Shares of the ASX-listed BHP Group Limited (AU:BHP) declined after the miner’s first-half profits dropped due to impairment charges on its nickel assets. BHP shares fell by 1.3% in today’s session, continuing their downward trajectory in 2024, resulting in a year-to-date loss of nearly 10%.
BHP is a multinational mining company with a diverse portfolio of commodities such as iron ore, coal, copper, nickel, and various other minerals.
Surviving the Nickel Crisis
Australia’s nickel industry is facing a crisis, with several companies suspending operations due to a sharp decline in the metal’s price. This decline is mainly attributed to a slowdown in demand from EV manufacturers and increased supply from countries like Indonesia.
BHP expressed concerns that the Australian government’s intervention to rescue the country’s nickel industry may not be adequate. It also stated that it is currently assessing options for its Nickel West business, a key nickel supplier to the global battery metals market.
Investors were also disappointed with the 20% cut in the company’s interim dividend to $0.72 per share.
Financial Numbers in the First Half
Speaking of the results, BHP reported an 86% drop in after-tax profits to $927 million, primarily due to an exceptional loss of $5.6 billion, stemming from the impairment of Western Australia Nickel and charges related to the Samarco dam failure. Excluding these charges, the company’s underlying profit remained flat year-on-year at $6.6 billion.
BHP’s revenue increased by 6% year-over-year to $27.2 billion, driven by iron ore and copper prices, alongside contributions from new mines like Prominent Hill and Carrapateena.
BHP Share Price Forecast
Post-results, analyst Paul McTaggart from Citi confirmed his Hold rating on the stock, predicting a 7.8% increase in the share price. McTaggart stated that the company’s outlook is supported by the slight improvement in the global economic forecast, especially the stable commodity demand in China and India.
According to TipRanks’ consensus, BHP stock has been assigned a Hold rating, backed by nine Holds, four Buys, and one Sell recommendation. The BHP share price target is AU$50.72, which is 11.6% above the current trading price.
