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BHP Billiton declares record final dividend as underlying profits jump 33%

Last updated: 05:30 21 Aug 2018 EDT, First published: 03:03 21 Aug 2018 EDT

BHP
Net debt is now at the lower end of BHP's target range

BHP Billiton plc (LON:BLT) announced a record final dividend after delivering a 33% increase in underlying profit, buoyed by higher production and prices across most of its commodities.  

The miner posted an underlying profit of US$8.93bn for the year to June 30, up from US$6.73bn a year ago. However, net profit fell 37% to US$3.71bn from US$5.89bn due to US$5.2bn in impairment charges mainly related to US onshore oil-and-gas assets, which the company has been winding down.

The charges also included an exceptional loss of US$650mln in relation to the Samarco dam collapse in Brazil that killed 19 people. 

READ: BHP Billiton served with a class action in Australia over Samarco dam failure

The group said in July that is would sell the bulk of its US onshore oil and gas unit for US$10.5bn while it has also agreed on another deal to sell its Fayetteville shale business in Arkansas to closely held Merit Energy Co. for US$300mln.

The decision to offload the underperforming onshore assets comes after receiving pressure from activist investor Elliott Management.

Higher production and prices

In other areas of the business, the group enjoyed a recovery in prices of oil, copper and steelmaking coal for the year but iron ore prices were slightly lower. 

Production of copper for the year grew 32% while the output of iron ore rose 3% and steelmaking coal increased 7%.

Output in the petroleum division, however, dropped 8%.  

Guidance for 2019 

For the fiscal year 2019, BHP’s guidance for copper production is between a decline of 4% and a rise of 1%. Iron ore output is expected to rise between 1% and 5% and steelmaking coal is forecast to grow between 1% and 8%.

BHP reduced its guidance for productivity gains, saying it now expects savings of US$1bn in 2019, compared to a previous forecast of US$2bnin the two years to 2019.

The company said its projection was lowered due to asset sales and challenging operating conditions at some Australian coal mines.

The group declared a final dividend of US$0.63 per share, taking the full-year payout to US$1.18 a share, up from US$0.83 last year.

Net debt was cut to US$10.9bn from US$16.3bn last year.

"We have announced a record final dividend for shareholders which reflects strong operating performance, solid prices and capital discipline," said chief executive Andrew Mackenzie. 

"Our balance sheet is strong, with net debt now at the lower end of our target range, and our investment plans on track across iron ore, copper, coal and petroleum."

Shares fell 1.3% to 1,622p in morning trading.

BHP CEO 'little bit more apprehensive' on short-term outlook for commodity prices

Speaking to reporters after the results were published, Mackenzie told reporters he was a "little bit more apprehensive" about the near-term outlook for commodity prices.

Longer-term, however, he sees strong demand for BHP's products. 

“And in the meantime we continue to work our productivity so that we can retain margins even in the face of maybe some input inflation and possibly lower prices," he said. 

BHP reviews impact of ongoing outage at Olympic dam

BHP also said it was assessing the impact of an ongoing outage at its Olympic dam copper smelter in South Australia following the failure of several boiler tubes at the acid plant.

However, it did not give an expected timeline for operations to resume.

Market may be disappointed by no share buyback, says analyst

The dividend represented a yield of 5.5% for the year but BHP did not announce the share buyback that some investors were expecting.

"The market may be slightly disappointed that BHP hasn’t declared a large share buyback like some of its peers in the natural resources industry," said Russ Mould, investment director at AJ Bell.

"However, shareholders will eventually be getting a slice of the US$10.8bn proceeds from selling its onshore US business at some point in the future.”

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