OPINION: BHP’s huge profit shows it’s balancing operational excellence with strategic moves. Chief executive Mike Henry says more inflation is coming, but it will create two opportunities.
There’s been the unification of its sharemarket listings in London and Australia. The potential for a big-bang deal. The $40 billion merger of its petroleum division with Woodside.$US10.7 billion December-half profit announced on Tuesday
The 64 per cent EBITDA margin and near record iron ore production that BHP produced in the six months to December 31 would be remarkable at any time. Whileare clearly vital to delivering big margins, the cost control delivered in the face of challenges created by the pandemic – labour shortages, rising costs and supply chain disruption – speaks to an organisation near the top of its game.
The BHP boss was blunt that inflationary pressures will continue to threaten the company’s massive margins, and many are outside its control. Diesel prices are at or near record levels. Acid prices have surged. Power prices are high around the globe. Chief financial officer David Lamont also noted royalties are well above historical ranges.But Henry is steadfastly refusing to fall into the trap of allowing the organisation to use inflation as an excuse. In fact, he sees it as an opportunity.
“We have learnt lessons from past upcycles. We’ve structured ourselves differently, we built greater capability. And you see that shining through in terms of results we’ve delivered in recent periods where, in spite of the inflationary environment that we find ourselves in, we are doing a pretty good job of keeping a lid on costs.“The expectation is we’ll do that in the periods ahead and certainly better than the industry on average.
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