Speaking after BHP posted a 144 per cent jump in first-half profit to $US9.44 billion, Mr Henry said while temporary supply chain disruptions had caused some of the recent inflation in global economies, he believed demand-led inflation was more enduring.
“Do we expect there to be a degree of permanency to this, certainly yes,” he said.
“We do see the world and Australia being in a period of higher inflation over the remainder of this decade than last.”
But Mr Henry argued demand-led inflation would be broadly positive for commodities, and if BHP could maintain its strong record on cost control, it implied expanding real margins for the business.
“Key for BHP is that we do a better job than others in terms of containing the impact of that (inflation) on the cost line… keeping in mind that we are already the lowest-cost major iron ore supplier in the world this would allow us to extend this lead.”
BHP on Tuesday reiterated full-year production guidance of 278-288 million tonnes from its powerhouse WA iron ore division while cost guidance was also maintained at $US17.50-$US18.50 a tonne. That came despite chief financial officer David Lamont citing rising costs for energy, diesel and royalties.
Mr Henry said while BHP would not be immune from the impacts of inflation, it had learnt lessons from past upcycles by restructuring and building greater capabilities.
He specifically cited the centralisation of the company’s procurement function, continuous improvement through centres of excellence and greater workforce flexibility within the operational services team.
“You see that shining through in terms of the results we’ve delivered in recent periods,” Mr Henry said.
“In spite of the inflationary environment we find ourselves in, we are doing a pretty good job of keeping a lid on costs and the expectation is that we will do that in the periods ahead, certainly better than the industry on average.”
Queried over the looming Federal Election, Mr Henry called on both major parties to commit to an ongoing focus on building skills to ease the labour availability and mobility crunch as well as more funding to support international trade.
BHP’s half-year result came on the back of a 27 per jump in revenue to $US30.5b driven by higher commodity prices, near record production at WA iron ore, higher copper concentrate sales at its Spence operation in Chile and favourable exchange rate movements.
RBC Capital Markets analyst Tyler Broda said BHP had pushed through the unification of its UK and Australian businesses with relative ease while also posting a very strong half-year result, which left it with a blank canvas for future M&A or cash returns.
