Wed, Feb 24, 2016 page15

• BHP reduces dividend for first time in 15 years

  ‘NO SILVER LINING’: The world’s biggest mining company saw its first-half profits plunge 92% amid a prolonged collapse in prices, and the outlook is deteriorating

  • Bloomberg
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  BHP Billiton Ltd made a larger-than-expected cut to its dividend, lowering the payout for the first time in 15 years, as the world’s biggest mining company seeks to protect its balance sheet and credit ratings amid a price collapse that saw first-half profits tumble 92 percent.

  Underlying profit fell to US$412 million at its continuing operations in the six months to Dec. 31, from US$4.9 billion a year earlier, Melbourne-based BHP said yesterday in a statement.

  Its first-half dividend was cut to US$0.16 from US$0.62 a year earlier and the company said it will adopt a policy to provide payouts at a minimum of 50 percent of underlying attributable profit.

  

  A bucket wheel reclaimer collects ore at the BHP Billiton iron ore loading facility in Port Hedland, north of Perth, on May 26, 2008.

  Photo: Reuters

  The payout had been forecast to drop to US$0.31, according to Bloomberg data.

  BHP warned in the statement that weaker prices and higher volatility across commodities markets are likely to persist for longer than the company had expected, prompting it to also cut its capital spending forecast and shake up top management.

  “The company is doing everything in its power to protect its balance sheet and to ensure cashflows — despite this long period of price weakness,” Sydney-based Fat Prophets resource analyst David Lennox said by telephone. “The credit ratings houses will probably leave them where they are, primarily because they have done that hard work on the balance sheet.”

  The big global miners are slashing dividends, cutting budgets and selling assets as pressure builds on them from investors and credit ratings companies to conserve cash to weather the commodities rout.

  BHP, which paid out about US$6.5 billion in dividends in the year to June 30, had been urged to cut its policy to maintain or increase its payouts each year, in place since 2003, amid weaker prices.

  The producer forecasts the crude oil market to rebalance in 2017 and copper to move to a structural deficit by the end of the decade, it said in a presentation.

  Iron ore prices are likely to remain low on weak demand and abundant supply, BHP said.

  BHP’s full-year dividend has not fallen since the 2001 merger between BHP Ltd and Billiton PLC that created the company.

  Before then, the company last chose to cut its dividend in 1988, the company said in an e-mailed statement.

  “Slower growth in China and the disruption of OPEC have resulted in lower prices than expected,” chief executive officer Andrew Mackenzie said in the statement.

  Global growth is expected to pick up slightly this calendar year, but will remain modest and subject to ongoing financial markets volatility, the company said.

  Capital expenditure in the year to June 30 will fall to US$7 billion, from an estimate in August of US$8.5 billion, while spending in fiscal 2017 will be cut to US$5 billion from the previous forecast of US$7 billion, the producer said.

  BHP posted a US$5.7 billion net loss in the half, from a profit of US$4.3 billion a year earlier.

  That compared to an average US$5.5 billion loss among three analyst estimates compiled by Bloomberg.

  “It’s a deteriorating outlook, there’s no silver lining in this cloud,” Melbourne-based Pengana Capital Ltd portfolio manager Tim Schroeders, who helps oversee about US$1.2 billion in assets, including BHP shares, said by telephone. “The tone is more negative, and that’s appropriate.”
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