BHP Billiton posts US$6.39 billion loss, worst ever result

SYDNEY: BHP Billiton reported an annual net loss of US$ 6.39 billion yesterday, its worst-ever result, as the impact of a fatal mine dam disaster in Brazil and weak commodity prices hit the world’s biggest miner.

Miners have been battling huge declines in the commodities market, with the outlook uncertain despite a recent improvement in prices.

The results for the year to June 30 followed a US$1.91 billion net profit in the previous corresponding period. Underlying earnings, which strip out one-off writedowns, came in at US$1.22 billion, slightly above analysts’ expectations.

“The last 12 months have been challenging for both BHP Billiton and the resources industry,” chief executive Andrew Mackenzie said in a statement.

“Nevertheless, our results demonstrate the resilience of our portfolio and the diverse ways in which we can create value for shareholders despite low commodity prices.”

The Anglo- Australian firm slashed its payout, declaring a final dividend of 14 cents, compared to 62 cents last year.

It followed the company’s decision in February to dump its progressive dividend policy in which shareholders are given gradually higher payouts.

The challenging market outlook saw global ratings agency Standard & Poor’s downgrade BHP’s rating from A+ to A in February.

Mackenzie said despite expectations that commodity prices would “remain low and volatile in the short- to medium-term”, he was confident about the long- term outlook, particularly for oil and copper.

At the same time, BHP has been grappling with the aftermath of the Samarco dam rupture in November in which 19 people died.

Samarco, which is co-owned by Brazilian mining giant Vale, is facing billions of dollars in legal claims for clean- up costs and damages.

BHP said its losses included a US$4.9 billion writedown on the value of some US assets and a US$2.2 billion loss relating to the Samarco dam failure.

The company’s share price closed 0.45 per cent higher to Aus$20.25, ahead of the profit announcement.

South32, which was spun off from BHP last year and which has assets including aluminium, coal, nickel, manganese, silver, lead and zinc, is set to report its earnings on August 25. — AFP

The move by highly indebted but ambitious China Evergrande Group comes amid a rare public Chinese boardroom spat.

Vanke is already fending off a potential bid from its biggest investor, financial firm Baoneng Group, which has built up a 25 per cent stake despite the developer’s protests.

In a filing late on Monday, Evergrande said it had paid 5.46 billion yuan (US$823 million) for another 2.14 per cent stake in Vanke, becoming its no. 3 investor.

The stake increase came nearly two weeks after Evergrande surprised investors by buying 4.68 per cent of Vanke for 9.1 billion yuan, citing the latter’s ‘strong results’ as a reason for the investment.

Officials at Vanke, worth about US$40 billion by market value, declined to comment on Evergrande’s latest move.

Evergrande, which has a market capitalisation of about US$10 billion and had total long-term debt twice that amount as of end-2015, declined to comment on whether it might increase its holding or seek representation on Vanke’s board.

“Evergrande will buy more,

Evergrande will buy more, from its track record it wouldn’t stop at a 6 per cent-plus stake. David Yang, UOB Kay Hian analyst

from its track record it wouldn’t stop at a 6 per cent-plus stake,” said UOB Kay Hian analyst David Yang in Shanghai. “Getting involved in this (Vanke) battle will not do Evergrande much harm.”

Yang said he expected Evergrande to seek seats on Vanke’s board at the latter’s next annual shareholder meeting in March 2017.

In a report earlier this month, JP Morgan analysts wrote that Evergrande, which has a track record of hostile takeover attempts, hoped to exercise influence on Vanke.

Shares in both home builders rose on Tuesday after Evergrande disclosed a move that leaves only Baoneng and state-owned China Resources Group as bigger investors in Vanke.

Vanke’s Shenzhen-listed shares surged 7 per cent to a record high, while its Hong Kong-listed shares rose more than 1 per cent, outpacing a flat benchmark index. Evergrande rose 1 per cent.

Wang Shi, Vanke’s chairman, has publicly opposed Baoneng’s moves in the past, urging regulators to investigate the funding of its purchases of Vanke shares. Baoneng has declined to comment on Vanke’s request.

Evergrande has spent over US$4 billion snapping up shares in companies this year, including taking control of smaller rival China Calxon Group, and earlier this month ratings agency Moody’s said its first Vanke purchase was credit-negative.

Still, early this month it paid about US$60 million to buy more of trading company Langfang Development Co Ltd, raising its stake to 15 per cent. — Reuters