Argo benefits from commodities

LISTED investment company Argo has increased its first-half profit on the back of improved dividends from investments in BHP Billiton and Rio Tinto.

The company yesterday said profit for the six months to December 31 rose 6.2 per cent from the same period a year earlier, to $110.5 million. It was driven by an 8.4 per cent increase in dividend revenue.

Argo reaped the benefits of stronger commodity prices, which allowed Rio Tinto to declare a record interim dividend in August and helped BHP Billiton increase its dividend after returning to profitability.

But managing director Jason Beddow warned the rise in dividends was largely because the same companies had reduced their payouts when under pressure a year earlier.

Growth in revenue from resources investments should continue in the second half, albeit at a slower pace, he said.

“We expect the dividends to grow from the mining companies, but nowhere near that sort of magnitude,” he said. “The cash flow of the mining companies is pretty good and they are at a point in the cycle where they are generating a lot of cash and not spending a lot of money on capital, and commodity prices are pretty good.”

Argo made $99 million worth of what it said was longterm investments over the period, including in Telstra and Westpac, and received proceeds of $49 million from longterm investment sales such as Westfield and Woolworths.