World’s biggest miner BHP reported a 2 per cent rise in underlying profit for the year to the end of June and declared a record dividend.
AJ Bell investment director Russ Mould said: “Diversified natural resources group BHP seems quite confident about the future given generous dividend payments and willingness to keep spending billions of dollars on project developments and looking for the next big metals or energy discovery.
“One might have expected the company to conserve cash and go into cautious mode given a backdrop of gloomy economic data. However, it seems like it is business as usual for BHP as it lays out plans to spend around $8 billion a year on capital and exploration expenditure.
“While considerably less than the $20 billion-plus it used to spend in the previous commodities boom, this is still a very significant amount of money.
“Big miners like BHP have historically thrived in more different market conditions thanks to having world-class assets with low operating costs. If commodity prices fall sharply, someone like BHP would have a better chance of still being able to operate profitability versus many of its competitors which could struggle.
“BHP, like most of its FTSE 100 natural resource peer group, has been streamlining its business in recent years and paying more attention to achieving greater operational efficiencies and stripping costs out of the business. That should put it in a stronger position should there be another commodities downturn.
“However, the current negative backdrop would suggest BHP may find it hard to keep growing earnings at the current rate, particularly in the short term.”
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