Price boom sends BHP profits soaring but inflation rears its head
BHP has produced a $US9.4 billion ($A13.9 billion) half year profit and will splash investors with a record dividend payout, but costs are blowing out.
BHP chief executive Mike Henry and CFO David Lamont
Investors will receive $US1.50 ($A2.10) a share in dividends for the half equating to a $US7.6 billion payout after a half year which chief executive Mike Henry called “strong” after mitigating the impacts of Covid and significant wet weather events.
“We made strong progress of the execution of our strategy,” Henry said.
“BHP is well positioned for the future. We are building on our strong foundations and capital discipline to reshape our business and grow long-term value for our shareholders and other stakeholders.”
Covid alone cost it $US223 million (pre-tax) in the six months and while its coal operations enjoyed record prices and $US2.2 billion in earnings before interest and tax, costs have increased significantly at the Queensland mines because of wet weather and a labour shortage. The China trade embargo meant it could not provide a reliable outlook for coal.
BHP said the coal industry faced a “difficult and uncertain period ahead while natural trade flows are impaired”.
The iron ore and coal performances were a huge result for BHP. For the December half year it reported Queensland coal revenue of $US4.3 billion compared with $US1.8 billion for the same period in 2020. EBITDA was $US2.2 billion against $US59 billion in 2020.
“Queensland Coal unit costs increased by 8 per cent to $US91 a tonne for the half year, primarily due to lower volumes following significant La Nina wet weather impacts, additional maintenance and labour constraints,” BHP said.
“Unit cost guidance for the 2022 financial year has been increased to between $US85 a tonne and $US94 a tonne … reflecting lower expected volumes for the full year. Workforce absenteeism arising from Covid-19 remains a risk for the remainder of the financial year.”
The Queensland coal business paid $US511 million in royalties, up significantly from the amount paid in all of 2021 of $US330 million.
Iron ore produced an underlying EBITDA of $10.244 billion even after unit costs in Western Australia blew out by 12 per cent on the back of higher diesel prices, increased royalties and costs associated with its South Flank ramp up. Covid cost the division about $US56 cents a tonne and labour constraints meant volumes were lower.
Unit costs at the Escondida mine were at the top end of guidance.
