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BHP dumps dividend policy after $A7.8 billion loss

Business

UPDATED: BHP Billiton has slashed its shareholder dividend and abandoned its progressive payout policy after a collapse in commodity prices forced it into a $US5.67 billion ($A7.84 billion) half-year loss.

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The move had been expected after the resources giant was forced to take a $US7.2 billion writedown against its US oil and gas assets in December and as rivals Rio Tinto, Glencore and Vale all slashed their own payouts in recent weeks.

BHP’s first half net loss was a far cry from its $US4.26 billion profit a year ago.

Underlying profit for the six months ended December 31 slumped 92 per cent to $US412 million, amid a prolonged downturn in its main iron ore, oil and coal businesses.

BHP cut interim dividend to 16 US cents per share, from 62 US cents a year ago, and like rival Rio Tinto, said it was dropping its long-standing policy of holding or increasing dividends at every result.

It will now ensure a minimum 50 per cent payout of underlying profit at every reporting period.

“We have not made these changes lightly. They are a determined response to changing markets that will also help us take advantage of the significant opportunities ahead,” chairman Jac Nasser said.

BHP shares climbed on the news, and by 2.26pm (AEDT), were up 42 cents or 2.4 per cent, at $17.60.

In January, Standard & Poor’s cut BHP’s credit rating by a notch and warned of further cuts, raising the stakes for the company.

“The extent of the dividend cut was certainly larger than expected,” Morningstar analyst Matthew Hodge said.

“It seems like they have really changed their philosophy over dividends and market outlook, but where they are now is pretty sensible.”

BHP said its focus on ekeing out efficiencies would continue, but it will reduce capital expenditure by another $US3.5 billion in the next 18 months.

Chief executive Andrew Mackenzie said while short term prospects in the commodities market remained uncertain, he was more confident about the longer term.

“We expect this period of lower prices and higher volatility will be prolonged,” he told reporters.

“But the markets will come back into balance in the medium term, probably starting with with gas and oil, and then copper.”

BHP outlined a $US1.12 billion provision against its joint venture Samarco business in Brazil – its first indication of the financial impact of the deadly dam disaster.

The company has fully written down its investment in Samarco, but Mackenzie said it is too early to estimate the full financial impact. Analysts have previously indicated the accident may cost the miner up to $US3.5 billion in fines and damages.

BHP also unveiled major changes in its operating model, shifting from the traditional minerals-focused divisions to businesses based on geographic areas.

Under the new plan, all the minerals business will be categorised into either Americas or Australia, while the petroluem business will remain separate.

The new model will result in the departure of several senior executives, including its iron ore and petroleum bosses.

BHP BILLITON POSTS HALF YEAR LOSS

* Revenue down 37pct to $US15.7b

* Net loss of $US5.67b vs net profit of $US4.26b

* Underlying profit down 92 pct to $US412m

* Interim dividend 16 US cents per share vs 62 US cents

BREAKDOWN OF BHP’S HY PERFORMANCE

* Iron ore profit down 82pct to $US74m

* Copper profit down 95pct to $US101m

* Petroleum loss of $US7.38b vs profit of $US2.26b

* Coal loss of $US342m vs profit of $US139m

AAP

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