BHP Foresees an economic recovery in China and central bank rate cuts to boost demand for steel and copper but asks to be vigilant about potential trade tensions posing risks to global growth, as it reported its lowest first-half profit in six years.
BHP had planned a $49 billion takeover of Anglo American, aiming to gain control of its valuable copper assets in Latin America. However, Anglo American rejected the deal, leading BHP to abandon its acquisition attempt. Following this failed bid, BHP’s CEO Mike Henry stated that the company is no longer considering acquisitions for the time being.
“Our current focus is 100% on organic growth options,” Henry said as per Reuters’ report.
BHP reported and announced a profit of $5.08 billion for the six months ending December 2024 on Tuesday, which is 23% lower from a year earlier but slightly ahead of the Visible Alpha consensus estimate of $5.01 billion. Its shares eased 0.3 %, showing consistency compared to the performance of other major mining companies.
It announced a 50 cents per share interim dividend, its lowest since 2017, down from 72 cents per share last year, but in line with consensus at the bottom end of the miner’s payout policy.
“The in-line results and dividend exceeded our expectations,” according to Macquarie analyst Rob Stein.
Following a string of cyclones that have hit Australia’s west coast and snarled iron ore shipments, BHP is expecting its full-year iron ore output from Western Australia to no longer be in the upper half of the expected range of between 282 million and 294 million metric tons.
However, the company expects global interest rate cuts to boost demand for its two main products, iron ore and copper, which has grown to account for nearly half of its profits.
“Central banks’ ongoing rate cuts are expected to translate into a recovery for steel and copper demand across the OECD (Organisation for Economic Co-operation and Development) in the near term,” it said.
“However, potential trade tensions present a risk to the recovery in developed economies and across the globe,” Henry said, adding that BHP’s exposure to U.S. tariffs was muted as the market accounts for only 3% of its revenue.
Despite the declining global trade and market uncertainties, BHP’s product demand has remained stronger. Henry also noted that he sees early signs of recovery in China, resilient economic performance in the U.S., and expansion in India.
BHP’s copper operations earned $5 billion in the first half of the year, growing by 44% as tight supply-demand fundamentals, Chinese stimulus plans and interest rate cuts in the United States are all contributing to the copper prices elevated.
It expects to invest $4.7 billion in fiscal 2025 on expanding its copper operations. By June, the company expects to have a growth of 24% or some 300,000 tonnes over the past three years.