BHP: A (mostly) reliable mining giant – The Wall Street Journal

DUBLIN — The mining industry is notoriously cyclical, and many mining companies – especially the small ones – are prone to big busts. Against this background, BHP usually stands out as an island of calm. The company chooses to operate primarily in the safer parts of the world and focuses on steady growth, reliable profit, and positive cash flows. In keeping with this reputation, BHP recently posted strong first-half numbers – it reported a best-ever first-half profit of $3.76bn. Of course, even the most reliable company has its ups and downs. Its profit would have been even higher were it not for issues ranging from train derailments to US tax problems. And looking ahead, the company has warned that ongoing global trade troubles will weigh on its ability to deliver growth. Still, there's a lot to like in the BHP results, even if the future doesn't look as bright as it once did. – Felicity Duncan.BHP: Everybody Hurts Sometimes.By Nathaniel Taplin.BHP, the world's largest miner, has long prided itself on its reliability in an industry characterised by big bets in exotic – and often unstable – locales. Problems are to be expected when companies operate in places like the Democratic Republic of Congo and Mongolia. But when things go wrong in Australia , BHP's heartland, investors are justified in asking some tough questions..___STEADY_PAYWALL___.BHP's travails were far from the worst mining problems in recent months, but things did go somewhat awry in the six months to December: Unplanned outages in South Australia and Chile pushed its copper output down 1%, while a train derailment in Western Australia weighed on iron ore output. Largely as a result, BHP took a $460m productivity charge, pushing its underlying first-half profit down 8% on the year to $4.03bn. The company still managed to send shareholders plenty of cash – its interim dividend is 55 cents a share, same as last year – and keep reducing net debt, which has fallen $1bn since June to $9.9bn..There is little sign of any fundamental problem: BHP says its margin on earnings before interest, taxes, depreciation and amortisation on continuing operations was 52% in the second half of 2018, down marginally from 55% in the previous period. Higher iron ore prices following the collapse late last month of a dam in Brazil operated by BHP's competitor Vale will also pad margins in early 2019..Nonetheless, given BHP's strategic shift toward copper and heavy investment in the metal – close to 40% of total capital expenditures over the past six months – operational trip-ups are concerning. Rivals such as Glencore and Rio Tinto aren't standing still: Their aggregate copper capex in first half 2018 was up more than 30% on the year to nearly $2bn. Both companies have struggled to overcome political and logistical hurdles in far-flung places such as Indonesia, Mongolia and Congo..BHP's projects in more stable countries such as Australia and Chile have been a selling point. That makes keeping those operations on an even keel all the more important..Write to Nathaniel Taplin at nathaniel.taplin@wsj.com

BHP: A (mostly) reliable mining giant – The Wall Street Journal

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