BHP will pay an unchanged interim dividend of 55 US cents a share after reporting an interim result hurt by problems at the WA iron ore mining operations, a nickel processing facility also in WA, and copper mines in South Australia and Chile.
All up those problems cost BHP $US460 million and meant the difference between a solid rise in interim earnings and a performance that saw little improvement.
BHP last month warned of a $US600 million hit from the outages at the WA iron ore mines caused by a train derailment last November, a fire at the Nickel West smelter in WA, and problems at Olympic Dam in South Australia and the Spence mine in Chile.
The steady payout though follows the whacking great $US1.02 a share special payment in January based on the sale of the company’s US onshore oil and gas assets last year.
Revenue edged up 1% to $US20.74 billion.
BHP shares closed at a new multi-year high yesterday of $37.01.
The shares hit a new year and multi-year intraday high of $37.21. BHP shares haven’t been this high since early 2011 when iron ore prices last went for a big run-up.
The shares have soared in the wake of the latest iron ore dam disaster in Brazil at a mine owned by rival miner, Vale.
Iron ore prices topped $US90 a tonne last week and ended above $US88 a tonne yesterday in Asian trading.
BHP CEO Andrew Mackenzie said yesterday in a statement the company had maintained a focus during the year on portfolio simplification, cash generation, and capital discipline and that this had “delivered higher cash returns to shareholders”.
Attributable profit of $US3.8 billion included an exceptional gain of $US32 million (after-tax), compared to an attributable profit of US$2.0 billion, which includes an exceptional loss of $US2.0 billion (after-tax) from the Trump tax changes last year, in the six months to December 2017.
Underlying attributable profit was $US3.7 billion, down from US$4.1 billion in the prior period.
BHP said the December 2018 half year “exceptional gain is related to the reversal of provisions for global taxation matters which were resolved during the period, partially offset by a loss related to the Samarco dam failure. The December 2017 half year exceptional loss related to the US tax reform and the Samarco dam failure.”
The company’s earnings before interest, tax, depreciation, and amortisation from continuing operations was $US10.5 billion, compared to US$10.8 billion in the December 2017 half year.
The company said “higher costs (including production outages), inflation and other net movements (in total $US1.1 billion) more than offsetting the benefits of higher volumes at WAIO (the West Australian iron ore operations) and Queensland Coal and favourable exchange rate movements (in total USUS800 million).
That saw the underlying EBITDA margin from continuing operations slipped to 52% from 55%.
“A negative movement in productivity of $US460 million was recorded and reflects a negative impact of $US835 million related to unplanned production outages at Olympic Dam (acid plant outage in August 2018), WAIO (train derailment in November 2018), Spence (fire at the electro-winning plant in September 2018) and Nickel West (fire at the Kalgoorlie smelter in September 2018).
“This impact was partially offset by the build-up of inventory levels during the outages (benefit of approximately $US160 million) as well as record volumes at Jimblebar (iron ore mine) and South Walker Creek (coking coal mine in Queensland).”
The company said the inventory build-up from the outages will be run down in the coming periods.
BHP said it expects a strong second half performance to offset the negative productivity movement in this period, bringing the overall movement to broadly flat for the full year, down from the previous guidance of $US1 billion.
