BHP Group Ltd. reported a 23% drop in first-half profit, driven by a sluggish Chinese economy that dampened demand for iron ore. As a result, the world’s largest miner reduced its interim dividend to the lowest level in eight years. The company posted an underlying attributable profit of $5.08 billion for the six months ending December 31, falling short of analyst expectations, which had pegged it at $5.39 billion. While iron ore remains BHP’s top revenue source, copper now accounts for 44% of its income.
The miner’s decision to lower its dividend to 50 cents per share, down from 72 cents a year earlier, highlights its focus on capital management as it pursues future growth. Analysts had forecast a dividend of 53.3 cents. This profit decline continues a broader trend for BHP, following its record earnings of $33.1 billion in 2022, driven by soaring iron ore demand. Since then, profits have more than halved, with declining capital returns and increasing capital expenditure weighing heavily on the company’s stock.
Despite the profit slump, BHP CEO Mike Henry maintained an optimistic outlook. He noted that demand for BHP’s products remains strong, buoyed by early signs of recovery in China, resilient performance in the U.S., and robust growth in India. However, BHP’s shares, which briefly rose in Sydney following the announcement, were down 0.6% at 10:10 a.m.
Iron ore prices fell by 5% during the reporting period, while copper prices dropped 9%. Additionally, BHP’s iron ore operations in Western Australia’s Pilbara were impacted by Tropical Cyclone Zelia last week. While the company kept its forecast for iron ore output between 282 million and 294 million tons for the year ending June 30, it no longer expects production to fall in the upper half of that range due to the storm’s effects.
Citigroup and Jefferies analysts expect capital allocation to take center stage in the mining sector this year, particularly as companies focus on expanding their portfolios of key commodities such as copper, essential for the energy transition. This shift in focus will be an area of attention for incoming chairman Ross McEwan, who will replace outgoing Ken MacKenzie, who led the company since 2017.
Under MacKenzie’s leadership, BHP emphasized higher investor returns, overseeing the divestment of its oil, gas, and coal assets, and pivoting toward inorganic growth through acquisitions such as the purchase of OZ Minerals in 2022 and a failed $49 billion bid for Anglo American Plc last year.
China’s ongoing economic struggles continue to weigh on BHP’s iron ore business. While Beijing has made efforts to stabilize its struggling property sector, the country’s economic recovery remains fragile. Additionally, China has yet to feel the full impact of tariffs imposed by the U.S. President Donald Trump, who signed executive orders last month levying a 10% tariff on all Chinese imports.
Despite these challenges, BHP remains cautiously optimistic about China’s recovery, with the company pointing to Beijing’s pro-growth policy stance, accommodative monetary measures, and fiscal initiatives aimed at boosting domestic demand. BHP also highlighted India as a “bright spot” for commodity demand.
Looking ahead, BHP sees copper and potash, used in fertilizer production, as crucial growth areas, particularly as demand for iron ore plateaus. To support its copper ambitions, BHP announced plans to invest at least $10 billion over the next 15 years to sustain and grow copper production at its Chilean operations, including a minimum of $4 billion at the Escondida mine.
The Escondida mine, where BHP holds a 57.5% interest alongside Rio Tinto Group, is one of the world’s largest copper mines. BHP also completed the acquisition of Filo Corp. in January, partnering with Lundin Mining to secure a 50% stake in the Filo Del Sol mine in Chile for $2.1 billion.
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