BHP flags impairments

BHP today reported a strong half-year production performance, but warned it would include impairment charges in next month’s financial results.
BHP flags impairments BHP flags impairments BHP flags impairments BHP flags impairments BHP flags impairments

Kristie Batten

The company said underlying earnings before interest and tax for the December half was expected to include impairment charges, predominantly related to conveyers at Escondida, in the range of US$250 million to $350 million.

Next month’s results will also include a non-cash revaluation of BHP’s US net deferred tax assets, as a result of new tax laws signed by President Donald Trump last month.

BHP said it was unable to provide an update on the ongoing financial impacts of the November 2015 Samarco disaster.

Meanwhile, half-year iron ore production was 117 million tonnes, in line with the prior year, and guidance for the 2018 financial year remains at 239-243Mt.

Production on a 100% basis was 136Mt, with guidance of 275-280Mt.

Record output at Jimblebar and Mining Area C was offset by the impact of lower opening stockpile levels following the June 2017 fire at Mt Whaleback.

The division hit a record annualised production rate of 284Mt per annum in the December quarter.

Half-year copper production soared by 17% to 833,000t as the Los Colorados extension project ramped up at Escondida.

Metallurgical coal output was down by 4% to 20Mt and guidance has been reduced to 41-43Mt due to challenging roof conditions at Broadmeadow and geotechnical issues triggered by wet weather at Blackwater.

Unit cost guidance is also under review.

Nickel West production increased by 11% to 45,000t.

Guidance across nickel, copper, petroleum and energy coal was maintained for FY18.

The company received higher average prices across all commodities aside from iron ore and natural gas for the half, with copper prices up by 33%.

BHP CEO Andrew Mackenzie said the strong operating performance in the half allowed the company to capture the benefit of higher prices.

“The successful Los Colorados Extension project ramp-up contributed to a 17% increase in copper output and production records were achieved at a number of Western Australia Iron Ore and Queensland Coal mines,” he said.

“The momentum we’ve built across the wider portfolio during the second quarter will flow through to an expected stronger second half operating performance.

“Together with incremental production from latent capacity projects in iron ore and copper, we expect volume growth of 6% for the full year.”

Shares in BHP gained 1.5% to A$31.21 in early trade.