BHP (ASX:BHP) Group Ltd (LSE:BHP, ASX:BHP) has initiated job cuts across its Australian operations as it embarks on a significant restructuring of its global functions, including mine planning, maintenance, logistics, decarbonisation and heritage protection.
This move to streamline operations and reduce costs follows comments from CEO Mike Henry about the particular challenge of wage inflation in Australia.
The restructure aims to decentralise the company's support services, granting more autonomy to its commodity divisions and encouraging self-sufficiency.
Details about the exact number of job reductions are yet to be disclosed, but the changes have been communicated to staff. A company spokesperson highlighted the goal of aligning work activities more closely with assets to facilitate faster decision-making.
The reorganisation has placed many roles, especially in BHP’s nickel operations in Western Australia at risk, as fluctuating iron ore prices and uncertainties in the Chinese market continue to hamper the company’s efforts.
Redundancies have already been made in several divisions, including the standalone planning and technical division and the health, safety and environment division, as responsibilities are redistributed among various sectors including heritage, maintenance and decarbonisation.
Company review
“The review has focused on understanding and responding to where our work has changed through time, new expectations, requirements or external interfaces,” the company said.
“It is about simplifying how we work in recognition of the capabilities we have invested in, and in empowering our people through greater accountability.”
“The restructure would see some national operations transferred to state-based teams based around particular commodities.
“In the main, we found that our operating model continues to be a source of competitive advantage,” BHP said.
The restructure follows BHP's recent consideration to place its nickel division under care and maintenance, alongside the potential suspension of construction activities at the West Musgrave nickel mine. This was revealed subsequent to BHP's acquisition of OZ Minerals last year, indicating a significant reassessment of its nickel operations.
Financial results
In its latest financial results, BHP reported a significant drop in profit, attributing part of the decline to nickel impairments. Henry emphasised the importance of cost management and criticised current industrial relations policies, suggesting a focus on improving productivity within existing assets rather than relying on government subsidies.
BHP’s statutory profit fell to an eight-year low of $US927 million ($1.419 billion), saddled by nickel impairments.
Underlying profit of $US6.6 billion profit was flat on this time last year and hit market expectations – only just.
The downshift in the commodity cycle from the pandemic boomtime backed a 20% drop in interim dividends to US72c.
eToro Market analyst Josh Gilbert said, "BHP saw its H1 underlying profit miss estimates, whilst revenue rose by US$1.5 billion year-over-year, with iron ore prices remaining resilient despite China’s ongoing troubles.
“Despite the headline miss on profit, I think investors can be pretty pleased with the results, with outlook showing demand is still healthy in China.
"This puts the world’s largest miner on track to meet its full-year output target while keeping costs at target; no easy feat in the face of high inflation.
"The big reason for the miss on profit was the impairment to its West Australia nickel operation and a significant one-off charge related to its Samarco mine in Brazil.
“However, China’s economy does remain a headwind for the business. The flailing economy needs more support, with this continued period of deflation continuing to impact the local property market. It’s hard to envisage that further support isn’t on the way, which should mean good news for BHP investors over the next 12 months – but the ongoing risks are obvious.
“The headline miss may grab investors' attention today but overall, this was a robust report during a challenging period for BHP. If China starts to play ball this year, good times shouldn’t be too far away for BHP."