How have ASX resources shares performed during the August 2021 earnings season?

The resources sector has benefited from strong commodity prices for most of FY21, leading to plenty of earnings season winners.

| More on:
Group of smiling coal miners in a coal mine

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX resources shares had a booming August 2021 earnings season. Commodity prices were strong for much of FY21, boosting returns for resources shareholders.

The iron ore price rose above US$220 a tonne earlier this year benefitting major miners such as BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG). The gold price has also been elevated, boosting incomes for gold miners such as Newcrest Mining Ltd (ASX: NCM).

This translated into strong cash flows and record profits for ASX resources shares. Shareholders were rewarded with outsize dividends, many of which may flow back into the share market given current low interest rates.

COVID-19 did not cause serious disruptions to resource production, and government stimulus measures increased demand for raw inputs, leading to higher commodity prices. 

How have ASX resources shares performed against the market?

ASX resources shares have underperformed the broader market recently, possibly on fears that higher commodity prices won't last.

The All Ordinaries Index (ASX: XAO) is up 10% over 2021. However, the BHP share price has fallen 4.3% since January and the Rio Tinto share price is down 7.5%. Shares in Fortescue Metals have plummeted 26.3% over 2021, while the Newcrest Mining share price is down 11%.

This month, iron ore prices fell to their lowest level since December last year, while gold prices have also backed away from recent highs.

Who are the winners this earnings season? 

Despite the recent withdrawal in commodity prices, ASX resources shares benefited from strong prices for most of FY21, leading to plenty of earnings season winners.

Rio Tinto and Fortescue achieved record financial results in the period to 30 June — Rio Tinto's earnings before interest, tax, depreciation and amortisation (EBITDA) for the half-year grew 118% to $21,037 million while Fortescue's earnings (EBITDA) for the full year grew 96% to US$16.4 billion.

Government stimulus in response to COVID-19 pressures has driven strong demand at a time of constrained supply resulting in a spike in prices. Rio Tinto reported free cash flow of $10.2 billion, with underlying earnings per share of 751.9 US cents, a 156% increase on FY20. The miner declared an interim dividend of 561 US cents per share, representing 75% of underlying earnings. 

Fortescue achieved record shipments, revenue, earnings, and cash flow in FY21, reflecting strong performance across the supply chain and heightened customer demand. Shareholders were rewarded with a $2.11 final dividend, bringing FY21 dividends to A$3.58 per share, a 103% increase on the previous year. This represented an 80% payout of net profit after tax, which was US$10.3 billion, up 117%. 

Fortescue finished the financial year with cash on hand of US$6.9 billion and net cash of US$2.7 billion. Delivering its second consecutive year of record performance, Fortescue is investing in its iron ore operations as well as pursuing opportunities in renewable energy. 

Newcrest also delivered record profits and free cash flows, delivering on full-year guidance. The gold miner produced 2.1 million ounces of gold and 142.7 thousand tonnes of copper (a record) in FY21.

The company has kept costs low, allowing for record margins even as the gold price has increased across the year.

This translated to record statutory and underlying profits for Newcrest of $1.2 billion, up 80% and 55% respectively. Annual free cash flow was a record $1.1 billion. Newcrest declared a fully franked final dividend of US 40 cents per share, 129% higher than the prior year. This brought full-year dividends to a record US 55 cents per share, equal to a 41% payout of FY21 free cash flow. 

And the losers? 

There were no real losers amongst resources shares this earnings season — BHP also delivered strong financial results and a record full-year dividend. BHP's earnings (EBITDA) increased 69% to US$37.4 billion, with free cash flow up 140% to US$19.4 billion.

Iron ore accounted for the bulk of earnings, at US$26.3 billion, followed by copper with earnings of US$8.5 billion. Earnings per share increased 88% to US 337.7 cents per share assisted by a strong underlying performance across the portfolio of assets. A final dividend of US 200 cents per share was declared. This brings full-year dividends to US 301 cents per share, a 151% increase on FY20. 

Simultaneously with the release of its full-year results, BHP announced plans to enter a merger with Woodside Petroleum Limited (ASX: WPL). The companies plan to combine their respective oil and gas portfolios in an all-stock merger, creating a global top 10 energy company by production.

BHP's oil and gas business would merge with Woodside, with Woodside issuing new shares to BHP shareholders. The expanded Woodside would be owned 52% by existing Woodside shareholders and 48% by existing BHP shareholders. The merger is intended to maximise the value of BHP's oil and gas assets through increased operating scale and synergies. 

What is the outlook for ASX resources shares?

Fortescue has provided guidance for iron ore shipments of 180 — 185 million tonnes in FY22. This would be on par with the 182.2 million tonnes of ore shipped in FY21. Capital expenditure in FY22 is projected at US$2.8 — US$3.2 billion, slightly below the US$3.6 billion spent in FY21.

Rio Tinto has provided guidance for iron ore shipments of 325 to 340 million tonnes over 2021. Capital expenditure is expected to be ~$7.5 billion a year for each of FY22 and FY23. 

Newcrest is in a strong financial position with net cash of $176 million as at 30 June 2021 and significant liquidity. This enables investment in attractive growth projects. The gold miner will fund a pipeline of organic growth options from expected cash flow generation as well as the strong balance sheet.

Newcrest has provided guidance for gold production of 1,800 — 2,000 million ounces in FY22 and copper production of 125 – 130 thousand tonnes of copper. 

BHP is focused on executing the merger with Woodside, which it says will provide shareholders with a choice to weight exposure between BHP and petroleum via Woodside. The combined entity will have a greater scale and diversity of geographies, products, and markets. A more diversified product portfolio is intended to support energy transition. 

Should you invest $1,000 in Bhp Group right now?

Before you buy Bhp Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Bhp Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 6 March 2025

Motley Fool contributor Katherine O'Brien 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.

More on Earnings Results

Happy couple doing online shopping.
Earnings Results

This ASX 200 stock is rising on $148m half-year profit

Another record result was recorded for Peter Alexander but Smiggle is struggling.

Read more »

Accountant woman counting an Australian money and using calculator for calculating dividend yield.
Earnings Results

Guess which $12 billion ASX 200 stock just lifted its dividend by 10%

Passive income investors will be pleased with the latest results from this ASX 200 stock.

Read more »

A scientist in a white coat and glasses puts her arms in the air in a sign of strength and success.
Earnings Results

Sigma shares climb after reporting massive 878% profit jump for FY25

Big profits have been reported from this pharmacy chain giant this morning.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Earnings Results

Brickworks shares higher on half year results and dividend increase

This blue chip has released its half year results. How did it do?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

Why this little-known ASX share just rocketed 27% in today's struggling market

The ASX share is grabbing investors' interest on Wednesday. But why?

Read more »

A woman holds her hands to the side of her face as she sits back in shock at something she is reading or seeing on her computer screen.
Earnings Results

Myer shares crash 10% on disappointing half year results

It was a tough half for the department store operator.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Earnings Results

New Hope shares surge 8% on half-year profit jump, dividend increase, and buyback

This coal miner impressed with its half year results. Here's what it reported.

Read more »

A lion dressed in a business suit roars as two sheep sit awkwardly at the boardroom table.
Materials Shares

Liontown share price roars higher on half year results

This lithium miner has handed in its report card on Friday.

Read more »