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(Alliance News) - BHP Group Ltd on Tuesday said its annual earnings fell sharply, amid lower revenue and inflationary pressures.
In the financial year ended June 30, the Melbourne-based diversified mining group said revenue fell 17% year-on-year to USD53.82 billion from USD65.10 billion. The decline was mostly due to "significantly" lower prices across iron ore, metallurgical coal, and copper.
In iron ore and copper - BHP's two largest segments - prices fell 18% and 12% respectively from the prior year.
Last month, BHP said its iron ore production inched up 1% to 257.0 million tonnes for the full year, while copper production rose 9% to 1.7 million tonnes.
On Tuesday, BHP said attributable profit from total operations plunged 58% to USD12.9 billion from USD30.90 billion. The prior year had included an exceptional gain of USD7.1 billion related to the net gain of the merger of BHP's Petroleum business with Woodside, which had completed during the year, BHP noted.
In addition, financial 2023 took a USD1.7 billion hit from "the lagged effect of inflation".
Basic earnings per share dropped to 255 US cents from 611 cents.
"In areas within our control we performed well," said Chief Financial Officer David Lamont.
"Production was up 3% in copper equivalent terms, supported by record annual production at Western Australia Iron Ore, Spence and Olympic Dam. On the cost front we met unit cost guidance for the majority of our assets," he added.
BHP announced a final dividend of 80 US cents, bringing the total payout for the financial year to 170 cents. This was down sharply from the 325 cents the year before.
Shares in BHP were down 1.9% at AUD42.71 each in Sydney on Tuesday afternoon.
Over financial 2023, BHP spent USD7.1 billion on capital and exploration expenditure, which was up 16% higher than the previous year. It now guides for a spend of around USD10 billion for the 2024 and 2025 financial years.
"The majority of this will be directed to improvement and growth, as we progress Jansen, Copper South Australia projects and growth in the Pilbara," CFO Lamont said.
Taking a broader view, BHP notes an "uncertain" outlook for the developed world, but expects China and India to remain "relative sources of stability" for commodity demand.
It expects near term demand to be met by a combination of "rising primary and scrap supply". The most likely outcome for the current financial year is set to be a "small surplus" or a "balanced market", with operational disruptions being a "key swing factor".
In the medium and longer term, it expects traditional demand from sectors such as home building, electrical equipment and household appliances to remain "solid". "The decarbonisation mega-trend is expected to bolster demand," it said. However, costs will likely rise as the challenges of developing new resources increase.
It expects the lag effect of inflation peaks seen in financial 2023, and "continued labour market tightness" to continue to drive costs higher in the current financial year.
"This concern is amplified by the proposed regulatory reform in Australia, which has the potential to add significantly to our labour costs," it noted.
Australia's governing Labor party is set to unveil its next stage of industrial relations reforms in the coming months.
"Overall, the cost of mining production is now estimated to be higher than it was prior to the pandemic. This implies that price support is also expected to be higher than in previous cycles and low-cost operators stand to capture potentially higher relative margins in certain commodities," BHP explained.
By Elizabeth Winter, Alliance News senior markets reporter
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