BHP Bil­li­ton profit dives to 10-year low on com­modi­ties rout


BHP Bil­li­ton (BHP.AX)(BLT.L) re­ported its worst un­der­ly­ing profit in a decade on Tues­day, gut­ted by plung­ing iron ore, cop­per, coal and oil prices, and said it would cut spend­ing more deeply to shore up div­i­dends.

BHP and its peers have been hit af­ter they hiked out­put of iron ore, cop­per and coal just as de­mand growth slowed in China, the top global met­als con­sumer, and have been slash­ing costs over the past three years to cope. The world's big­gest miner re­it­er­ated its pledge to never cut its div­i­dend, and low­ered its tar­get for cap­i­tal spend­ing for the year to June 2016 to $8.5 bil­lion from $9 bil­lion pre­vi­ously to help meet the prom­ise.

"Our com­mit­ment to our pro­gres­sive div­i­dend is res­o­lute," Chief Ex­ec­u­tive An­drew Macken­zie told re­porters. "It has with­stood many pre­vi­ous cy­cles and is a key dif­fer­en­tia­tor rel­a­tive to our peers." BHP shares jumped 6 per­cent in early Lon­don trade, partly re­vers­ing a 9 per­cent fall in the pre­vi­ous ses­sion when com­mod­ity stocks glob­ally fell on fears of a hard land­ing for the Chi­nese econ­omy.

The mar­ket wel­comed the sharp cost cuts and the com­pany's lower debt, which will help make the pro­gres­sive div­i­dend more af­ford­able, three an­a­lysts said. But some in­vestors ques­tioned the wis­dom of the div­i­dend pol­icy for a com­pany in a cycli­cal busi­ness. "We're cur­rently at the point where their earn­ings are too low for the kind of div­i­dends they're want­ing to pay," said Bren­ton Saun­ders, an an­a­lyst at BT In­vest­ment Man­age­ment.

"Un­less com­mod­ity prices went up, it looks like they would have to use debt to fund their div­i­dend in this com­ing year." BHP, the last of the big five global min­ers to re­port re­sults, said its un­der­ly­ing at­trib­ut­able profit fell to $6.42 bil­lion for the year to June from $13.26 bil­lion a year ear­lier. The re­sult was be­low an­a­lysts' fore­casts around $7.73 bil­lion.

Net profit dropped 86 per­cent, as BHP took $ 2.9 bil­lion in post- tax charges that it flagged pre­vi­ously, mainly on its U.S. shale and Nickel West busi­nesses.

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