Big hits take the cream off BHP

Payouts hit bottom line

BHP will pay a US72c a share interim dividend after delivering underlying profit results in line with analyst expectations, despite an 86 per cent slump in statutory profits on the back of massive one-off charges.

The company booked a statutory net profit of $US927m ($1.42bn) for the half year, but the company’s underlying attributable profit – excluding one-off charges – of $US6.6bn was broadly in line with the first half of the previous financial year.

BHP last week flagged it would take more than $US5.7bn in one-off charges against its accounts, on an after tax basis, as it wrote off the entirety of its Nickel West assets and took a $US3.2bn income statement charge in relation to the Samarco Dam disaster.

The company said the charge reflects “potential future outflows” to resolve the Brazilian prosecution, as well as its existing obligations under a framework agreement set shortly after the 2015 collapse of the Samarco tailings dam.

BHP booked underlying earnings before interest, tax, depreciation and amortisation of $US13.9bn, and underlying earnings before interest and tax of $US11.23bn.

Chief executive Mike Henry said the nickel and Samarco charges had undermined a “solid operational performance and overall healthy commodity prices”.

“At our Western Australia iron ore operations, we remain the lowest cost major producer globally and in copper we set new production records at our operations in South Australia and Chile. In South Australia, our consolidated copper province has performed strongly, and we are pursuing future growth options,” he said.

“We’ve seen volatility in global commodity prices and demand in the developed world has been softer than expected. That said, China demand is healthy despite weakness in housing and India remains a bright spot.”

Analyst consensus estimates had tipped underlying EBITDA for the first six months of the year at $US13.87bn, with underlying EBIT at $US11.06bn. Analyst consensus had expected a US69c a share interim dividend.

As always, the company’s profits were led by its dominant iron ore division, which delivered a $US9.67bn underlying EBITDA for the half-year, on revenue of $US14.06bn. That is up from underlying EBITDA of $US7.64bn from revenue of $US11.82bn the previous financial year.

With first half production and shipments of about 142.1 million tonnes, BHP said it remained on track to meet annual guidance of 282 to 294 million tonnes from its Pilbara mines.

Copper earnings also lifted, to $US6.47bn, from $US2.81bn the previous year.

BHP said it expected the iron ore market to remain “balanced” through the remainder of the year, with the weakness in the Chinese property sector likely to be offset by a strong surge in Indian steel production.

BHP shares last traded at

$46.04.