BHP Rakes in Record-Setting Profits as Demand for Coal Soars

For the past couple of years, future predictions for coal seemed to be grim. As countries around the world stepped up their efforts to incorporate green energy into their infrastructures, dirty energy sources such as coal and oil would be among the first to get the axe.

Coal is among the dirtiest fuel sources on the globe, after all, accounting for 54% of carbon emissions in America’s electric production sector despite generating only 20% of the country’s electricity. However, the global energy crisis coupled with the Russia-Ukraine war caused an upheaval in the energy industry, forcing several European countries to turn back to coal for power production.

According to Australian mining firm BHP, the surge in coal demand caused an increase in prices that resulted in record profits for the miner. The company has revealed that it will be able to remit a record-setting amount of cash to its investors thanks to high coal prices that helped BHP increase its annual profits by 26%.

With a final dividend of $8 to $9 billion, BHP will now be able to issue $1.75 per share to its investors, bringing its overall payments for the year to $16.5 billion, the company’s highest disbursement of funds since it was founded more than 100 years ago. BHP’s revenue increased by 14% from $21.32 billion to $65 billion this June as coal prices rose and its profits soared.

The company ended the financial year with only $333 million in net debt and managed to generate more than $24 billion in extra cash. BHP drew a large chunk of its profits this year from its Australian coal operation, which earned around $8.7 billion before tax and interest against a loss of $577 million. The miner managed to increase profits even though earnings from its iron ore business dropped from $23.4 billion last year to $19.5 billion.

Despite these record profits, BHP is well aware of the energy sector’s changing landscape. Even if it takes a while, countries will steadily reduce their reliance on coal in favor of cleaner sources of energy such as solar, wind and geothermal energy. This means that there will come a time when BHP has to adapt if it wishes to remain competitive and profitable in the energy space.

Mike Henry, the company’s chief executive, revealed that he is looking to diversify the company’s growth resources to incorporate the clean-energy sources that will be increasingly demanded by the world as it decarbonizes.

The profits being raked in by BHP aren’t unique to this company since other industry players such as Arch Resources Inc. (NYSE: ARCH) are also enjoying the renewed demand and surging prices of coal across the globe.

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