BHP Group (NYSE ticker: BHP), formerly known as BHP Billiton, has posted its best profits in over 10 years after the company released its earnings report of the first half of the 2021 fiscal year that ended on June 30. The report shows that the company’s profit from operations in the period between January 2021 and June 2021 is $25.9 billion, almost doubling its profit last year that stood at $14.4 billion.
BHP’s Earnings Per Share (EPS) climbed from 157.3 cents in 2020 to 223.5 cents as of June 2021, but its net debt did not change much- it dropped a few million dollars from $7.6 billion in 2020 to $7.1 billion as of June 30, 2021.
Due to this astounding performance and growth in profit, BHP’s shareholders are smiling at their cheques, as the company announced it would pay out a dividend of $2 per share, which is also a record payout in the company’s history. With a dividend of $2 per share, the company will pay out $15 billion to shareholders.
BHP is an Anglo-Australian multinational company with operations in mining, refining, selling, and distributing precious metals and petroleum products. The company is headquartered in Melbourne, Victoria, Australia. After releasing the report, BHP’s stock rose more than 7% in early afternoon trading, and it is currently trading at $75.82 a share.
BHP Chairman Kenneth “Ken” Norman MacKenzie noted that BHP’s performance is a testament to the group’s rich portfolio of assets, a healthy balance sheet, and a dedicated team of people ingrained with a performance culture. It should be noted that this multinational company which has oil and gas fields in Australia, Trinidad and Tobago, the Gulf of Mexico, and Algeria employs over 80,000 people around the world.
With BHP’s healthy balance sheet, good profits and revenues that improve every other half of the fiscal year, the company is looking forward to adding more assets to its portfolio. After releasing this half’s report, it has confirmed plans to merge its petroleum business with another Australian energy giant, Woodside Petroleum (ASX ticker: WPL), in a deal worth $28 billion. When shareholders and regulators approve of the deal for both companies, it will become one of the largest energy companies in the world, and it will be the largest listed on the Australian Securities Exchange (ASX). Currently, BHP has a market capitalisation of $181.81 billion, and Woodside Petroleum’s market capitalisation stands at $19.98 billion.
Speaking about the planned merger, MacKenzie said that this merger would maximise the value of BHP’s oil and gas assets through increased operating scale and synergies. It will also pave the way for the unification of the company’s corporate structure to support a more diversified product portfolio. Like other energy giants around the world, BHP is exploring the options and possibilities of transferring to clean energy in an effort to curb its carbon dioxide (CO2) footprint. MacKenzie said that the merger would make BHP operations simpler, flexible, and more efficient.
According to the merger documents filed to regulators, existing Woodside shareholders will hold a majority stake in the merged company (52%), while existing BHP investors will hold the remaining 48% as Woodside issues new shares to BHP shareholders.
Moving towards a new, greener economy…
As governments and significant industry players curtail their operations and technologies to cut their carbon emissions and achieve a net-zero level by 2050, BHP said that it is reviewing and reassessing its petroleum oil operations to align with its long term plans to transition into cleaner energy amid growing climate concerns.
According to Jamie Maddock, an Equity Research Analyst at Quilter Cheviot, a UK-based investment management firm, BHP is looking to transition to the “new economy” and is currently exploring more sustainable industries to position its already rich portfolio for the future.
Maddock said that the company’s decision to merge its petroleum business with Woodside and its termination of operations in thermal coal (with the sale of its Colombian coal interests to Glencore) would help lift its Environmental, Social, and Governance (ESG) credentials with investors.
In June, BHP announced that it had reached an agreement with a Swiss-based mining company, Glencore PLC, to buy BHP’s 33.3% per cent stake in the Cerrejón coal mine for $294 million. Cerrejón coal mine is one biggest open-cut thermal coal mines in the world. BHP is looking for more buyers of its thermal coal business as it plans to exit the coal mining business entirely.
Just like other energy companies, BHP was also affected by the coronavirus pandemic that reduced mobility and fuel consumption, but it has come out of the ruins of that to stay profitable; Senior Analyst at Freetrade, Dan Lane, noted that BHP’s full-year financial report paints a picture of a financially healthy company. It is yet to be seen if the company will keep up with this performance going forward.
In other news…
HSBC working on a $2 billion IPO for China’s biggest AI firm SenseTime
British multinational investment bank and financial services holding company HSBC is working to pull together an Initial Public Offer (IPO) for SenseTime, China’s largest Artificial Intelligence (AI). If everything goes according to plan, SenseTime will have its shares listed on the Hong Kong Stock Exchange (HKEX) a few weeks from now. According to Bloomberg, this IPO could raise as much as $2 billion for SenseTime.
SenseTime, which uses AI technology to provide a range of software packages for augmented reality, autonomous driving, medical image analysis, and facial recognition, among others, is arguably the largest AI company in the world, and its revenues soared last year as tech firms benefited from the pandemic. This performance, among other factors, has been fronted by the company to attract investors for its planned IPO that is still subject to approval from regulators.
As HSBC works with SenseTime to have the later company’s shares listed on the HKEX, they have it in mind that regulators on mainland China have been clamping down on tech giants in the previous few months, citing concerns of privacy, how companies collect and use user data, as well as security. This strict scrutiny has caused high volatility on the HKEX, and some companies have seen their stock price plummet, billionaires have lost a few billion dollars, and some companies have paused their plans to go public.