BHP Profit Falls on One-off Charges; Payout Pared as Miner Pursues Growth — 2nd Update

By Rhiannon Hoyle

BHP Group reported a 39% fall in annual profit because of one-off charges and dialed back its payout to investors as the company spends more to expand in commodities like copper that it bets will be in demand for the energy transition and a rising world population.

Australia-based BHP, the world's most valuable miner, reported a net profit of $7.90 billion for the 12 months through June, down from $12.92 billion the year prior. Its bottom line was weighed by a $2.7 billion write-down of the value of the Australian nickel operations it is suspending due to a market glut, and an increase in the money it has set aside for costs related to a dam disaster in Brazil nearly nine years ago.

Annual earnings were slightly higher year over year, as higher copper and iron-ore prices offset lower prices for coal and nickel. BHP reported an underlying profit of $13.66 billion for the year. That compared with a $13.42 billion profit a year ago and analyst expectations of $13.52 billion, according to a consensus compiled by Visible Alpha from 15 forecasts.

Directors declared a final dividend of 74 U.S. cents a share, taking the company's full-year payout to $1.46 a share. It paid a total dividend of $1.70 for the prior fiscal year.

BHP's final dividend represented 53% of underlying profit, down from 59% a year ago. BHP said it is the fourth-largest full-year ordinary dividend it has declared.

Analysts had widely forecast the company to rein in its spending on dividends as it saves more cash for projects and deals.

BHP wants to be bigger in copper, an industrial metal that's arguably the most critical for the energy transition, and plans to start producing fertilizer ingredient potash, which it says will be needed for more efficient and sustainable farming.

Today, the company makes most of its profits from steelmaking commodity iron ore. It is also the world's biggest exporter of steelmaking coal.

"We believe [copper] is long term very attractive as the world population continues to grow, standards of living rise, we see further urbanization and the energy transition unfolds," Chief Executive Mike Henry told reporters on a call.

BHP is already one of the world's top copper miners. It sought to cement a No. 1 position in the industry with a bid for London-based Anglo American, but was rebuffed.

BHP's $50 billion takeover plan for Anglo American, which it abandoned in May after failing to convince its rival to further engage in talks, would have added some of the world's most prized copper mines to its business. Copper represents about 30% of the output of Anglo American.

BHP says the world will need twice as much copper over the next 30 years as it did over the past three decades.

Copper, an efficient conductor of electricity, is used in electric cars at much higher quantities than in gasoline-powered ones. The same is true for renewable energy versus conventional coal-fired plants, while a huge expansion of copper-intensive electricity grids is also expected in the shift to clean energy.

In July, BHP struck a deal with Lundin Mining to jointly acquire Canadian exploration company Filo for roughly 4.10 billion Canadian dollars, equivalent to $3.0 billion. Filo's Filo del Sol project, which straddles the Argentina-Chile border, is considered to be one of the most significant copper discoveries globally in recent decades, Henry said.

A year earlier, the company bought Australian copper-and-gold miner Oz Minerals for roughly $6 billion--its biggest acquisition since 2011.

"Clearly it was a disappointing outcome," said Henry of the failed Anglo American approach. "But I was very clear at the time: It wasn't Plan A for us."

Plan A is developing BHP's existing copper resources, he said. The miner has copper projects under development in Chile and Australia.

On Tuesday, BHP published a maiden resource for a deposit called Oak Dam in Australia and gave more details about how it intends to increase production from its copper mines in the years ahead.

The company reported $9.27 billion in capital and exploration expenditure for fiscal 2024, up 31% year over year. It expects to spend about $10 billion in the year ahead and roughly $11 billion in the year after that.

Roughly 65% of capital investment will likely be in copper and potash over the medium term, BHP said.

In potash, BHP is betting future demand will be benefit from a rising population and changing diets. Potash is a potassium-rich salt used to improve agricultural production.

Construction of BHP's huge Jansen potash project in Canada's Saskatchewan province is ahead of its original schedule and first production just over two years away, the miner said. The company is spending $5.7 billion on the first stage of the development and has already begun work on a $4.9 billion second stage.

BHP estimates the Jansen mine will represent roughly 10% of the market once those two stages are complete and producing at their full potential.

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

(END) Dow Jones Newswires

August 26, 2024 22:47 ET (02:47 GMT)

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