BHP’s profits have taken a 37% slump, as the mining giant booked a $US13.4 billion (A$20.9 billion) annual profit for the financial year 2022-23. 

Revenue decreased by US$11.3 bn due to “significantly lower prices in key commodities”, according to BHP’s official financial results report. 

Shareholders will receive US80c a share, down by 48% from last year’s dividend of US$1.75. 

Including an interim dividend, this is US$1.70 for the full 2022-23 financial year, down from US$3.25 from 2021-22. 

Despite the drop in BHP’s dividend price, they were still the fourth-highest in the company’s history, with 2022’s US$3.25 being a record payout. 

In a statement from BHP, Chief Executive Officer, Mike Henry was upbeat, stating that the company’s financial results were “strong” as it managed “lower commodity prices and inflationary pressures.” 

 

Continuing on, Henry stated that “commodity demand has remained relatively robust in China and India,” which seems at odds with recent concerns over China’s struggling economy. 

 

Henry addressed this concern too, stating that “China’s trajectory is contingent on the effectiveness of recent policy measures,” referring to China’s restrictions on crude steel production and potential stimulus measures for the country’s struggling real estate sector. 

As the world’s largest steel producer, China’s July output eased by 0.34% from a month ago, (manufacturing 91.11 million tons less than June) as a result of the production restrictions affecting certain areas. 

This is largely blamed on China’s property sector woes, which appear to be stifling demand for steelmaking raw materials such as iron ore and coking coal. 

In July, Chinese home prices fell in 49 out of 70 major cities from the previous month, while China’s housing inventory at the end of July jumped 17.9% from a year earlier. This is a huge stock of unsold homes which is likely to dampen developers’ appetite for new construction. 

Talks of a government stimulus package to support the Chinese real estate sector have been discussed, but yet to be implemented, by top leaders in the country.

As for the iron ore market forecast looking ahead, BHP stated there are two uncertainties over the next six months, which both revolve around the world’s largest steel producer: 

“…how effectively China’s stimulus policy is implemented” and “the breadth, timing and severity of any mandated steel production cuts.” 

BHP believes there is cost support in the “US$80-US$100/t range” on a 62% Fe cost and freight (CFR) basis. 

Iron Ore futures are currently trading around US$109 per tonne, just above this range (as at 21/8/23).

Past performance is not a reliable indicator of future performance.