By Rhiannon Hoyle


BHP Group dialed back its dividend on Tuesday as the world's biggest miner reported a steep fall in first-half net profit and flat underlying earnings.

Chief executive Mike Henry said BHP has faced volatility in global commodity prices and demand in the developed world that has been softer than expected, even as appetite from buyers in China and India has been relatively strong.

Underlying profit, a closely watched measure of profitability that strips out some one-time charges, was largely unchanged on year despite a boost to revenue from higher iron ore and copper prices, the company said. Revenue rose by 6% to $27.23 billion. BHP's underlying profit of $6.60 billion beat a consensus estimate of $6.43 billion compiled by Visible Alpha from 15 analyst forecasts.

BHP said it made a net profit of $927 million for the six months through December, compared to a profit of $6.46 billion a year ago. It wrote down the value of its nickel operations and set aside more cash to cover costs associated with the 2015 Samarco disaster. The impairment charges, totaling $5.64 billion, had been flagged to the market last week.

Directors of the company declared an interim dividend of 72 cents a share, down from 90 cents a share a year ago. That equates to a payout of 56% of underlying profits, BHP said.

The company has a policy of paying a minimum 50% of underlying attributable profit each six months. A year ago, it paid shareholders the equivalent of 69%.

Several analysts predicted BHP would need a rein in shareholder returns as the company's net debt levels increase. The miner reported net debt of $12.65 billion at Dec. 31, compared to $6.91 billion a year earlier.

BHP said it has a track record of strong returns and that, including its latest dividend, it will have paid shareholders roughly $44 billion in cash returns since the start of 2021. The miner's interim dividend is higher than a 69-cent-a-share consensus estimate compiled by Visible Alpha.

Some analysts have highlighted the uncertainty that the company faces over the total costs relating to the catastrophic 2015 dam failure that killed 19 people and polluted hundreds of miles of rivers.

The miner is also facing fresh questions over its outlook for growth as nickel--a commodity it has previously highlighted as an investment priority--faces what BHP says could be a prolonged downturn.

The Australia-based mining giant has in recent years centered its growth ambitions on producing more copper and nickel and starting to produce potash, which is mainly used as fertilizer to improve the quality and yield of agricultural production.

Last year, it made its biggest acquisition in more than a decade with the $6 billion takeover of Oz Minerals, a purchase that gave it additional copper mines and a new nickel project in Australia.

In announcing the write-down of its nickel business last week, BHP said it was reviewing plans for the acquired nickel project and cautioned it might suspend its existing nickel operations for an unspecified time if conditions stay weak.

Nickel prices have roughly halved since the start of 2023 as demand for batteries failed to meet expectations. The market has also been swamped by a huge increase in supply from Indonesia, said BHP.

"BHP's external operating environment in 2023 was relatively volatile," the company said in its half-year report. Prices for the commodities it produces were slightly higher overall but with significant variation between individual commodities, while external cost inflation remained a headwind, BHP said.

BHP said it expects the outlook for the developed economies to improve modestly in the near term after a difficult year for both steel and nonferrous metals demand in 2023. Commodity demand in developed countries has been soft over the past 12 months due to policies targeting high inflation and the lagged effects of the energy crisis, said the miner.

"We believe that the lag effect of higher interest rates will continue to restrain household consumption in the developed world in the first half of 2024, but we expect that steel, copper and nickel demand will all be modestly firmer across the Organisation for Economic Cooperation and Development [countries] in the coming 12 months," BHP said.

China and India should also remain relative sources of stability for world commodity demand, the miner said.


Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com


(END) Dow Jones Newswires

02-19-24 1742ET