MELBOURNE (Reuters) – BHP Group reported its best first half profit in seven years on Tuesday, announcing a record interim dividend as China’s strong appetite for iron ore to support its infrastructure kept prices high.
China’s reliance on commodity-intensive stimulus to support economic growth has led prices of the steelmaking ingredient to soar to multi-year highs, while the COVID-19 vaccination attempt has improved the outlook for world trade this year.
The largest publicly traded miner in the world said in a statement that it expects a continuation of strong Chinese demand in 2021 and recovery of the rest of global crude steel production.
“It’s a pretty solid result,” said Argo Investments portfolio manager Andy Forster.
“Relative to expectations, things looked pretty good, strong cash flows and dividends, projects performed well,” he said. “Strong iron ore and copper should also prepare it for a reasonably good second half.”
BHP is the first of its Australian competitors to report this week, and all are expected to make money off sky-high iron ore prices. Rio Tinto reports Wednesday and Fortescue Thursday. Last month, BHP predicted record iron ore production per year.
The company announced an interim dividend of $ 1.01 per share, up from its payout of $ 0.65 per share last year.
Underlying profit from continuing operations for the six months ended December 31 increased from $ 5.19 billion last year to $ 6.04 billion. However, it missed a $ 6.33 billion consensus from 17 analysts compiled by research firm Vuma Financial.
BHP acknowledged that its coal business, which is currently under review for sale or spin-off, has been hit by a trade hiatus between Australia and China that the miner does not expect to resolve anytime soon.
“We certainly do not expect this policy to be reset any time soon,” Chief Executive Mike Henry told reporters in a results call.
BHP is expected to make an investment decision shortly on the $ 5.3- $ 5.7 billion Jansen potash project in Canada and the Scarborough natural gas project in Western Australia, in which BHP will invest $ 1.4-1.9 billion.
Jefferies expects both to be approved, “but we think M&A options will also be considered,” a report said.
Reporting by Melanie Burton in Melbourne, Shriya Ramakrishnan and Anushka Trivedi in Bengaluru; Edited by Grant McCool and Sam Holmes