BHP's half-year profit surpasses expectations, and the impact of inflation decreases.

On Tuesday, the company reported first-half profit that slightly exceeded analyst expectations, thanks to the strong iron ore prices, and stated that the inflationary impacts were diminishing.

Despite being the world's largest listed miner, the company expressed caution about the demand recovery in the developed world in the next 12 months. However, it remains uncertain how effective stimulus policies have been in China, its largest customer.

India has considerable positive momentum, according to a bullish outlook.

BHP anticipates a more balanced global economy and evidence that the worst of the general inflationary wave has passed, which will positively impact their industry in calendar year 2024.

BHP's revenue growth of 6% was driven by higher iron ore and copper prices, as well as new projects, but was partially countered by lower energy coal prices.

BHP reported an underlying profit of $6.60 billion for the six months ended Dec. 31, which is the same as the previous year, but higher than an LSEG estimate of $6.42 billion.

The company announced an interim dividend of $0.72 per share, which exceeded Citi's expectation of $0.68 and the Visible Alpha consensus of $0.70.

Analysts at Citi advised that the market should expect a modestly higher dividend from BHP as a reflection of their improving confidence in commodity demand/prices.

The price of BHP shares decreased by 0.3% to A$45.91, reflecting a negative outlook in the resources sector.

BHP stated that its Western Australia Nickel business incurred a $2.5 billion impairment charge last week, and it believes the nickel industry will face a challenging period due to the increasing supply of nickel from Indonesia.

BHP stated that our assumption is that the market may rebalance by the late 2020s.

The West Musgrave copper nickel project of BHP may be slowed down due to the decline in nickel prices, which could affect the 3,000 employees working at the nickel smelter and refinery in Western Australia.

Henry stated that the decision would likely occur in months, not years, and that the nickel market's sudden and significant decline was not anticipated.

BHP stated that while it appreciated Australia's efforts to strengthen the nickel industry through a production tax credit, it emphasized the importance of implementing the right policy settings to maintain a competitive position as a nation in the long term.

CEO Mike Henry stated that the company desires the government to enhance industrial relations policies, fiscal settings, and permitting requirements. However, he noted that this may not be sufficient for miners who have already placed their operations in care and maintenance.

The challenges in the nickel market are so significant that it may not be enough to change direction.