BHP (ASX:BHP) Group Ltd’s share price was volatile in early trading as investors reacted to the company’s lowest dividend payout since 2017, a positive copper outlook and CEO Mike Henry’s comments on potential trade policy impacts under Donald Trump.
Shares fluctuated between A$40.40 and A$41.15 before settling 0.3% lower at A$40.70 by 10:20 am AEDT. At midday, the company was 0.66% higher to $41.07.
The mining giant reported first-half revenue of US$25.2 billion, marking an 8% decline from the prior corresponding period, primarily due to weaker realised prices for iron ore and steelmaking coal.
Attributable profit rose to US$4.4 billion but underlying attributable profit fell 23% to US$5.1 billion after adjusting for HY24 exceptional losses. Some analysts had expected underlying profit to reach US$5.39 billion, according to Bloomberg.
"The troubles for Australia’s largest miner continued today, as BHP’s first-half-year profits missed estimates while also cutting its interim dividend to $0.50 a share," eToro market analyst Josh Gilbert said.
"These results today are the tell-tale sign of waning Chinese demand for BHP’s key commodities like iron ore and copper, with prices remaining in reverse in the last six months of 2024.
"Copper production was a bright spot, up 10%, with a 22% increase at its Escondida mine. An 8% jump in copper prices this year is good news but iron ore prices remain a drag and will continue to weigh heavily on the business.
"Its dividend cut will be a disappointment to shareholders. Although expected, the cut was larger than analysts had forecasted. It’s the lowest payout since 2017 and comes on the back of profits tumbling by more than 23%.
"The problem is that BHP needs to keep spending big to maintain production levels or even raise them and that’s coming at a time when profits keep falling.
"BHP’s long-term strategy remains focused on growth and that is going to bring near-term challenges.
"The market is going to keep a very close eye on its moves over the months ahead, particularly after its failed bid to acquire Anglo American (JO:AGLJ). Investors will be looking for any updates on future acquisition plans, especially as BHP looks to bolster its copper business, a key to future growth.
"CEO Mike Henry has said this is a resilient result and that there are early signs of a recovery in China. Those early signs really need to come to fruition if shareholders are to keep the faith, and BHP is to enjoy a positive year, with shares down 4% over the last three years."
Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) declined 11% to US$12.4 billion, falling short of the US$12.77 billion forecast by some analysts.
Citi analysts, led by Paul McTaggart, noted that the EBITDA result aligned with Visible Alpha consensus and exceeded Citi’s own estimates by 3%. “Underlying NPAT was 4% ahead of Citi with DPS (dividend per share) of US50c in line (payout of 50%),” the analysts stated.
Barrenjoey analysts, led by Glyn Lawcock, also observed that underlying EBITDA was in line with consensus and 2% above their estimates. However, they highlighted that iron ore and coal earnings were below expectations, while copper outperformed. The interim dividend of US50c per share surpassed Barrenjoey’s forecast of US47c per share.