Stock Market

Tough Times for BHP: Slumping Profits and Wobbly Shares

Heads up! BHP Group (ASX:BHP), the mining big shot of the globe, faced quite a rough patch this Tuesday. Why? Well, it seems like our friends over in China aren’t craving metal as much as they used to, especially that iron ore. Imagine this, BHP’s profit for the fiscal year of 2023 took a nosedive, shrinking a whopping 37% to $13.4 billion. Ouch! That’s the rockiest it’s been in the past three years. To paint a clearer picture, it’s like the company’s annual revenue shrank, like a wool sweater in hot water, by 17% to a mere $53.8B.

Hold onto your hats, because there’s more. The Anglo-Australian mining giant, maybe feeling a bit generous, dished out a final dividend of $0.80 a share. If you’re thinking, “Wasn’t it higher last year?” You’re spot on! It tumbled down from last year’s $1.75. The aftermath? BHP’s shares stumbled and fell, causing the ASX 200 index to catch a cold, dipping by 0.3%.

Drilling deeper, one major hiccup was a steep 18% drop in the price tag they got for iron ore sales in 2023. The culprit? China’s shrinking appetite for metal. It’s like the country’s hunger for metal fizzled out, pulling down the market prices like a lead balloon over the past year.

Word on the street is that China’s economy’s on a bit of a roller-coaster. Even with COVID restrictions loosening up, things like manufacturing and real estate, which are pretty much China’s bread and butter, haven’t bounced back. And boy oh boy, the looming debt crisis in their property scene? It’s got folks on edge, considering that’s where a huge chunk of metal demand comes from. A few bigwig property firms there are even teetering on the brink of default. Now that’s a domino effect no one wants to see!

However, BHP’s not throwing in the towel just yet. They’re optimistic that despite the current hiccups, China and India will keep coming back for more. But, on the flip side, the thirst for commodities in the developed world? It’s been dwindling.

But wait, there’s a twist in the tale. BHP’s also wrestling with rising expenses down under, thanks to Aussie living costs shooting up and a tighter job market. Word is, this trend might hang around till 2024. Yikes!

Oh, and speaking of mining woes, BHP’s buddy, Rio Tinto Ltd (ASX:RIO)? They too faced a slump in their mid-year earnings this July. Blame it on China’s waning interest and those iron ore prices. Their shares? Took a bit of a tumble on Tuesday too. What a ride!

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