BHP’s highly anticipated FY21 results is right around the corner, so why are its shares tanking?
The post BHP (ASX:BHP) share price slumps ahead of today’s results release appeared first on The Motley Fool Australia. –
Investors are selling down the BHP Group Ltd (ASX: BHP) share price in the lead up to its FY21 results, which will be released at 5:00 pm on Tuesday.
At the time of writing, shares in the iron ore major are down 1.25% to $51.42.
BHP forecast to double profits
The BHP share price has tipped 2.73% lower this week despite an expected triple digit increase in net profit after tax (NPAT), according to Commsec’s reporting season calendar.
BHP is forecast to deliver FY21 NPAT of US$16 billion, compared to US$7.956 billion in FY20.
The bumper result should come as no surprise after iron ore prices surged from ~US$100/tonne in July 2020 to well over ~US$220/tonne by the end of FY21.
The mining giant reported a 71% increase in consolidated sales revenue to US$33,083 million while underlying earnings would surge 156% to US$12.2 billion.
As a result, Rio Tinto’s Board declared a fully franked ordinary interim dividend of US$3.76 per share, up 143% on the prior corresponding period. There was also an additional fully franked special dividend of US$1.85 per share.
Based on Rio Tinto’s closing price on the day of the announcement ($132.22) and current exchange rates, this equates to a yield of approximately 5.7%.
Why is the BHP share price tanking?
Analysts are increasingly concerned about how ASX 200 iron ore shares will perform once they trade ex-dividend.
In the case of Rio Tinto, its shares went ex-dividend on 12 August, resulting in a 6.88% fall from $129.14 to $120.26.
The Australian reported commentary from Morgans Financial analyst Adrian Prendergast who said “[investors] looking to lighten positions opportunistically in the big miners should consider waiting to see their full-year results, but then trim before these stocks go ex-dividend”.
To add further insult to injury, Chinese steel production has plummeted to 15-month lows in the wake of government output mandates, according to Mining.com.
It reported: “The world’s top producer made 86.79 million tonnes of crude steel last month, falling 7.6% from June and 8.4% from 93.36 million tonnes in July 2020, data from the National Bureau of Statistics (NBS) showed on Monday.”
It’s also reported that Beijing has begun inspecting steel mills to check that cuts in capacity and output are taking place, and shutting down outdated furnaces and limiting production at more heavily polluting plants.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.