Mining group BHP reported a 23% decline in profit for the first half as an increase in copper, iron ore and steelmaking coal sales was offset by low iron ore and steelmaking coal prices.
The company delivered an improved operational performance, with copper production increasing by 10% year on year in the six months to end-December.
The increase in copper output, combined with higher copper prices, saw the metal making up a greater proportion of BHP’s earnings. Copper’s share of underlying earnings before interest, tax, depreciation and amortisation (ebitda) grew from 25% to 39%.
However, underlying attributable profit was down 23% at $5.1bn, with revenue in the six months to end-December $2bn lower than in the second half of 2023, primarily driven by a decline in iron ore and steelmaking coal prices.
The profit slump prompted BHP to cut its interim dividend to 50 US cents per share, down from 72c in the previous comparable period.
China is a significant customer for BHP’s goods, particularly its iron ore and steelmaking coal, and the country’s economic slowdown and low activity in its construction sector put pressure on its steel production in the second half of last year, in turn lowering the demand for iron ore and steelmaking coal.
BHP, the world’s largest holder of copper resources, last year made three attempts to buy Anglo American, each of which was turned down. While the door is still open for further buyout offers, BHP CEO Mike Henry said the tough market conditions had weighed on BHP’s appetite for inorganic growth.
“Given the market circumstances, we think it’s increasingly challenging to do large M&A for value, and at the end of the day we are all about shareholder value.
“At the same time, we’ve made significant progress on growing and maturing our portfolio of attractive organic projects in copper and potash. We are 100% focused on delivering those,” said Henry.
Henry said that there would still be speculation about deal activity, but the group’s focus was entirely on organic growth.
In line with this, BHP reported $5.2bn in capital and exploration expenditure for the period under review, up 10% year on year, with $3.2bn invested in potash and copper.
The group’s focus is on growing its exposure to copper and potash, both of which have a demand outlook supported by the world’s industrialisation and population growth. As a result, it plans to invest about 65% of its medium-term capital on these “future-facing commodities”.
“The trajectory of the world population growing from 8-billion today to 10-billion in 2050, with more people living in cities, together with the energy transition and the growth of data centres and AI, will compound the need for more metals and minerals,” said Henry.
On top of the $3.2bn investment in copper and potash, the group completed the $2bn formation of Vicuña Corp last month. This joint venture with Lundin Mining is aimed at developing the Filo del Sol and Josemaria copper projects in Argentina.
Interest rate cuts were expected to drive a recovery in steel and copper demand across the Organisation for Economic Co-operation and Development (OECD) in the near term and Henry considered early signs of recovery in China, strong growth in India and a resilient economic performance in the US as positive indicators.
However, the company warned that potential trade tensions, such as US tariffs, could threaten the recovery in developed economies, with sluggish industrial activity weighing on the demand for commodities.
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