Diversified mining giant BHP has surprised shareholders with a record $5.1bn (R73.4bn) interim dividend, saying it is more upbeat about global economic prospects in light of vaccine rollouts and stimulus efforts.
The world’s largest listed miner says it is encouraged by the pro-growth agendas of politicians in large economies and is optimistic about sustained demand for commodities in the 2020s.
The group, which has a primary listing in London and a secondary listing on the JSE, effectively quit SA in 2015 when it spun off some of its operations, including coal, manganese and zinc interests, into a new company, South32.
“We are confident in the outlook,” CEO Mike Henry said during the results presentation. “While the world is a more volatile and uncertain place today, the global economy is rebounding strongly despite the ongoing effects of Covid-19.”
BHP now estimates that the world economy will be 4.5% smaller in the 2021 calendar year than it would have been if Covid-19 had not occurred, which is a 1.5 percentage point improvement from its view six months ago.
High iron ore and copper prices helped offset lower petroleum, coal and nickel prices in the half-year to end-December, with the group raising its interim dividend by 55% to $1.01 per share.
The group has paid out $30bn to shareholders over the past three years, with debt falling 7% year on year to R11.84bn at the end of December.
Christiaan Bothma, an investment analyst at Sanlam Private Wealth, said BHP recorded a strong operational result largely in line with market expectations. However, the interim dividend payout of 85% of earnings, which is well above the minimum of 50%, surprised the market to the upside, he said.
“With current high spot prices for iron ore, we see further upside for shareholder returns over the next six months, especially given that debt levels are well contained below management’s guided range,” said Bothma.
Profit from operations rose 17% to $9.75bn, with Covid-19 costing it $436m before tax, due to increased security, health and hygiene costs. The group, however, reported that net profit fell a fifth to $3.87bn. This was largely a result of $2.2bn in one-off items, primarily due to previously flagged write-downs to its thermal coal operations.
BHP said there was uncertainty regarding coal production, given a Chinese ban on Australian coal imports. However, CFO David Lamont said on Tuesday the group had been able to redirect its coal to other markets.
BHP’s outlook for global economic growth and commodity demand remains positive, said Henry, with the group expecting continuing growth in demand for energy, metals and fertilisers.
The group expected more than 1-billion tonnes of steel production in China for the third consecutive year, Henry said.
In afternoon trade on Tuesday, BHP’s share was up 2.54% to R452.46 while the JSE’s resources index was up 1.23%. The group’s share has risen 16.32% so far in 2021 and 39% over the past 12 months.
Update: February 16 2021
This article has been updated with additional information throughout.