BHP Group Ltd on Tuesday reported a slump in interim profit, after its half-year was stung by an impairment of its nickel assets, and a charge related to the Brazilian dam incident in 2015.
The Melbourne, Australia-based resource miner said attributable profit dropped 86% to $927 million in the six months to December 31, from $6.46 billion the prior year.
BHP last Thursday had flagged that two charges would hit its interim results.
The sharp drop stemmed from a non-cash impairment charge of $2.5 billion against the carrying value of Western Australia Nickel, the company’s Australian nickel business unit. This follows a sharp fall in the price of nickel, amid supplies of cheap nickel from Indonesia.
BHP last week said it is reviewing the future of its Australian nickel operations, and has decided to place the Kambalda nickel concentrator into care and maintenance in June. BHP is also considering whether to put the entire Nickel West unit, which alongside West Musgrave forms the Western Australia Nickel project, into a period of care and maintenance.
BHP also recorded an income statement charge of $3.2 billion in relation to the fatal failure in 2015 at the company’s jointly-owned Samarco dam in southeastern Brazil.
On an underlying basis, attributable profit was mostly flat year-on-year at $6.57 billion compared to $6.60 billion. Operating profit dropped 56% to $4.80 billion from $10.83 billion.
BHP cut its interim dividend by 20% to 72 US cents from 90 cents.
‘The period also had its challenges, with adjustments relating to Nickel West, West Musgrave and Samarco offsetting an otherwise solid operational performance and overall healthy commodity prices,’ said Chief Executive Officer Mike Henry.
More positively, revenue rose 5.9% year-on-year to $27.23 billion from $25.71 billion. The rise was mostly down to higher iron ore and copper prices, as well as the contribution from new mines - Prominent Hill, a major copper, silver, and gold mine in north west South Australia, and Carrapateena copper mine in South Australia’s Far North region.
Despite a 43% increase in sales volumes at New South Wales Energy Coal, realised prices fell 65%, which offset the topline rise somewhat.
‘We’ve seen volatility in global commodity prices and demand in the developed world has been softer than expected. That said, China demand is healthy despite weakness in housing and India remains a bright spot. In Australia, the mining industry is facing near-term headwinds in developing resources and it’s essential that the right industrial relations and fiscal settings are in place to support the sector’s ability to compete and win in global markets,’ CEO Henry continued.
Shares in BHP fell 1.1% to A$45.54 each in Sydney on Tuesday.
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