BHP declared record dividend as profit hits four-year high

By David Stringer

(Bloomberg) – BHP Billiton Ltd. paid out a record dividend as profits hit a four-year high on stronger prices and confirmed it’ll return the bulk of almost $11 billion in asset sales to investors.

The world’s top miner Tuesday raised its annual dividend 42 percent, including a record final payment, though it said it’ll wait to confirm how and when it’ll hand back a further windfall from deals agreed last month to sell U.S. shale assets. BHP follows Rio Tinto Group and Vale SA in lifting payouts, as investors press for greater rewards.

Ken MacKenzie, chairman of BHP Billiton Ltd., addresses shareholders as Andrew Mackenzie (CEO) looks on during the company’s 2017 AGM in Melbourne. Photographer: Carla Gottgens/Bloomberg

While BHP continues to have a positive outlook bolstered by rising commodities demand in the developed world, it warned key oil, copper and coal units are forecast to see rising costs and also flagged concerns over slower growth in China and global trade tensions.

Full-year underlying earnings jumped 33 percent to $8.9 billion in the 12 months through June, Melbourne-based BHP said in a statement. That compared with a $9.2 billion average estimate among analysts’ forecasts compiled by Bloomberg.

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The producer booked $5.2 billion of after-tax impairments, including a previously flagged writedown on the value of the shale assets, a $2.3 billion charge as a result of President Donald Trump’s U.S. tax reform and $650 million of costs related to the deadly Samarco dam failure.

BHP shares fell as much as 2.2 percent in London and traded at 1,618.80 pence by 8:15 a.m. The stock earlier fell 1.9 percent in Sydney.

The producer is pursuing nine significant projects, spending about $1 billion on exploration work and could consider a potential acquisition to lift output in conventional oil, according to Chief Executive Officer Andrew Mackenzie. “We are really pulling the growth lever pretty hard,” he told reporters on a conference call.

BHP will seek to accelerate conventional oil production to capture better prices, he said. Output from offshore oil and gas assets is forecast to fall as much as six percent in the current fiscal year as fields decline.

The producer’s cash pile is being boosted after it struck the deals last month to sell U.S. shale assets, including to BP Plc. The net proceeds will be returned once the agreements are completed, Mackenzie said. BHP is continuing to seek a partner to take a stake in the Jansen potash project, and continues to consider the future of the Nickel West asset, he said.

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Higher production and stronger prices in copper delivered the most significant boost to BHP’s annual profits, though the producer flagged that output at Escondida – the world’s No. 1 mine – could fall as much 8 percent in the current fiscal year on declining grades.

Costs are forecast to rise in BHP’s oil division, at Escondida and potentially at its Queensland coal assets, while targets to make $2 billion of productivity improvements over two years have been scaled back, the company said.

The mining sector is feeling the impact of more expensive raw materials, labor and energy, including higher oil prices, Rio said last month. Copper producer Antofagasta Plc said last week profit tumbled as costs rose to the highest since 2015.