BHP data was hit by inflation and weak commodity prices

BHP blamed inflation and weak commodity prices for the drop in profits in the second half of last year, but said “strengthening activity” in China was cause for optimism for the year ahead.

The Australian miner’s revenue fell 16 percent to $25.7 billion and attributable profit fell 32 percent in the six months to December 31 compared to the same period last year.

“Commodity prices are going down – it’s a cyclical industry,” chief executive Mike Henry told the Financial Times. “However, the underlying performance of the business is very strong,” he added, pointing to increased copper production as an example.

Inflation increased its costs by about $1 billion due to factors such as higher gas prices.

At the same time, the price of iron ore, which typically accounts for more than half of BHP’s income, was about 25 percent lower in the given period than a year earlier.

Inflation and labor shortages have lifted the price of mining iron ore in Western Australia to $18.30 a tonne from $16.15 in 2021.

However, the company was optimistic about its outlook for China, pointing out that now that the epidemic restrictions have been lifted, activity there is strengthening.

According to Henry, Chinese and Indian demand will be a “stabilizing counterweight” to the slowdown in the US and Europe.

“This will be another billion-ton plus year for Chinese steel production, which is likely to be an increase over last year,” he added.

Iron ore prices have risen nearly 30 percent since November as Chinese mills began replenishing inventories and picking up activity.

Henry also welcomed the recent news that China has eased its unofficial ban on Australian coal imports. “We are very encouraged by the improvement in trade relations,” he said, adding that BHP is “ready to work with Chinese customers”.

BHP announced a dividend of $0.90 per share, or $4.6 billion, the fifth highest half-yearly dividend in its 138-year history.