Iron ore prices boost profits as ASX earnings season gets underway
Fortescue announced a monster interim dividend for shareholders
2 min
ASX earnings season is well underway, with hundreds of Australia’s biggest publicly–listed companies reporting their latest financial results to the market. This week, the country’s three biggest miners, BHP, Fortescue and Rio Tinto released their figures. All three companies benefitted from stronger iron ore prices, however weaker prices for other commodities put a drag on earnings for diversified operators, BHP and Rio Tinto, while iron ore pure-play Fortescue delivered a turbocharged profit.
Let’s review the key points of each company’s report.
BHP Group Ltd (ASX: BHP)
BHP released its half-year figures for FY24 on Tuesday. The company reported a 6 percent revenue increase to US$27.2 billion. Its underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) lifted 5 percent to US$13.9 billion but profit after tax spiralled by 86 percent to US$927 million.
BHP said higher iron ore and copper prices along with production from mines acquired under the Oz Minerals takeover in May 2023 boosted revenue. But its profit was impacted by a US$2.5 billion impairment of the carrying value of its West Australian nickel business and a US$3.2 billion provision for reparations and compensation relating to the Brazil dam disaster in 2015. The BHP share price fell 1.54 percent on Tuesday, and is down a further 2.57 percent since. BHP closed yesterday at $44.30.
BHP shares will pay a fully franked interim dividend of 72 US cents per share, which is 20 percent lower than last year.
Fortescue Ltd (ASX: FMG)
Fortescue released its results yesterday, reporting a 21% revenue bump to US$9.5 billion for1H FY24. Underlying EBITDA came in 36% higher at US$5.9 billion and net profit after tax was up 41 percent to US$3.3 billion.
Higher iron ore prices turbocharged Fortescue’s revenue during the period. The company delivered its second–highest number of shipments for a first half ever, including first shipment from the new Iron Bridge project. The Fortescue share price lifted 1.73 percent yesterday to $27.83per share.
Fortescue shares will pay a fully franked interim dividend of AU$1.08 per share, up 44 percent on last year.
Rio Tinto Ltd (ASX: RIO)
Rio Tinto reports on a different financial year cycle to the other two majors, and released its full-year earnings for FY23 yesterday. Revenue fell 3 percent over the year to US$54 billion. Rio’s underlying EBITDA was 9 percent lower at US$23.8 billion and profit after tax declined 19 percent to US$10 billion.
The company said its iron ore division delivered increased revenue and EBITDA due to higher commodity prices, however, this was offset by higher costs and weaker prices for copper, aluminium, diamonds and other minerals due to lower global demand amid increased supply. The Rio Tinto share price fell 0.96 percent yesterday to $124.36 per share.
Rio Tinto shares will pay a fully franked final dividend of US$2.58 per share for 2H FY23, up 14 percent.
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New research suggests spending 40 percent of household income on loan repayments is the new normal
3 min
Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.
Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.
“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.
CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.
Sydney
Sydney’s median house price is $1,414,229 and the median unit price is $839,344.
Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.
Melbourne
Melbourne’s median house price is $935,049 and the median apartment price is $612,906.
Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.
Brisbane
Brisbane’s median house price is $909,988 and the median unit price is $587,793.
Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.
Adelaide
Adelaide’s median house price is $785,971 and the median apartment price is $504,799.
Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.
Perth
Perth’s median house price is $735,276 and the median unit price is $495,360.
Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.
Hobart
Hobart’s median house price is $692,951 and the median apartment price is $522,258.
Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.
Darwin
Darwin’s median house price is $573,498 and the median unit price is $367,716.
Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.
Canberra
Canberra’s median house price is $964,136 and the median apartment price is $585,057.
Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.
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