BHP announces $7b loss

The New Daily
Feb 23, 2016, updated Feb 23, 2016

The world’s biggest mining company BHP Billiton has announced a loss of almost AUD$7.84 billion in its half year results amid tumbling commodity prices.

The Melbourne-based company’s revenue for July to December 2015 was AUD$21.7 billion, prompting it slash the interim dividend from 62 to 16 US cents (22 cents) per share.

It had an underlying profit of AUD$570 million (US$412 million).

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BHP Billiton predicted in a statement that “the period of weaker commodity prices and higher volatility will be prolonged”.

Ratings agency Standard and Poor’s recently cut BHP’s long-term credit rating from `A+’ to `A’ and warned it would be lowered further if the miner continues with its progressive dividend policy while its cash flows are pressured by lower commodity prices.

Excluding one-off costs and gains, the mining giant’s underlying profit was $US412 million ($570 million).

The company explained poor market conditions have resulted in the abandonment of its “progressive” dividend policy, where it had promised to maintain or increase shareholder payouts year after year.

Instead, the world’s biggest miner has slashed its interim dividend by around three-quarters to 16 US cents (22 cents).

In addition, the company has adopted a new policy that will see it pay out a minimum of 50 per cent of underlying profits in dividends, with the possibility of additional amounts depending on circumstances at the time.

The minimum in this half-year would have been 4 US cents, but the board elected to top up the dividend by 12 US cents to 16, as that was still covered by free cash flow.

BHP Billiton’s chief executive Andrew Mackenzie said the company had thought it had a “fighting chance” of maintaining its dividend when it last reported in August, but times have changed.

“We’re now looking at an outlook which is significantly worse than probably our low-case outlook was just six months ago, and that’s our mean-case outlook,” he told journalists on a conference call.

“We’re in a new era, a new world, and we need a different dividend policy to handle that.”

Mr Mackenzie said the big shift for his company had been the depth of the plunge in oil prices.

“We didn’t foresee the possibility of sub-$US30 oil, and that’s an important source of earnings for BHP Billiton,” he added.

In January, the mining giant slightly lowered its iron ore production target and flagged a further $1 billion hit to its bottom line, after earlier writing down $US7.2 billion ($A10.41 billion) in the value of its US shale assets.

BHP Billiton posted a net profit of AUD$2.64 billion for the 2014-15 financial year, down 86 per cent on 2013-14.

-with AAP, ABC