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New BHP boss wants miner to go up a gear

Mike Henry says he can get miner humming after Andrew Mackenzie rebuilt the foundations
February 19, 2020

BHP (BHP) kept its positive run going from the start of 2019 despite weaker commodity prices, giving new chief executive Mike Henry a positive inaugural first-half result to present. The diversified miner upped its half-year dividend by18 per cent year on year to 65ȼ (50p), off the back of a 15 per cent increase in underlying cash profits, to $12.1bn.   

IC TIP: Hold at 1669p

The flat copper price in the six months to 31 December had less of an impact than they otherwise would have because of higher production and lower costs at Escondida (helped by higher byproduct credits) and lower costs at the iron ore division. BHP also maintained guidance for the full year despite Cyclone Damien in the Pilbara, which saw Rio Tinto (RIO) drop guidance from 330-343 million tonnes (t) to 324-334mt. BMO analyst Edward Sterck said this meant BHP could “capitalise on any price support from reduced seaborne supply”. 

Looking ahead, Mr Henry flagged “the coronavirus outbreak, trade policy and geopolitics” as risks to commodity prices in the second half.  The chief executive took over from Andrew Mackenzie at the start of the year, and was determined to put a new spin on the company on his first major outing. 

On an analyst call, he said Mr Mackenzie had given BHP good foundations but he would get the company “humming”. This will involve bringing more operational jobs in-house and looking to exploration and early-stage acquisition for growth, he said. 

BHP was one of the first major extractive companies to commit to both measuring and trying to reduce its scope 3 emissions, which are those from down the supply chain. The first-half 2020 results came and went without concrete goals in this space, although Mr Henry said BHP had started working with steelmakers in China. 

BHP has made other steps to cut its scope 1 and 2 emissions (those from direct operations and the power they use), like a 2022 shift to renewable power at its massive Chile copper operations, but still owns coal assets. Mr Henry said he would sell BHP’s thermal coal holdings “for value” but will keep metallurgical coal as part of the portfolio. Glencore chief executive Ivan Glasenberg was asked on Tuesday if he was interested in BHP’s Mt Arthur thermal coal mine in New South Wales, but declined to comment. 

Bloomberg consensus places 2020 full-year cash profits at $23.6bn, up slightly from $23.2bn in 2019.

BHP (BHP)    
ORD PRICE:1,669pMARKET VALUE:£94bn
TOUCH:1,668.6-1,669.2p12-MONTH HIGH:2,079pLOW: 1,586p
DIVIDEND YIELD:6.6%PE RATIO:12
NET ASSET VALUE:951¢*NET DEBT:24%**
Half-year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (ȼ)Dividend per share (ȼ)*
201820.76.8076.655.0
201922.37.7996.365.0
% change+8+15+26+18
Ex-div:05 Mar   
Payment:24 Mar   
£1=$1.30, *Includes UK and Australian-listed shares **Includes lease liabilities of $1.9bn