Mixed reviews of BHP’s 2017-18 result. Net earnings were light on compared to forecasts, some provisions were higher, but the final dividend is a record 63 US cents a share.
Iron ore rival Rio Tinto lifted its interim dividend to an all time high of $US1.27 a share earlier this month, but smaller rival, Fortescue Metals slashed its full year payout to 23 cents a share from 45 cents a year earlier.
BHP’s full-year payout was $US1.18 a share, up from 83 US cents in 2016-17.
Underlying earnings were up 33% at $US8.93 billion ($A12.2 billion) for the year to June 30 on revenues 21% higher at $US43.6 billion.
Including a number of one off items, profit fell 37% to $US3.71 billion.
Those one-offs were mostly a $US2.8 billion post-tax loss from the sale of its US shale oil and gas assets to BP in July.
The statutory profit also reflects a charge of $US650 million in its fiscal 2018 results following the 2015 Samarco dam failure in Brazil that killed 19 people.
BHP shares eased 1.8% to $32.55.
The global miner reported earnings before interest, tax, depreciation and amortisation of $US23.18 billion, up 20% on the previous year and perhaps the best indicator of what was a solid year’s performance.
Some analysts thought the underlying result was well short of estimates around $US9 billion.
BHP also warned about rising costs and tariffs. The company said threats to global economic growth have increased due to rising trade protectionism.
“Near-term prospects for the U.S. economy are sound, with cyclical fundamentals solid," BHP said.
“However, we expect the increase in protectionism to weigh on consumer purchasing power and international competitiveness."
The miner also said it expects China’s economy to slow modestly in 2018.
The record final dividend was higher than BHP’s policy has allowed for and there will be another multi-billion dollar return later this year from the sale of the company’s US onshore shale gas assets. Settlement of that $US10.8 billion deal is expected in the next month or so.
Under its dividend policy BHP’s must pay a minimum of 50% of underlying attributable profit at every reporting period to its shareholders. For the June half of fiscal 2018, that would have been 46 US cents a share a share.
But outlining the record dividend, BHP said in yesterday’s statement “the board has determined to pay an additional amount of 17 US cents per share, or $US0.9 billion ($US900 million), taking the final dividend to a record US63 cents per share. This is equivalent to a 69 per cent payout ratio."
In total, BHP has declared total dividends for fiscal 2018 of $US6.3 billion, which is $US1.8 billion above its minimum payout policy.
“Across our dramatically simplified portfolio of tier-one assets, we see this year’s strong momentum carried into the medium term as our leadership, technology and culture drive further increases in productivity, value and returns,” CEO Andrew Mackenzie said in yesterday’s statement.
“We have started the new year with the sale of our onshore US business for $US10.8 billion, and once completed we expect to return the net proceeds to shareholders," he said.
BHP saw average prices for its oil, copper and steelmaking coal up 26%, 23% and 9%, respectively. Iron ore prices were slightly weaker during the 12-month period, down 3%.
Since June 30 though iron ore prices are roughly steady, oil is down a touch but copper has shed close to 20% since its four and a half year peak in early June.
The company also produced more. Full-year output of copper jumped 32%, while production of iron ore was 3% higher and coking (steelmaking) coal was up 7%. Its petroleum division was the outlier, with an 8% fall in output but the surge in global prices more than made up for that.
The miner also slashed its net debt to $US10.9 billion at the end of June, down from $US16.3 billion one year ago. The US gas sale proceeds could eliminate that debt easily, but BHP wants its balance sheet to carry debt.
