BHP Earnings Drop as Iron Ore and Coal Prices Slump

Strong Profit Growth Despite Lower Payouts

BHP Group, one of the world’s leading mining companies, reported a 14% increase in annual profit for the fiscal year ending in June. However, the company reduced its dividend payout to shareholders as lower prices for iron ore and coal impacted its overall earnings.

The company recorded a net profit of $9.02 billion for the 12-month period, compared to $7.90 billion in the previous year. The prior year's results were affected by significant one-time charges, including a $2.7 billion impairment related to its Australian nickel operations. This helped boost the current year's profit figures.

Despite the positive net profit, BHP's underlying earnings declined compared to the previous year. While higher copper prices provided some support, they were not enough to offset the drop in iron ore and coal prices. Iron ore, which makes up more than half of BHP's revenue, saw a price decline of about 20%.

BHP reported an underlying profit of $10.16 billion, a 26% decrease from the previous year. Analysts had anticipated an underlying profit of approximately $10.22 billion, according to data from Visible Alpha.

Dividend Adjustments and Market Reaction

In response to the financial performance, BHP's board declared a final dividend of 60 U.S. cents per share, down from 74 cents in the previous year. However, this was still higher than market expectations of a 51-cent payout. As a result, BHP's shares rose by 1.0% during late morning trading in Sydney.

CEO Mike Henry emphasized that the dividend, representing 60% of the underlying profit, reflects strong performance despite challenging market conditions. BHP has committed to paying shareholders at least 50% of its underlying attributable profit in each reporting period.

Henry also highlighted that BHP achieved new production records in both copper and iron-ore operations, with unit costs decreasing by nearly 5%. Additionally, the company generated excess cash following the sale of its Carajás assets in Brazil to CoreX, a company founded by Turkish billionaire Robert Yildirim, for up to $465 million.

Strategic Shifts and Future Outlook

BHP is focusing on its most profitable mines and commodities it expects to remain in high demand for decades. The company is expanding its presence in copper, a key metal for the energy transition, and plans to begin producing potash, an essential ingredient for sustainable agriculture.

To support these growth initiatives, BHP has raised its net-debt target range. The new target is between $10 billion and $20 billion, up from the previous range of $5 billion to $15 billion. As of June 30, BHP reported net debt of $12.92 billion, an increase from $9.12 billion the year before.

Henry stated that the change in the debt target was not intended to provide more flexibility for future acquisitions. He noted that valuations for potential assets remain high, making it difficult to balance acquisition premiums with shareholder value.

“M&A is just one of our growth levers,” Henry said. “In today’s market, it’s challenging to find the right combination of commodities, asset quality, and pricing to unlock attractive value for BHP shareholders.”

BHP has been active in the M&A space, recently acquiring Canadian exploration company Filo in a joint deal with Lundin Mining. Last year, the company made a $50 billion bid for Anglo American, but the offer was rejected.

Navigating Economic Uncertainty

Henry acknowledged the mixed global economic outlook, particularly the impact of policy uncertainty and tariffs on investment and trade flows. In the iron-ore market, prices have been pressured by a slowdown in China's real estate sector, while a global surplus is affecting steelmaking coal prices.

Despite these challenges, BHP noted that demand for most of its commodities in the first half of 2025 was stronger than expected. Henry commented that global economic growth is projected to slow to around 3% or slightly below in the near term due to shifting trade policies, but demand for commodities remains robust, especially in China and India.