BHP says it will return a record amount of cash to investors as soaring coal prices have helped the world’s largest miner deliver a 26% increase in annual profits.
Australian company claims final dividend of $8.9 billion, or $1.75 per share, taking total payments for the year to $16.5 billion, the highest disbursement in the company’s 137-year history.
BHP said shareholder returns were close to $36 billion, including shares in Woodside Petroleum given to its shareholders in exchange for the sale of the mining company’s petroleum division.
The bumper payout closes a transition year for BHP, during which the company expanded its oil and gas operations, unify its share structure in Australia and approved the development of a huge potash project in Canada.
CEO Mike Henry is looking to increase BHP’s exposure to higher growth resources that will be in demand as the world looks to decarbonise.
The company caught on as commodity prices plummeted to make a $5.8 billion cash offer to Australian rival Oz Minerals. The bid is rejected by the Oz Minerals . board last week and Henry declined to say whether he would increase the offer.
Oz Minerals will be “good to have but not important” for BHP, and the $140 billion company will remain “disciplined” on pricing, Henry said.
“This is a very complete and fair offer,” he added. “Really disappointing is the other side. . . opted out of what we think is a pretty compelling offering for shareholders. “
Henry was speaking after BHP reported its highest profit since 2011, when it still owned an oil and gas business.
Basic profit from continuing operations — a metric tracked by analysts — rose 26% to $21.32 billion with revenue up 14% to $65 billion in the year to June.
Australian-listed shares of BHP were up nearly 4% on Tuesday morning following the release of the results.
The miner ended the year with a net debt of just $333 million, significantly below its $5 billion – $15 billion target range.
The main driver of the profit improvement was BHP’s Australian coal business, which delivered a basic profit before interest and tax of $8.7 billion versus a loss of $577 million a year due to inflated prices. .
Earnings from BHP’s biggest business – iron ore – fell to $19.5 billion from $24.3 billion a year ago. The company said it is working on a plan to increase annual output of the steelmaking raw material to 330 million tonnes, up from 283 million last year.
The world’s biggest miners spent the last few weeks report lower profits and dividends as fears of a demand recession hit raw material prices and clouded the outlook.
The exceptions are companies with large coal businesses, which have benefited from rising prices as the war in Ukraine has reduced exports from Russia.
BHP is a leading supplier of coking coal used to make steel and owns a large thermal coal mine in New South Wales.
The company recently launched a review of its coking operations in Queensland following the introduction of a three-tier resource tax in the state. This move caused mining The industry was not consulted on the decision to take advantage of high coal prices to boost public spending.
Henry said BHP is re-evaluating future investment decisions and is unable to provide guidance on capital expenditures needed to maintain steady production at around 60 million tonnes a year.
“This is a significant change in royalties,” he said. “So, of course, that drives us back and. . . look at our investments and how we will run our business in the future. “
BHP also flagged the impact of inflation on its operations, saying unit costs in its iron ore division could hit $19 next year. Iron ore production cost $14.82/ton in the recent fiscal year 2021.