BHP's profit expected to drop 26%

The extent of the fall in the mining sector should be highlighted as companies release earnings reports.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The extent of the mining sector's fall is set to be highlighted when heavyweights BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) release their respective financial reports this month. It is expected that both companies' profits will be significantly lower than those recognised in previous corresponding periods.

When BHP's full year profit report is released on August 20, it is expected that the company's profits will have fallen by up to 26%, with the market anticipating the recognised profit to be just US$12.5 billion compared to last year's US$17.1 billion.

Although the company ramped up its production of iron ore for the year, diminished global demand for the commodity – and thus, a lower selling price – will offset much of the gains made from increased supplies. Lower earnings from coal, aluminium, nickel and petroleum will further add to the pain.

However, despite the significantly lower profits, it is still anticipated that the company's annual dividend will increase to around US$1.17 per share compared to last year's US$1.12 per share, according to Citi. This is due to the company's progressive dividend policy, whereby the company has introduced a heavy focus on shareholder returns and ensuring long-term sustainability.

The market also awaits an update from the company regarding its intentions for the Jansen potash project in Canada, which came under the spotlight last week.

Meanwhile, Rio's interim report is due out this Thursday. Analysts are expecting the company's earnings to be between US$4.23 billion and US$4.3 billion, as compared to the US$5.2 billion recognised in the previous corresponding period.

Foolish takeaway

The mining boom seems well and truly a thing of the past. Recognising this, both Rio and BHP have vowed to significantly reduce costs by divesting in non-core projects and reducing unnecessary capital spending.

Shares in both companies have fallen heavily over the last two years, however, neither register as bargains due to the volatility remaining in the sector. With commodity prices continuing to fall, investors would be wise to remain on the sidelines until either company can provide a clearer perspective on future prospects.

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading


Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »