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BHP boosts dividend, returns to profitability

Business

BHP Billiton has joined its peers in sharply lifting dividends as stronger prices for iron ore, coal and petroleum helped the global miner post a solid return to profitability.

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The company also declared its US onshore shale assets as “non-core” and said it is actively pursuing options to exit these, agreeing to address a key concern raised by activist fund managers.

BHP posted a full-year profit of $US5.89 billion ($A7.42 billion) compared to a $US6.4 billion loss a year earlier and trebled final dividend to US43 cents a share, from US14 cents a year ago.

Underlying profit for the year to June 30 jumped to $US6.73 billion, from $US1.22 billion a year ago, as higher margins and cost reductions boosted earnings.

But, the result has still missed analyst expectations for underlying profit of around $US7 billion.

The results confirmed that last year’s South Australian blackout cost its Olympic Dam operations US$105 million in lost production.

While the company predicted that Olympic Dam’s copper production would fall to 150kt this year due to maintenance, production was expected to increase to 215kt in the 2019 financial year.

“In the medium term, the Olympic Dam Brownfield Expansion project has the potential to increase capacity to 280kt,” the company said.

Chief executive Andrew Mackenzie said the company had a very strong financial year, with free cash flow of $US12.6 billion – the second highest on record.

“This strong momentum will be carried into the 2018 financial year, with volume growth of seven per cent and further productivity gains expected,” Mackenzie said.

“Our relentless focus on cash flow, capital discipline and value creation should allow us to significantly increase our return on capital by the 2022 financial year.”

BHP said its results included an exceptional loss of $US842 million related to the fatal Samarco dam failure in Brazil, an extended strike at its jointly-owned Escondida mine in Chile and Chilean withholding tax paid at a concessional rate.

The company recorded an exceptional loss of $US381 million in relation to the Samarco dam collapse with the mine’s operations still suspended.

The miner realised additional productivity gains of $US1 billion in FY2017, and expects to deliver a further $US2 billion of productivity gains over the two years to the end of the 2019 financial year.

UBS analyst Glyn Lawcock said that while there was a miss on the headline profit, interest would still be driven by the strong cash flow and US shale exit announcement.

“The market (is) expected to like the strong cash flow and debt reduction, together with decision to exit US shale seen as a positive,” he said in a note.

Activist hedge fund Elliott Advisors, which last week raised its economic interest in the company to above five per cent, has been calling for a restructure of its operations including a demerger of the petroleum business, as a means to unlock shareholder value.

BHP said it was actively pursuing options to exit the US shale assets for value, but in the meantime, will complete well trials, acreage swaps and assess midstream solutions to increase the value, profitability and marketability of its acreage.

By 1039 AEST, BHP shares were up 1.52 per cent to $26.09, in a firm Australian market.

BHP SWINGS TO FULL-YEAR PROFIT

* Net profit of $US5.89b, vs $US6.38b loss

* Underlying profit $US6.7b vs $US1.2b

* Revenue $US38.285b, up 24pct

* Final dividend US43 cents per share vs US14 cents

– AAP

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