BHP's bumper profit; rate hikes on RBA agenda; Taylor’s new frontbench

BHP's bumper profit; rate hikes on RBA agenda; Taylor’s new frontbench

News in brief

Federal Liberal leader Angus Taylor announced his shadow Cabinet yesterday, and not surprisingly, he rewarded his supporters, though not all Sussan Ley followers got ousted.

 

The Reserve Bank released the minutes from its February meeting yesterday - the one where they hiked rates to 3.85 per cent. The minutes show the board was concerned that inflation has been "broadly based" - the share of items rising above 2.5 per cent a year has increased sharply. Also, the bank thinks people now expect inflation to be above that level and it has kept the door open for another hike in May.

 

The International Monetary Fund has weighed in with some fairly radical advice for Australia. Its annual health check says Australia should lift the GST and use the revenue to cut income taxes.

 

Coles got its chance in Federal Court yesterday to defend allegations that it misled customers about discounting, arguing that shoppers knew of inflationary pressures on grocery items, and discounts were a moment in time and should not be compared with historical pricing.

 

An update on a story from last week, when German newspaper Bild alleged that male ski-jumpers were having hyaluronic acid injected into their penises to increase the surface areas of their suits, allowing them to jump further. We suspected fraud, but we were wrong. An Italian doctor has admitted to the practice, though for cosmetic rather than performance reasons.

Fear-o-meter

Australia’s two biggest companies, Commonwealth Bank and BHP, have produced ripper profits showing that cost control, strategic drive and strong management can make a difference at large caps.

 

It has set a strong tone for the December half reporting season, meaning any company missing expectations or not providing positive earnings guidance is being sold off.

 

Commonwealth Bank has been impressing investors for a couple of years. Yesterday it was the turn of BHP to show off. Its result was better than forecast as was the dividend. The growth of its copper division, which includes gold and silver, to outperform its iron ore business is vindication of CEO Mike Henry’s strategy.

 

He has been pushing hard into future proof commodities, like copper. Copper is in everything from electric vehicles to solar panels to wind turbines. But now there is also a new angle — artificial intelligence. Data centres are copper-hungry infrastructure. And there’s plenty of that going on globally.

 

BHP’s share price hit a new record yesterday, valuing the stock at not for off $270 billion. Like Commonwealth Bank, it is showing why it is one of the country’s biggest companies.

Fear & Greed Q+A today

Speaking to Ausbiz about BHP's bumper profit, and copper surpassing iron ore as the main source of revenue for the first time: 

 

"Our projects, including in Vicuña in Argentina, are very attractive. Overall, we have increased copper in our portfolio by 30% over the last four years. And what we are going to do between now and mid-30s is increase it further by another 40%. And this is when we are already the world’s largest copper producer.

 

Vicuña is going to be a top five copper, gold and silver basin for us over a period of time. Here in South Australia, our assets go from 300kt to 500kt of copper production — real expansion — and it has a lot of gold, silver and uranium, which are these prizes that are very attractive for the asset.

All this together means that by mid-30s, we are looking at two and a half million tonnes of copper equivalent, which includes copper and its byproducts."

BHP has delivered a blockbuster half-year result and for the first time ever, copper has overtaken iron ore as the company's biggest earnings driver. BHP's underlying profit rose 22 per cent to $US6.2 billion for the half year. The interim dividend — 73 US cents a share — was way above the 63 US cents a share the market had pencilled in. The Big Australian’s share price jumped five per cent yesterday and is up 30 per cent in three months. The result demonstrates the success of the structural shift at the world’s biggest miner. BHP has been deliberately pivoting toward copper for years, and this result validates the strategy. When boss Mike Henry joined BHP six years ago, 70pc of earnings was from iron ore and now it’s less than 50 per cent.

Greed-o-meter

Miner	Market Cap	1 yr %
BHP	$268B	+29%
Fortescue	$62B	+4%
Rio Tinto	$61B	+35%
Northern Star	$40B	+58%
Evolution Mining	$30B	+140%
South32	$20B	+20%
Lynas Rare Earths	$15B	+117%
Newmont	$15B	+135%
PLS	$14B	+95%

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The materials sector has had a very good 12 months. Commodity prices have soared, with gold, copper and silver all hitting record highs, and the AI boom has ensured strong demand for critical minerals. Look at the one-year performance of our biggest miners:

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Source: MarketIndex