Mining giant BHP is the latest coal miner to benefit from coal prices as its shares yesterday surged by nearly 6 percent after it posted record-high annual profits.
Glencore this week also declared a whopping dividend and profit on its coal business, as Exxaro yesterday in a trading statement for the six-month period ended June flagged its profits would be up by as much on 32 percent on the coal price bonanza.
BHP’s shares traded at R468.10 at 4.10pm and 35.63 percent higher in the past three years.
In its results for the year ended June 30, 2022, the supplier of coking coal, which is used to make steel, said it recorded underlying earnings of $40.6 billion (R667bn), and free cash flow of $24.3bn reflects higher coal and copper prices and disciplined cost control.
BHP reduced debt and announced a final dividend of $1.75 per share, bringing total cash dividends for the full year to $3.25 per share.
Its profit from operations amounted to $34.1bn, up 34 percent from the prior year.
BHP said its operations were hit hard by inflation, and its unit costs in its iron ore division could be $19 next year.
The operation produced iron ore at a cost of $14.82 a ton in the 2021 fiscal year.
According to the group, its main driver of improved profits was its Australian coal business, which delivered underlying earnings before interest and tax of $8.7bn against a loss of $577m a year as prices increased.
Iron ore earnings dropped to $19.5bn from $24.3bn a year ago.
Chief executive Mike Henry said: “BHP delivered strong operational performance and disciplined cost control. These strong results were due to safe and reliable operations, project delivery and capital discipline, which allowed us to capture the value of strong commodity prices. BHP remains the lowest-cost iron ore producer globally, and we delivered record annual sales from Western Australia Iron Ore.”
The merger of BHP’s Petroleum business with Woodside Energy was completed on June 1, the group said.
Last week, BHP made a bid to acquire Oz Minerals for $5.8bn, which was rejected. Oz Minerals said the offer was not sufficient and significantly undervalued it.
Sanlam Private Wealth investment analyst Christiaan Bothma said: “BHP reported a record set of numbers today with all key estimates beating market expectations on the back of a solid operational performance and high commodity prices.”
He said the final dividend declared of $1.75 per share brought the total dividend to $3.25 a share, or an industry-leading 70 percent payout. After recent disposals of most of their fossil fuel businesses, iron ore becomes increasingly important to BHP’s investment case – iron ore contributed more than 50 percent of cash profits.
“Despite this large single commodity risk, it is worth emphasising that these are world-class mines with very long lives, situated in a premier mining jurisdiction (Western Australia) and on average right at the bottom of the industry cost curve – which means that their assets are well protected against future price declines and that they should continue to make decent profits even in a down-cycle,” he said.
BUSINESS REPORT