BHP profit eases ac­tivist ire

North West Telegraph - - Telegraph News - Stu­art McKin­non

Higher prices for iron ore and coal, a big­ger div­i­dend pay­out and a com­mit­ment to exit its US shale gas busi­ness have helped BHP as­suage its frac­tured re­la­tion­ship with ac­tivist share­holder fund El­liott Man­age­ment Cor­po­ra­tion.

The min­ing giant last week re­ported un­der­ly­ing profit of $US6.7 bil­lion, up 454 per cent on the pre­vi­ous year, but well short of an­a­lysts’ ex­pec­ta­tions of $US7.3 bil­lion.

The bot­tom line profit of $US5.9 bil­lion, con­trasted with a loss of $US6.4 bil­lion in the pre­vi­ous year, which was mainly at­trib­ut­able to the Sa­marco dam col­lapse.

The re­sult was driven by the com­pany’s Pil­bara iron ore oper­a­tions which de­liv­ered rev­enue of $US14.6 bil­lion, com­pared with $US10.5 bil­lion in the 2016 fi­nan­cial year on higher prices for the com­mod­ity.

Iron ore’s con­tri­bu­tion was 40 per cent of BHP’s rev­enue.

Rev­enue of $US7.6 bil­lion from the coal di­vi­sion was up from $US4.5 bil­lion the pre­vi­ous year on re­bound­ing prices.

The strong per­for­mances from the two di­vi­sions helped fund a tre­bling of the com­pany’s fi­nal div­i­dend to US43¢ a share, up from US14¢ the pre­vi­ous year, rep­re­sent­ing a 75 per cent pay­out ra­tio and rais­ing the an­nual pay­out to US83¢.

BHP also an­nounced last week it would exit its un­der­per­form­ing US shale busi­ness, which had been one of El­liott’s three com­plaints.

The Paul Singer-led fund, which this month an­nounced it had raised its stake in BHP to 5 per cent, had also wanted the miner to ditch its dual list­ing struc­ture and boost re­turns to share­hold­ers.

While the dual list­ing is likely to re­main be­cause of reg­u­la­tory is­sues, the higher div­i­dend pay­out may go some way to ap­pease El­liott’s con­cerns.

BHP chief ex­ec­u­tive An­drew Macken­zie said the com­pany had gen­er­ated free cash­flow of $US12.6 bil­lion over the year, its sec­ond high­est on record.

“We used this cash to re­duce net debt by nearly $US10 bil­lion and re­turn $US4.4 bil­lion to share­hold­ers,” he said.

“Pro­duc­tiv­ity gains across our sim­pler port­fo­lio of tier one as­sets in­creased our re­turn on cap­i­tal to 10 per cent.”

BHP pre­dicted the premium com­manded by its higher-grade iron ore lump and fines prod­uct from WA would re­main healthy, at least for the rest of the cal­en­dar year.

Chi­nese steel­mak­ers have been forced to max­imise their out­put by us­ing higher grade feed as idle, in­ef­fi­cient and pol­lut­ing fur­naces are closed as part of a Govern­ment crack­down.

Unit cash costs at BHP’s Pil­bara iron ore oper­a­tions fell 3 per cent to $US14.60/t over the year.

The iron ore spot price last week was $US79.93/t, its high­est since April 6.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.