BHP coal impairments hit profits

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BHP coal impairments hit profits

PERTH (miningweekly.com) – Diversified major BHP has reported solid interim results for the half-year ended June, with both revenues and underlying attributable profit up on the previous corresponding period.

Revenue for the half-year was up 15% to $25.6-billion, while underlying attributable profit was up 16% on the prior period to $6-billion.

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BHP reported that attributable profit for the year was down by 20% on the previous corresponding period, to $3.8-billion, and accounted for a $2.2-billion loss related to impairments of the New South Wales energy coal and associated deferred tax assets, and Cerrejon, as well as Covid-19 related costs.

The miner noted that the total impact from Covid-19 on its operations was worth some $436-million pre-tax in the December halfyear, brought on by lower volumes at operated assets, and additional direct costs incurred in relation to preventative measures, such as increased social distancing, security and health and hygiene services.

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Profit from operations reached $9.8-billion in the half-year to December, compared with the $8.3-billion in the previous corresponding period, driven by higher iron-ore and copper prices, record production from the Western Australian iron-ore operations, and record average concentrator throughput at Escondida, in Chile, as well as a solid cost performance supported by cost reduction initiatives across BHP’s assets.

This was partially offset by a stronger Australian dollar, planned maintenance, natural field decline at its petroleum assets, copper grade decline, and adverse weather and inflation.

BHP reported that underlying earnings before interest, taxes, depreciation and amortization increased by 21% in the period, to $14.6-billion, while net operating cash flows increased by 26%, to $9.3-billion.

“BHP has delivered a strong set of results for the first half of the 2021 financial year,” said CEO Mike Henry on Tuesday.

“Our continued delivery of reliable operational performance during the half supported record production at Western Australia iron-ore and record concentrator throughput at Escondida.

“Our operations generated robust cash flows, return on capital employed increased to 24% and our balance sheet remains strong with net debt at the bottom of our target range. The board has announced a record half-year dividend of $1.01 per share, bringing BHP’s shareholder returns to more than $30-billion over the past three years.”

Henry said on Tuesday that the company further grew value in the business during the half-year under review through achieving first production at the Spence Growth Option and through the acquisition of an additional interest in Shenzi.

“Our other major projects in iron-ore, petroleum and potash are progressing to schedule.

“Creating and securing more options in future-facing commodities remains a priority. In nickel and copper, we established further new partnerships, acquired new tenements and progressed exploration. 

“Our outlook for global economic growth and commodity demand remains positive, with policymakers in key economies signalling a durable commitment to growth and signalling ambitions to tackle climate change. These factors, combined with population growth and rising living standards, are expected to drive continuing growth in demand for energy, metals and fertilisers,” said Henry.

Capital and exploration expenditure guidance for the 2021 financial years has increased from the $7-billion to $7.6-billion owing to a stronger Australian dollar, and guidance for the 2022 financial year has remained unchanged at around $8.5-billion.

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