Soaring commodity prices lift BHP to best profit in 11 years, growing arsenal for M&A

A small toy figure and a mineral imitation appear in front of the BHP logo in this November 19, 2021 illustration. REUTERS/Dado Ruvic/Illustration

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  • Annual profit up 26%, shares up 5.5%; record dividend
  • Does not rule out new offer for OZ Minerals, first offer rejected
  • OZ Minerals “nice to have, but not a must have” – ​​BHP CEO

Aug 16 (Reuters) – BHP Group Ltd (BHP.AX) on Tuesday reported record profits amid rising commodity prices, sending shares higher as the global miner took a second approach in its spurned $6 billion bid for OZ Minerals not ruled out ( OZL.AX).

Shares of the world’s largest mining company by market value soared 5.5% as investors hailed a better-than-expected 26% annual profit jump to $21.3 billion — the highest since 2011 — and the announcement of a record dividend .

Cashier and nimbler after merging its public holdings in London and Sydney, BHP is again looking for acquisitions and on August 8 offered to buy copper and nickel miner OZ Minerals in an A$8.34 billion deal (June 5). $.8 billion) — its second takeover bid in a year. The offer was rejected. Continue reading

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“We have many levers for growth, and mergers and acquisitions is just one of those levers … we will remain disciplined,” BHP chief executive officer Mike Henry said during an earnings briefing.

Henry did not comment on whether BHP would return to OZ Minerals with a revised offer. OZ Minerals shares were up 1.2% by 0230 GMT, while the Sydney benchmark was up 0.5%.

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“It’s nice to have, but not a must,” Henry said, referring to OZ Minerals. “It’s quite disappointing that the board (of OZ Minerals) has decided not to get involved,” Henry told reporters at a media briefing after announcing his company’s full-year results.

The increase in underlying income from continuing operations topped a consensus estimate of $20.89 billion compiled by Vuma Financial.

The bid for OZ Minerals, along with the merger of its petroleum business in June, shows BHP has large excess cash flow and is looking to expand, said Azeem Sheriff, a market analyst at CMC Markets.

“The copper and energy space is really positive for the company and that’s reflected in the step-forward guidance,” said Sheriff.

“BHP retained $4 billion in cash despite having $300 million in net debt, which tells us the balance sheet remains prepared for further mergers and acquisitions,” RBC analysts said in a statement.

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FORWARD-LOOKING GROWTH

For the fiscal year ended June 30, shareholders will receive a final dividend of $1.75 per share, which translates to a peak annual payout of $3.25 per share, at a time when other miners have been cutting investor returns to contend with declining profits.

The miner said it will explore options to expand production at its main iron ore production unit to 330 million tons per year and will continue to explore growth options in “future-looking” commodities such as copper and nickel.

The miner’s performance at its Western Australian iron ore operations also helped offset a fall in prices of the raw material used to make steel from last year’s record levels as China’s push to curb emissions and easing construction activity in the country’s debt-ridden real estate sector spurred demand restricted.

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“We expect China to emerge as a source of stability for commodity demand in the coming year, with policy support gradually taking hold,” Henry said.

BHP also warned of a slowdown in advanced economies as monetary policy tightens and said it expected labor restrictions would continue to put pressure on global and local supply chains.

Competing miner Rio Tinto (RIO.AX), (RIO.L) reported a 29% fall in first-half profit and halved its dividend by more than half in July, citing slowing demand from China and shortages in the supply chain. Continue reading

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Reporting by Savyata Mishra in Bengaluru and Praveen Menon in Sydney; Edited by Arun Koyyur and Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.

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