BHP Profit Falls on Nickel, Brazil Iron Ore Asset Write-Down

Anglo-Australian mining giant BHP Group Ltd. on Tuesday saw its profit decline in the first half, as the company received a blow from a write-down of its nickel assets and Brazil iron ore holdings.

BHP stated that its underlying profit from continuing operations in the six months ending December 31 stood at $6.6 billion.

However, its net income in the period dropped 86% from the year earlier to $927 million, marking its lowest statutory profit since February 2016, when it posted a $5.6 billion half-year loss due to impairments.

That was also the case for the latest slide, with the world’s largest miner taking a hit from $5.7 billion in impairments and charges. First-half sales climbed 6% from the previous year to $27.2 billion.

The Melbourne-based firm said it would pay shareholders a $0.72 interim dividend worth $3.6 billion, slightly exceeding expectations of $0.69 per share.

Still, it ended below the $0.90 per interim dividend in the last six months and was the lowest half-year payout since February 2020.

BHP’s Nickel, Iron Ore Woes

The report came after BHP warned last week that its half-year earnings would be weighed by billions of dollars in impairments and charges.

In the same week, the company announced a $2.5 billion post-tax impairment on the value of its Western Australian nickel assets, as Indonesia’s increased exports of the battery metal led prices down.

BHP chief executive Mike Henry said they have observed volatility in commodity prices globally, and demand in the developed world has been weaker than anticipated.

Nickel prices have fallen around 40% in 2023 as new refining methods made the country’s low-quality nickel a key component in lithium-ion electric vehicle (EV) batteries. The slump shows how producers see no improvement any time soon as sales growth for EVs loses momentum.

Adding to BHP’s woes were the costs related to the Brazilian mining disaster in 2015.

In January, a Brazilian federal judge ordered the Australian miner and Rio de Janeiro-based Vale SA to pay R$47.6 billion ($9.67 billion) in compensation for damages caused by a dam failure at their joint iron ore mining venture, Samarco Mineração SA.

BHP will also separately shoulder an additional $3.2 billion impairment from the incident, bringing the costs associated with the dam collapse the company needs to cover to about $6.5 billion.

Iron ore remains a significant source of revenue for the firm, with the prices of steel-producing material rising 28% over the reporting period and staying historically high.

BHP expects all its assets to hit output and cost targets for the full-year period, stating that demand from its top client China was ‘healthy’ despite a weaker housing sector, while India was still a ‘bright spot.’

The two countries are likely to stay as critical sources of stability for commodity demand, according to the company.

User Review
0 (0 votes)


Leave a Reply