BHP Billiton posts worst profit in 11 years, maintains dividend

BHP Billiton has revealed a big slide in full year profits. Photo: Bloomberg BHP Billiton has maintained its “progressive” dividend policy, despite full year profits sliding to their lowest point in more than a decade.

The $US0.62dividend was in line with BHP’s promise to maintain its dividend amid the shrinking of the company through the spin-outofSouth32, and came as part of a weaker than expected set of full year results.

The resources giant posted a $US6.4 billion underlying profit, which was well below the $US7.5 billion that analysts had expected.

BHP has not posted a profit this low since the earliest days of the mining boom in 2004

But in a big positive, the miner’s debt has continued sliding and was $US24.4 billion at June 30.

Many analysts had predicted BHP would need to increase debt to afford its dividend, and BHP chief executive Andrew Mackenzie sought to highlight the $US1.4 billion reduction in net debt.

BHP Billiton chairman Jac Nasser Photo: Bloomberg

“The success of our productivity initiatives generated strong cashflow which supported our dividend commitment, funded continued investment in growth and enabled a reduction in net debt, despite the dramatic fall in commodity prices,” said Mr Mackenzie.

When combined with the interim dividend paid in February, BHP paid out 2 per cent more in dividends during the 2015 financial year, on top of the South32 demerger.

BHP’s profit wasalways going to struggle amid a broader collapse in commodity prices during the 2015 financial year.

Oilprices fellby 48per cent during the period, whileiron ore and copper fell by 40 per cent and20 per cent respectively.

Increased productivity andlower costs of production have taken the edge of those falls, but cannot reverse them entirely.

In a major shift of rhetoric, BHP has given up on its claim that Chinese steel production will rise to 1 billion tonnes between 2025 and 2030.

The company said on Tuesday it now believes Chinese steel production will peak between 935 million and 985 million tonnes around 2025.

The new forecast implies that Chinese steel will continue growing, unlike the China Iron and Steel Association which believes it has already peaked.

As expected, the result included numerous impairments. BHPhad already announced more than $US3 billion of impairments against its US shale division and $US290 of impairments against the Nickel West business.

On Tuesday there was a further $US839 million impairment on the copper division, including stockpiles at Escondida and a provision for redundancies at Olympic Dam in South Australia.

BHP shares rose by about 1per cent on Tuesday before the release of the company’s results.

But the stock, excluding the influence of the South32 demerger,hasfallen 34 per cent over the past year.