BHP share price on watch amid 86% profit decline and dividend cut

Here's how the Big Australian performed during the first half.

| More on:
Worker in hard hat looks puzzled with one hand on chin

Image source: Getty Images

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 BHP Group Ltd (ASX: BHP) share price will be on watch this morning.

That's because the mining giant has just released its half-year results and reported a huge profit decline.

BHP share price on watch as profits tumble

  • Revenue up 6% to US$27.2 billion
  • Underlying EBITDA up 5% to US$13.9 billion
  • Profit after tax down 86% to US$927 million
  • Underlying profit flat at US$6.6 billion
  • Fully franked interim dividend down 20% to 72 US cents

What happened during the half?

For the six months ended 31 December, BHP reported a 6% increase in revenue to US$27.2 billion.

This was primarily a result of higher iron ore and copper prices, as well as the contribution of new mines Prominent Hill and Carrapateena. This was partially offset by New South Wales Energy Coal (NSWEC), which struggled with significantly weaker realised prices.

BHP's unit costs rose 5.4% across its major assets during the first half. This reflects its disciplined cost and reliable operational performance and the normalisation of commodity linked consumable prices such as diesel and acid.

This ultimately led to the Big Australian's underlying profit remaining flat at US$6.6 billion or 129.6 US cents per share.

However, on a reported basis, BHP's profit came in 86% lower at US$927 million. This was driven by US$5.6 billion of previously announced exceptional items. This comprises a ~US$2.5 billion impairment of Western Australia Nickel and a ~US$3.2 billion charge related to the Samarco dam failure.

Nevertheless, this didn't stop BHP from rewarding its shareholders with another decent dividend. It declared a fully franked interim dividend of 72 US cents per share, which represents a 20% reduction on last year's payout.

How does this compare to expectations?

This result appears to have fallen short of expectations, which could be bad news for the BHP share price today.

Goldman Sachs was forecasting revenue of US$27.6 billion and the market was expecting earnings per share of US$1.43 per share. BHP has missed with both metrics.

Management commentary

BHP CEO, Mike Henry, acknowledged that it was a challenging half for the miner. He said:

Today, we announced underlying attributable profit of US$6.6 billion for the half year. We also announced an interim dividend of 72 US cents per share – a total of US$3.6 billion, equating to a payout ratio of 56%. The period also had its challenges, with adjustments relating to Nickel West, West Musgrave and Samarco offsetting an otherwise solid operational performance and overall healthy commodity prices.

Commenting on the miner's outlook, Henry sounds cautiously optimistic. He said:

We've seen volatility in global commodity prices and demand in the developed world has been softer than expected. That said, China demand is healthy despite weakness in housing and India remains a bright spot. In Australia, the mining industry is facing near-term headwinds in developing resources and it's essential that the right industrial relations and fiscal settings are in place to support the sector's ability to compete and win in global markets. Long term, the mega-trends playing out in the world around us continue to underline our confidence in future demand for steel, non-ferrous metals and fertilisers.

Management also advised that all assets are on track to meet their FY 2024 production and unit cost guidance.

The BHP share price is down 5% over the last 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall
Dividend Investing

Here's the BHP dividend forecast through to 2028

Will the Big Australian continue to reward shareholders with big dividends?

Read more »

Business people standing at a mine site smiling.
Materials Shares

Are BHP shares a buy following the miner's quarterly update?

Is now the time to buy this mining giant's shares? Let's see what Goldman Sachs is saying.

Read more »

Three miners stand together at a mine site studying documents with equipment in the background
Materials Shares

Pilbara Minerals share price tumbles on quarterly update

How did the lithium giant perform during the third quarter?

Read more »

A man in a business suit looks at a gold phone with his head in an exploding cloud of gold dust.
Materials Shares

Glitter up: Which ASX shares are commodities prices shining on in 2024?

Commodity prices have surged in 2024 driven by safe-haven demands and green technology needs.

Read more »

A female worker in a hard hat smiles in an oil field.
Materials Shares

Should you buy Rio Tinto shares following its quarterly update?

Let's see what analysts are saying about the mining giant.

Read more »

A male lion with a large mane sits atop a rocky mountain outcrop surveying the view, representing the outlook for the Liontown share price in FY23
Materials Shares

Where will Liontown shares be in 3 years?

Can this stock recharge investor excitement?

Read more »

A man checks his phone next to an electric vehicle charging station with his electric vehicle parked in the charging bay.
Materials Shares

2 of the best ASX 200 lithium stocks to buy now

Analysts speak very highly about these lithium miners.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Materials Shares

Why this ASX battery materials stock could rocket 60%

Bell Potter is tipping this stock to have a bright future.

Read more »