Annual Net Profit Plummets 37%
BHP, the world's largest mining company by market capitalization, saw its annual net profit plunge to the lowest level in three years due to a decline in demand from China.
According to BHP's investor relations (IR) materials released on the 22nd (local time), the net profit for the fiscal year 2023, which ended in June, was $13.4 billion (approximately 18 trillion KRW), a 37% drop compared to the previous year ($21.3 billion).
BHP's deteriorating performance was attributed to weak sales of its core business, iron ore. The company explained the poor results as being due to "various cost pressures such as falling commodity prices and rising energy costs."
Iron ore prices surged above $130 per ton in March amid reopening expectations following the lifting of lockdowns in China, the world's largest commodity buyer, but turned downward amid deflation concerns. As of this day, iron ore prices are trading in the low $110 per ton range.
There are also forecasts that Chinese steelmakers will continue to reduce iron ore imports in the second half of this year due to a slowdown in the real estate market. Commonwealth Bank of Australia (CBA), Australia's largest bank, predicted, "As the outlook for China's real estate market worsens, iron ore prices will remain in a downward phase for the time being."
The Chinese government has introduced measures such as interest rate cuts to prevent a recession amid deflation concerns and the added risk of a domino effect of defaults triggered by the real estate sector, but evaluations suggest these efforts have fallen short of expectations, raising concerns about a prolonged downturn.
In this situation, the company maintained a positive outlook. Mike Henry, BHP's Chief Executive Officer (CEO), expressed optimism, stating, "Demand from China in environmentally friendly technology industries such as electric vehicles remains reasonable and healthy." He added, "If the Chinese government's real estate stimulus measures succeed, we expect iron ore demand to pick up around the end of this year or next year."
However, CEO Henry noted, "In the short term, China's economic trajectory depends on how effective the government's measures to stimulate the economy prove to be."
On this day, BHP shares listed on the New York Stock Exchange closed at $55.36, down 1.56% from the previous session. Due to weak performance, BHP's stock remains at the level of one year ago ($58.79). It has fallen 10.8% so far this year.
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