BHP declares record dividend as China steel demand boosts profits
By Frank Prenesti
Date: Tuesday 16 Feb 2021
(Sharecast News) - Australian mining giant BHP declared a record interim dividend after reporting a rise in profits driven by Chinese demand for iron ore.
The world's biggest miner declared its biggest-ever interim dividend of $1.01 a share, up from 0.65 cents, as profits from its operating business soared by 17% to $9.8bn - its best result in seven years
BHP lifted its outlook for the global economy as the rollout of Covid-19 vaccines accelerated. However, the company was forced to slash the value of value of the thermal coal assets and also reported $200m of covid-related costs.
"The deployment of vaccines in key economies, albeit with some uncertainty as to timing and efficacy, removes a material amount of downside risk to the short term demand and price outlook for our portfolio commodities," the company said on Tuesday.
Steel prices have soared as China turned to commodity-intensive stimulus measures to boost economic growth after the impact of the coronavirus pandemic.
Half-year attributable profit fell a fifth year on year to $3.87bn, driven down mostly by a total of $2.2bn in exceptional items that the thermal coal assets writedown.
BHP said it expected a continuation of strong Chinese demand in this year and recovery in the rest of the world's global crude steel production.
Chief executive Mike Henry admitted Chinese ban on Australian coal has caused problems as the company tries to sell its Mount Arthur coalmine and exit the thermal coal market.
The trade spat has seen cargo vessels queued up off China's coal and is hurting the markets for both thermal coal, burned to make electricity, and coking coal, used in the steelmaking process. "The industry faces a difficult and uncertain period ahead," BHP said.
Profits were also boosted by global demand for copper, which has hit record highs as the drive for electric vehicles grows.
"On the supply side, we note near term risks from the escalation of Covid-19 cases in Chile, and the fact that a number of wage negotiations at Chilean mines are scheduled for the current calendar year, spread across both halves."
"Longer term, end-use demand is expected to be solid, while broad exposure to the electrification mega-trend offers attractive upside."
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