🔥 Premium AI-powered Stock Picks from InvestingPro Now up to 50% OffCLAIM SALE

RPT-UPDATE 3-BHP Billiton profit dives to 10-year low on commodities rout

Published 26/08/2015, 08:17 am
© Reuters.  RPT-UPDATE 3-BHP Billiton profit dives to 10-year low on commodities rout
BHP
-
BHPB
-
HG
-
S32
-

(Repeats story published Tuesday; no changes to text)

* Underlying annual profit down 52 percent

* BHP to cut FY2016 capital spending to $8.5 bln

* Achieves $4 bln operating cost cuts 2 years ahead of plan

* UK shares jump 6 pct, outperform rivals

By Sonali Paul

MELBOURNE, Aug 25 (Reuters) - BHP Billiton BHP.AX BLT.L promised to keep its dividends even as it reported its worst underlying profit in a decade on Tuesday, hurt by plunging iron ore, copper, coal and oil prices.

BHP and its peers have been hit after they hiked output of iron ore, copper and coal just as demand growth slowed in China, the top global metals consumer, and have been slashing costs over the past three years to cope.

The world's biggest miner reaffirmed its pledge to never cut its dividend, and lowered its target for capital spending for the year to June 2016 to $8.5 billion from $9 billion previously to help meet the promise.

"Our commitment to our progressive dividend is resolute," Chief Executive Andrew Mackenzie told reporters. "It has withstood many previous cycles and is a key differentiator relative to our peers."

BHP shares jumped 6 percent in early London trade, partly reversing a 9 percent fall in the previous session when commodity stocks globally fell on fears of a hard landing for the Chinese economy.

The market welcomed the sharp cost cuts and the company's lower debt, which will help make the progressive dividend more affordable, three analysts said.

But some investors questioned the wisdom of the dividend policy for a company in a cyclical business.

"We're currently at the point where their earnings are too low for the kind of dividends they're wanting to pay," said Brenton Saunders, an analyst at BT Investment Management.

Mackenzie said if it came to the crunch the company would cut investments to protect its dividend policy.

"At the moment, with our delivery of productivity, we're not having to defer any capex so we're not having to compromise our growth plans, but I think if push came to shove we would be prepared to do that, but let me be clear, so far that's not been necessary."

BHP, the last of the big five global miners to report results, said its underlying attributable profit fell to $6.42 billion for the year to June from $13.26 billion a year earlier. The result was below analysts' forecasts around $7.73 billion.

Net profit dropped 86 percent, as BHP took $2.9 billion in post-tax charges that it flagged previously, mainly on its U.S. shale and Nickel West businesses.

The miner raised its full-year dividend to $1.24 from $1.21, but that was less than analysts' forecasts around $1.27.

The miner said it had achieved $4.1 billion in cost cuts, two years ahead schedule, as it looked to protect its investment grade rating, and said it would generate more savings in the year ahead by working its operations even harder.

CONFIDENT ON CHINA

Mackenzie dismissed concerns that the cost-cutting combined with the rising dividend was coming at the expense of investment in BHP's growth, and said the company was becoming more efficient in how it deployed capital.

"Our growth plans have in no way been put off by increasing our dividend," he said, adding that it would consider acquisitions in copper and oil.

BHP spun off the company South32 S32.AX to shareholders in May with a string of unloved assets as it sought to simplify down to four main commodities - iron ore, copper, coal and petroleum - but has been hit by sliding prices for all four due to slowing growth in China.

Despite a market panic over the outlook for China, Mackenzie said BHP was confident the world's second-largest economy would achieve 7 percent growth this year.

BHP sees moderate but sustainable growth in Chinese steel production over the next decade, although it trimmed its forecast for peak steel production to between 935 and 985 million tonnes in the mid 2020s, from 1 billion tonnes previously.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.