BHP Earnings: What to Expect from World's Largest Miner
BHP Group, the world's largest miner by market value, is set to release its first-half earnings on Tuesday, just before the Australian market opens. Analysts are predicting that the company will post an underlying profit of $6.43 billion for the six months ending Dec. 31. This figure is based on 15 analyst forecasts and is slightly lower than the underlying profit of $6.60 billion that BHP reported for the same period last year.
Directors are expected to declare an interim dividend of 69 cents per share, which is a decrease from the 90 cents per share dividend that was declared a year ago. However, these figures were compiled before BHP announced last week that it would be taking a write-down against its nickel assets and increasing its provision for the 2015 Samarco dam failure. This may impact the final dividend amount.
One aspect to watch closely is the payout ratio, which is the proportion of underlying profits that BHP pays out as dividends. Last year, the payout ratio was 69%, but analysts are predicting that it will be closer to 55% this time due to higher net debt. This could be further impacted by rising capital expenditure and ongoing Samarco claims.
BHP's nickel business in Western Australia has also been a topic of concern. The company announced an impairment of approximately $2.5 billion against the carrying value of the business and stated that it may mothball its Nickel West operations for an unspecified period of time due to falling prices. Investors will be interested to hear from executives during the earnings call about the company's plans to navigate this downturn.
With BHP projecting a challenging future for the nickel market, attention will turn to where the company plans to find growth. Nickel had previously been identified as a key growth area, but analysts suggest that new, non-organic growth options may now be necessary.
The release of BHP's first-half earnings will provide valuable insights into the current state of the company and the challenges it faces. Investors and analysts will be closely watching the profit figures, dividend declaration, payout ratio, and plans for future growth in order to assess BHP's performance and future prospects.
Analyst comment
Positive news:
– BHP Group is expected to post a strong underlying profit of $6.43 billion for the six months ended Dec. 31, slightly lower than the previous year’s profit.
– Directors are expected to declare an interim dividend of 69 cents a share, which is lower than the previous year’s dividend but still demonstrates a commitment to shareholder returns.
Neutral news:
– The payout ratio is expected to be around 55% due to higher net debt and ongoing Samarco claims. This is slightly lower than the previous year’s payout ratio but still within BHP’s policy of paying a minimum 50% of underlying profit as dividends.
– BHP flagged an impairment of roughly $2.5 billion against its nickel business and potential mothballing of Nickel West operations due to a fall in prices. Investors will be eager to hear about BHP’s strategy to ride out the downturn in the nickel market.
As an analyst, I predict that the market reaction will be relatively neutral to slightly negative as BHP’s profit is slightly lower than the previous year and the dividend is also lower. The uncertain outlook for the nickel business may also weigh on investor sentiment.
