17/08/2021 - 15:52

BHP lifts profit, announces three major deals

17/08/2021 - 15:52

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BHP is reshaping its business and corporate structure, with the company selling its petroleum division, making a big investment in potash and ending its dual-listed structure.

BHP has announced a big investment in potash.

BHP is reshaping its business and corporate structure, with the company selling its petroleum division, making a big investment in potash and ending its dual-listed structure.

The mining giant has approved US$5.7 billion in capital expenditure for the Jansen stage 1 project in Canada.

It confirms that BHP sees potash as one of its key commodities, alongside iron ore, copper and nickel.

BHP has also confirmed the sale of its petroleum business to Woodside Petroleum, through a scrip-based deal that will create a global top 10 energy company.

The merged company will be valued at about $40 billion – nearly double Woodside’s pre-deal valuation.

In a third major initiative, BHP intends to unify its ‘dual listed company’ corporate structure under its existing Australian parent company.

BHP has previously resisted pressure from activist shareholders to adopt this change but said it now stacked up.

It said that following recent changes to its portfolio, there has been a significant reduction in the earnings contribution from assets held by UK-based BHP plc.

In addition, it said there was a material reduction in the expected costs of unification of approximately US$1.2 billion, with one-off costs now expected to be US$400 to US$500 million.

Unification would result in a corporate structure that is simpler and more efficient, reduce duplication and streamline its governance and internal processes, BHP said.

The company’s board and management, and dividend policy, will remain the same.

The suite of deals overshadowed the announcement of a strong lift in earnings, driven by its Pilbara iron ore business.

Profit from operations jumped 80 per cent to US$25.9 billion.

Attributable profit of US$11.3 billion included an exceptional loss of US$5.8 billion predominantly related to the impairments of its potash and energy coal assets, and the current year impact of the Samarco dam failure in Brazil.

It will pay a final dividend of US$2.00 per share, taking total dividends to US$3.01 per share, equivalent to an 89 per cent payout ratio.

Chairman Ken MacKenzie said the company’s performance over the past year illustrated the strength of its portfolio, balance sheet, people and culture.

BHP is in a strong position to manage its future in a time of rapid change,” he said.

“We have a clear strategy and are executing against it.

“Jansen stage 1 will give BHP exposure to a commodity with a strong demand outlook and decades of potential growth.

“The agreement to pursue a merger of BHP’s petroleum business with Woodside will maximise the value of our oil and gas assets through increased operating scale and synergies, with a more diversified product portfolio to support the energy transition.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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