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BHP Warns Over Virus Impact as Iron Ore Profits Boost New CEO

BHP Warns Over Virus Impact as Iron Ore Profits Boost New CEO

(Bloomberg) -- BHP Group’s first-half earnings surged 29% on higher iron ore prices, allowing the company’s new top executive to extend a run of bumper returns to investors, even as the impact of the coronavirus outbreak stokes short-term uncertainty.

The world’s top miner boosted its interim dividend payment 18%, though acknowledged that move reflected “caution due to near term market volatility driven by the 2019 coronavirus disease outbreak, trade policy and geopolitics.” BHP said Tuesday it will revise down expectations for economic and commodity demand growth, if the virus isn’t “demonstrably well contained” this quarter.

BHP Warns Over Virus Impact as Iron Ore Profits Boost New CEO

Key Insights

  • New Chief Executive Officer Mike Henry, a company veteran promoted to the role last month, set out some tentative details of his plans for the company, saying he wants BHP to be “safer, lower cost, more reliable and more productive -- with our portfolio and capabilities fit for the future.”
    • Investors will be looking for more specifics as Henry hosts teleconferences Tuesday, and holds meetings over the coming weeks.
  • The first-half earnings show just how dependent BHP remains on iron ore as an engine of profits. Sales of the steelmaking ingredient accounted for about 47% of revenue in the first half, up from about 36% a year ago.
    • Underlying earnings at BHP’s continuing operations jumped to $5.2 billion from $4.03 billion a year earlier, BHP said. That was in line with a $5.1 billion median estimate among five analyst forecasts compiled by Bloomberg.
  • BHP is progressing work to set new goals for scope 3 carbon dioxide emissions -- those generated by customers using the company’s products -- and will outline new climate change plans later in 2020. Henry is facing more intense scrutiny over emissions and on preparations for longer-term shifts in demand for fossil fuels.
  • The producer flagged petroleum output is now seen at the bottom of a forecast range of 110-116 MMboe as a result of Tropical Cyclone Damien off the coast of Western Australia. Iron ore and coal operations remain on track, it said.

Market Reaction

  • BHP’s Sydney-traded shares have advanced about 4% in the past year, lagging rivals including Rio Tinto Group and Fortescue Metals Group Ltd.

Get More

  • For more details on the earnings data, click here.
  • Read the statement here.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editors responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net, Keith Gosman, Rob Verdonck

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