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BHP Quotes Strong China Demand For Its Dividend Bonanza

BHP Quotes Strong China Demand For Its Dividend Bonanza
With increased demand for iron ore from China in recent months, the top metal user of the world, to support the country’s push in infrastructure development, there was a surge in the price of the raw material which helped Australia’s mining giant BHP Group to report its best profit for its first half of the year in seven years while also declaring a record interim dividend.
The prices of the steel making ingredient has been pushed to multi-year highs because of the reliance of China on implementing commodity intensive stimulus measures to stimulate economic growth of the country. The company has also benefited from a brighter outlook for the global economy and trade this year because of the roll out of the Covid-19 vaccines across the world.
The company expects a continuation of the strong demand from China throughout 2021 as well as the recovery of the global crude steel production for the rest of the world, said the largest listed miner of the world in a statement.
"It's a pretty solid result," said portfolio manager Andy Forster of Argo Investments. "Relative to expectations, it looked pretty good, strong cash flows and dividend, projects operationally performing well," he said. "Strong iron ore and copper should set it up for a pretty good second half as well."
It is expected that like BHP, its Australian peers will also benefit from the sky high prices for iron ore when they report their performance later this week. Rio Tinto is set to report its quarterly performance on Wednesday while Fortescue will do so on Thursday. Record annual iron ore output was forecast by BHP last month.
The Australian mining giant also declared an interim dividend of $1.01 per share which was higher than its last year’s payout of $0.65 per share dividend.
The company also reported a growth in its underlying profit from continuing operations for the six months ended December 31 to $6.04 billion compared to $5.19 billion for the same period a year ago. However the company missed the consensus estimates of 17 analysts compiled by research firm Vuma Financial of $6.33 billion.
But the trade dispute between Australia and China has hit BHP’s coal business and the company does not expect the trade spat to get resolved any time soon, the company acknowledged. BHP is reviewing its coal business and contemplating a sale or a spin off.
"We're certainly not banking on any near-term resetting of that policy," Chief Executive Mike Henry told reporters on a results call.
Investment decision on the $5.3-$5.7 billion Jansen potash project in Canada as well as on the $1.4-1.9 billion Scarborough natural gas project off Western Australia are to be taken by the company soon.
Jefferies said kin a report that it expects the company to approve both the investment projects, "but we believe M&A options will be considered as well," it said.

Christopher J. Mitchell

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