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BHP welcomes inflation as profit jumps 61%


MongiIG

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The BHP Group, a leading mining and resources company, reported results for the half-year ended 31 December 2021 on Tuesday.

BG_BHP_324232.jpgSource: Bloomberg
Hebe Chen | Market Analyst, Australia | Publication date: Tuesday 15 February 2022 

 

Even through BHP's most important export business, iron ore, has experienced a rollercoaster price journey during the second half of 2021, the company still reported strong result across all of its business units.

Record prices for coking coal and copper prices also helped drive the group’s pre-tax profit up by 61%.

Key summary of the report

BHP%201502.pngSource: BHP Group

 

In terms of the outlook for the upcoming quarters, BHP was upbeat about future demand and was confident that the headwinds from China - the company’s biggest customer - would ease in the year ahead.

Share price - technical analysis

Market participants responded warmly to BHP’s financial results and pushed the share price up by more than 2% in the early morning while the broadly sour momentum among ASX traders dragged the price down to the red zone after mid-day trading.

Overall BHP's share price has continued to move up for the past four weeks and is 20% up from the start of the year. The current upward moving trajectory remains in play and could send the price to its last May high at $51.7 before challenging the yearly rooftop above $53.

Both ascending RSI trendline and the rising trading volume are in favour of bulls from the weekly chart. From a near-term perspective, a price gap between $48.99 and $51.12 left on 18 August 2021 was expected to be filled and fixed before the price edging toward $51 and above.

On the other hand, another gap below - between $47.5 and $48.25 - will act a support for the price for the selling pressure. The 20-day moving average (around $46.9 at the moment) will the next support level to eye.

BHP%20Weekly.JPGSource: ProRealTime
BHP%20Daily.JPGSource: ProRealTime

 

Rio Tinto

Another Australian mining giant, Rio Tinto Group, produces iron ore, copper, diamonds, gold and uranium. Rio will report its first half earnings on 23 February.

What to expect

Like BHP, Rio Tinto is expected to report strong results for FY21.

Benefiting from the rising commodity prices under the inflationary environment, Rio is estimated to deliver a 48% increase in underlying EBITDA in calendar year 2021, compared to 2020, according to Macquarie.

Iron ore makes up around 73% of Rio Tinto’s group earnings. Although recent fourth quarter (Q4) result show that Rio Tinto’s 2021 iron ore production was down 4%, the price for the key steel-making material has jumped more than 50% in the past three months.

Apart from that, Rio Tinto’s exposure to aluminium and copper - both recorded their decade-high recently - is also tipped to bolster the Australian mining giant’s profit growth.

Rio%201502.png

Share price - technical analysis

Since the start of 2022, Rio Tinto shares have gone up by around 23%. The uptrend looks likely to continue from a technical point of view.

The daily candlestick of Rio Tinto has printed a “U-shape” or “Bowl shape” of rebound from last November’s dip and skewed to the upward moving channel. The price momentum stays in favour of the bulls as the 20, 50 and 100-day moving averages are all some distance below despite today’s pullback.

The price gap between $122 and $126 is the most noteworthy level of technical resistance at the moment. Once broken through, $129 should be in view and mark a six-month high for the Australian mining leader.

RIO%20daily.JPGSource: ProRealTime

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