Source:
https://scmp.com/business/companies/article/1722637/bhp-billiton-half-year-earnings-plunge-31pc Companies
BHP Billiton half-year earnings plunge 31pc
Resources giant raises interim dividend as result beats market forecasts
BHP Billiton's Mount Newman iron ore mine in Western Australia. Investors hailed better-than-expected half-year results in iron ore, the company's biggest earner. Photo: AFP
Resources giant BHP Billiton, the world's biggest miner, posted a 31 per cent drop in half-year profit as prices for all its main products collapsed, but beat market forecasts and flagged further belt tightening to withstand the tough conditions.
The company again cut its targets for capital spending and said it would reap savings of US$4 billion in the next two years, shoring up cash flows so it could stick to its policy of not cutting dividend payouts.
"We are confident that we can maintain our progressive dividend policy and continue to selectively invest in projects that offer compelling returns," chief executive Andrew Mackenzie said.
BHP could not match rival Rio Tinto's recent US$2 billion share buy-back as its petroleum arm, the business that sets BHP apart from other miners, has been battered by a 50 per cent fall in oil prices since June last year.
But investors still hailed better-than-expected results in iron ore, BHP's biggest earner, and the aluminium, manganese and nickel businesses that the company plans to hand to shareholders in a new company called South32.
"Quality operations are making a fist of the tough environment, and they're doing better than the market's expecting, so that's a great outcome," said Ric Ronge, a portfolio manager at Pengana Capital.
Mackenzie made no promises about a capital return to shareholders any time soon.
"I said very clearly our priorities for now are for preserving the progressive base dividend policy … to retain our strong A credit rating and then to invest selectively in some of the high-value projects we have," he said.
Underlying attributable profit fell to US$5.35 billion for the six months to December from US$7.76 billion a year earlier, ahead of analysts' forecasts for about US$5.1 billion.
BHP raised its interim dividend 5 per cent to 62 US cents, also slightly ahead of market forecasts.
Underlying earnings from iron ore slumped 35 per cent, but thanks to sharp cost-cutting, the global mining giant achieved a strong 57 per cent earnings before interest, tax, depreciation and amortisation margin on iron ore despite the price slump.
Petroleum earnings dropped 15 per cent even as output increased.
Aluminium, manganese and nickel earnings rose nearly fivefold to US$716 million.