BHP profits dip but iron ore offsets other commodity price volatility

Volatile commodity prices dented BHP’s full-year profits, but the mining giant’s huge iron ore assets operations bolstered its bottom line.

BHP has revealed plans to sell coal assets in Queensland, New South Wales and South America while reporting a dip in full-year profit.

Commodity price volatility, the coronavirus pandemic and social unrest in Chile, where it operates the world’s biggest copper mine, all contributed to the slide.

The mining giant posted a net profit of $US7.96 billion ($A11.03 billion) for the 12 months to June 30, down 4 per cent from the 2019 financial year.

BHP chief executive Mike Henry said fiscal 2020 had been challenging, but the company’s operations had generated robust-free cashflow and net debt was at the low end of its target range.

“We expect most major economies will contract heavily in 2020, China being the exception,” he warned.

“Recovery will vary considerably by country.

“Our diversified portfolio and high-quality assets position us to continue to generate returns in the face of near-term uncertainty.”

Moody’s Investors Service vice-president Matthew Moore said BHP’s results were strong and supported by its iron ore operations, which benefited from higher prices and production and helped offset considerable earnings falls for petroleum and coal.

BHP CEO Mike Henry says it’s been a challenging year for the mining giant. Picture: Aaron Francis/The Australian

Mr Henry announced the company sought to exit its BMC mines in Queensland, Mt Arthur mine in the Hunter Valley and Cerrejon operation in Columbia, saying it wants to concentrate its coal portfolio on higher-quality coking coals as steelmakers seek to improve blast furnace utilisation and reduce emissions intensity.

Mr Moore and RBC Capital Markets analyst Tyler Broda agreed that from an environmental, social and governance perspective, the decision was understandable.

BHP also seeks to improve its petroleum portfolio by getting rid of mature assets including the Bass Strait oil and gas field.

The company issued a final dividend of 55 US cents per share, down 23 US cents from the final dividend issued last financial year.

Mr Broda said the dividend could have been higher, considering BHP’s cashflow and net debt position.