BHP announces record cash return on rising coal prices

BHP announces record cash return on rising coal prices

BHP said it would return a record amount of cash to investors as rising coal prices helped the world’s biggest miner post a 26 percent rise in annual profits.

The Australian company announced a final dividend of $8.9 billion, or $1.75 per share, bringing its total payout for the year to $16.5 billion, the largest payout in its 137-year history.

BHP said shareholder returns were close to $36 billion, including Woodside Petroleum shares given to its shareholders in exchange for the sale of the miner’s oil division.

The deferred payout concludes a transformational year for BHP in which the company expanded its oil and gas operations, unified its share structure in Australia and approved the development of a huge potash project in Canada.

Chief executive Mike Henry is seeking to increase BHP’s exposure to higher-growth resources that will be in demand as the world moves to decarbonise.

The company took advantage of a sharp drop in commodity prices to launch a $5.8 billion cash bid for Australian rival Oz Minerals. The offer was rejected by Oz Minerals board last week and Henry declined to say whether he would increase the offer.

Oz Minerals would be “nice to have but not vital” for BHP, and the $140 billion company would remain “disciplined” on pricing, Henry said.

“This is a very full and fair offer,” he added. “It’s really disappointing that the other side . . . has decided not to participate in what we think is a fairly compelling offer for shareholders.”

Henry was speaking after BHP reported its biggest profit since 2011, when it still had an oil and gas business.

Underlying profit from continuing operations – a measure watched by analysts – rose 26 percent to $21.32 billion on revenue that rose 14 percent to $65 billion in the year to June.

Australian-listed BHP shares rose nearly 4 percent on Tuesday morning after the results were announced.

The miner ended the year with net debt of just $333 million, well below its target range of $5 billion to $15 billion.

The main driver of the profit improvement was BHP’s Australian coal business, which posted underlying earnings before interest and tax of $8.7 billion on a loss of $577 million a year as prices rose.

Earnings in BHP’s biggest business — iron ore — fell to $19.5 billion from $24.3 billion a year ago. The company said it is studying plans to increase annual production of the steelmaking ingredient to 330 million tonnes, up from 283 million last year.

The world’s largest miners have spent the past few weeks reporting lower profits and dividends as fears of a demand-sapping recession crushed commodity prices and clouded the outlook.

The exception was companies with large coal operations, which benefited from rising prices as the war in Ukraine reduced exports from Russia.

BHP is a leading supplier of coking coal, which is used to make steel, and owns a large thermal coal mine in New South Wales.

The company recently launched a review of its coking operations in Queensland following the introduction of a three-tier royalty rate in the state. This move angered him mining industry, which was not consulted on the decision to use the high price of coal to increase public spending.

Henry said BHP was reviewing its future investment decisions and could not offer guidance on the capital expenditure needed to maintain stable production at around 60 million tonnes a year.

“This is a pretty significant shift in royalties,” he said. “Of course, it makes us come back and . . . review the investments and how we continue to run the business.”

BHP also flagged the impact of inflation on its business, saying unit costs in its iron ore division could hit $19 next year. The operation was producing iron ore at $14.82 per ton as recently as fiscal 2021.



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