Shares in global resources giant took a tumble today despite a rise in full-year profits and a record dividend payout for shareholders.
Underlying profit, a figure that excludes one-off losses and gains, was 33% higher at $9.6 billion US$ in the 12 months to 30 June, from $7.2 billion in the 12 months to 30 June 2017.
The dividend per share rose 42% to 118 US cents, from 83 cents, and underlying basic earnings per share were 33% higher at 167.8 cents, from 126.5 cents.
Expected productivity gains halved
Despite this, the shares declined by 16p, or 0.97%, to 1,629.20p in trading this morning. One negative factor weighing on the stock may have been guidance suggesting lower than hoped-for productivity benefits.
“This guidance is lowered from $2 billion over the two years to the end of the 2019 financial year.”
There were two reasons for this, said BHP. One was that two units – one involving onshore US oil and gas assets, the other the Chilean copper mine Cerro Colorado – that had been expected to contribute $200 million to productivity gains had been sold, thus no longer formed part of the group.
The second, it said, reflected “modified assumptions in respect of the pace of productivity uplift over the two-year period at Queensland Coal – reduction of approximately $700 million following the challenging operating conditions at the Broadmeadow and Blackwater mines during the 2018 financial year”.
Commodity outlook positive
BHP Billiton operates across the world, with Australia and the Americas being strong centres of operation. The resources in which it is involved include oil, gas, potash, copper, iron ore, nickel and zinc.
In an industry with a traditionally abysmal record of capital discipline – in which shareholders’ money has been wasted on vanity projects and unnecessary takeovers – BHP touted its record in this area in the year under review, pointing out that net debt had been reduced by 33% from $16.3 billion to $10.9 billion.
The outlook for commodities generally was positive, said BHP Billiton, despite ‘trade war’ fears depressing copper prices.
Andrew Mackenzie, chief executive, said, “We have announced a record final dividend for shareholders which reflects strong operating performance, solid prices and capital discipline. Our relentless focus on safety and productivity has released additional volumes across our supply chain, with 8% volume growth for the year.”
“Our balance sheet is strong, with net debt now at the lower end of our target range, and our investment plans on track across iron ore, copper, coal and petroleum.”
He added, “Our rich suite of options coupled with our rigorous capital allocation framework will make sure we get the most out of every dollar we invest.”