Higher iron ore prices boost BHP, but profit still misses expectations
BHP has reported stronger half-year profit on the back of robust iron ore prices but warned of the threat of the coronavirus outbreak for 2020.
The mining giant’s underlying profit jumped 39 per cent to $5.2bn (£3.9bn) for the six months to the end of December, its best profit figure in five years.
However, profit fell below expectations of $5.28bn profit, and BHP saw its share price slip 1.3 per cent to 1,669.6p as it also flagged the threat of the coronavirus outbreak, which is called one of the global economy’s “key uncertainties”.
BHP said it hoped international efforts to contain the coronavirus will prevent a hit to profit in the current quarter.
“As long as coronavirus is… better contained within this quarter, on balance, we think that for the remainder of the half, the overall market demand and the economy will hold up,” new chief executive Mike Henry told investors, according to Reuters.
“If it extends beyond that, of course, then we’d be back in looking at what the implications are.”
BHP also disappointed investors by delivering an interim dividend of $0.65, an increase of $0.10 on last year but below the $0.71 forecast.
Free cash flow came in at $3.7bn compared to $3.6bn the previous year.
BHP boss Henry said: “We delivered a strong set of half-year results, grounded in solid operational performance.
“Prices have held up in part because of some other supply side disruptions.
“Despite near term uncertainty – due to the coronavirus outbreak, trade policy and geopolitics – we remain convinced about the positive underlying fundamentals of our commodities. We see enormous potential to reliably deliver exceptional financial and operational performance, and to grow value and returns.”
The coronavirus threat has knocked industries including the automotive and airline sectors, which have suffered supply chain hits and flight cancellations respectively.
China, which imported record amounts of iron ore last year, is trying to stimulate its economy to mitigate against the coronavirus.
Henry stressed efforts by the company to future proof its business model in light of the global trend towards decarbonisation.
He said the company will put more effort into exploration and early stage acquisition of copper and nickle as part of meeting “social value” commitments.
Henry added the company could sell its thermal coal assets depending on the price and if there are buyers available.
Reuters also reported that BHP will carry out staff restructuring in its technological operations by making more of its employees permanent.
BHP is the first mining company to post its half-year results but others are expected to perform strongly.