BHP trims dividend as it braces for Covid-19 fallout
Global mining giant BHP is bracing for a tough few months as Covid-19 pushes most major global economies into recession, but it has reported that robust iron-ore prices helped offset the effects of the pandemic in its year to end-June 2020.
Iron-ore prices have been boosted since a dam disaster in Brazil disrupted global supply in 2019, helping to offset lower coal and oil prices during the pandemic.
Attributable profit for the year to end-June 2020 was 4% lower at $8bn, including $1.1bn one-off items. This includes a writedown of its copper mine Cerro Colorado, after a decision to reduce production, as well as provisions for the cancellation of power contracts as the group switches to renewable energy suppliers.
The group declared a final dividend of 55 US cents a share from 78c in the previous year, which equates to a $2.8bn payout.
Total dividend announced of $1.20 a share for the year is equivalent to a 67% payout ratio, and is 10% lower than the prior comparative period.
The group’s policy is to pay out at least 50% of underlying attributable profit, referring to profits received rather than profits accounted for on the balance sheet.
BHP CEO Mike Henry said the group expected major economies, with the exception of China, to contract “heavily” in 2020, while the recovery will vary by country.
“BHP delivered a strong set of results for the 2020 financial year that reflect the strength, resilience and quality of our people and our portfolio,” said Henry.
“In a year marked by the challenges of the global Covid-19 pandemic, social unrest in Chile and commodity price volatility, we were safer, more reliable and lower cost,” he said.
The diversified miner reported a profit from operations of $14.4bn and underlying earnings before interest, taxes, depreciation and amortisation of $22.1bn, at a margin of 53%.
The group said capital and exploration expenditure was expected to be about $7bn in the 2021 financial year and $8.5bn in 2022.
“We continue to advance our exploration programmes in petroleum, copper and nickel, with results of the third phase of the drilling programme completed at our Oak Dam copper discovery in South Australia currently under analysis,” BHP Group said.
“We have also added to our early stage optionality in nickel with the acquisition of the Honeymoon Well tenements in Western Australia.”
The company’s share price fell 2.76% to R410.37 on Tuesday. It has gained 24% so far this year.
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