BHP Billiton posts decline in half-year profit

23 February 2015 (Last Updated February 23rd, 2015 18:30)

Global mining major BHP Billiton has reported a decline of 31% in December 2014 half-year profit to $5.5bn, citing collapse of prices for all its main products.

Global mining major BHP Billiton has reported 31% decline in half-year profit to $5.5bn, citing collapse of prices for all its main commodities.

The company, which cut its targets for capital spending, noted that it would reap $4bn savings in the three years to 2017.

BHP Billiton chief executive officer Andrew Mackenzie said: "These results demonstrate the effectiveness of our strategy and the quality of our people, assets and processes.

"Despite significant falls in the prices of our main commodities over the last six months, Group margins remain healthy, free cash flow has increased and we have strengthened our balance sheet."

The company also announced the increase of its interim dividend 5% to $0.62, slightly ahead of market forecasts.

Underlying earnings from iron ore slumped 35%, and for aluminium, manganese and nickel earnings rose nearly five-fold to $716m.

According to the company, in the first-half it cut costs by $1.75bn and achieved additional output worth $500m due to better productivity.

London Capital Group dealer Lewis Sturdy said: "At face value it is another bleak looking mining update from the world's largest miner. By beating market forecasts and making good margins in its key iron ore sector BHP Billiton is keeping investors happy this morning.

"Holding onto current dividend ratios has been a key theme in this sector in the wake of the commodity slump and BHP is no different. To support the dividend ratio investors may warm to its selective cost cuts while maintaining plans to de-merge part of their operation in the summer."

The company reported an underlying EBIT of $9.2bn and an underlying EBIT margin of 32% for the half year.

 

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http://www.bhpbilliton.com/home/investors/news/Documents/2015/150224_BHPBillitonInterimResultsfortheHalfYearEnded31December2014.pdf

 

Source:

http://www.reuters.com/article/2015/02/24/bhp-billiton-results-idUSL4N0VT3GF20150224

Global miner BHP Billiton posted a 31 percent 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 $4 billion in the three years to 2017, shoring up cash flows so it could stick to its policy of not cutting dividends.

"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 in a statement.

The world's biggest miner could not match rival Rio Tinto's recent $2 billion share buyback as its petroleum arm, the business that sets BHP apart from other miners, has been battered by a 50 percent fall in oil prices since June.

But investors still hailed better than expected results in iron ore, BHP's biggest earner, and in the aluminium, manganese and nickel businesses that the company plans to hand to shareholders in a new company called South32.

Amid tough conditions "they're doing better than the market's expecting, so that's a great outcome," said Ric Ronge, a portfolio manager at Pengana Capital.

BHP's shares added 3 percent to $33.10, reaching a three-month high in a weaker overall market.

Mackenzie made no promises about a capital return to shareholders anytime 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 $5.35 billion for the six months to December from $7.76 billion a year earlier, ahead of analysts' forecasts for around $5.1 billion.

BHP raised its interim dividend 5 percent to $0.62, also slightly ahead of market forecasts.

IRON ORE MARGIN

Underlying earnings from iron ore slumped 35 percent, but thanks to cost cutting BHP achieved a 57 percent earnings before interest, tax, depreciation and amortisation (EBITDA) margin despite the price slump.

That was just below the 58 percent margin achieved by Rio Tinto in the same period.

Petroleum earnings fell 15 percent even as output increased. BHP called off the sale of its Fayetteville shale assets as it was unable to get what it considered a fair price.

Aluminium, manganese and nickel earnings rose nearly five-fold to $716 million, a promising sign for shareholders as BHP is set to hand them a new company, South32, by June.

South32 will house BHP's aluminium and manganese units, the Cerro Matoso nickel mine, Cannington silver mine and some coal mines in Australia and South Africa.

"If our shareholders approve the demerger, we do not plan to rebase or lower our dividend, which implies all other things being equal, a higher payout ratio," Mackenzie told reporters.

The miner is sticking to its plan to hold a shareholder vote on the demerger in May and complete the spin-off mid-year.

COST CUTS

The company said it cut costs by $1.75 billion and achieved additional output worth $500 million in the first-half due to better productivity, taking total productivity gains over the past nearly three years to around $10 billion.

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Source:

http://www.abc.net.au/news/2015-02-24/bhp-billiton-slashes-costs-as-profit-almost-halves/6244578

 

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From: "Daniel Garrun" <[email protected]>
Sent: Tuesday, February 24, 2015 15:07
To: "[email protected]" <[email protected]>
Subject: FW: BHP Billiton +3.5% LCG view: "By making good margins in its key iron ore sector BHP Billiton is keeping investors happy this morning. BHP has followed a sector trend in holding onto current dividend ratios despite the recent commodities slump."

BHP Billiton +3.5% LCG view: "By making good margins in its key iron ore sector BHP Billiton is keeping investors happy this morning. BHP has followed a sector trend in holding onto current dividend ratios despite the recent commodities slump."

Lewis Sturdy, dealer at London Capital Group said: "At face value it is another bleak looking mining update from the world's largest miner. By beating market forecasts and making good margins in its key iron ore sector BHP Billiton is keeping investors happy this morning. Holding onto current dividend ratios has been a key theme in this sector in the wake of the commodity slump and BHP is no different.
To support the dividend ratio investors may warm to its selective cost cuts while maintaining plans to de-merge part of their operation in the summer."