END) Dow Jones Newswires
February 19, 2020 02:47 ET (07:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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