BHP's Full Year Results: Slightly Below Expectations in Challenging Environment
The largest mining company in the world BHP Billiton (ASX:BHP) released its full year results after market close yesterday. Total profit after tax was US$1.9bn, an 86% decrease compared to FY14.
BHP reported revenue from continuing operations of US$44.6bn which is 21.4% lower than in FY14. Total revenue including discontinued operations was US$52bn.
As for the statutory results this resulted in net profit after tax from continuing operations of US$3.5bn. As of 30 June 2015 net tangible assets per security were $US12.44.
The underlying results are more meaningful as it gives investor’s an indication of the profitability of BHP’s continuing operations. The miner achieved underlying EBITDA of US$21.8bn which is a 28% decrease compared to last year’s US$30.3bn. The underlying attributable profit has more than halved to US$6.4bn.
Despite challenging market conditions, BHP reduced its net debt position to and reduced capital and exploration expenditure by 24% to $11bn. The capital expenditure guidance for FY16 is US$8.5bn.
BHP’s Chief Executive Officer Andre Mackenzie said: “The success of our productivity initiatives generated strong cash flow which supported our dividend commitment, funded continued investment in growth and enabled a reduction in net debt, despite the dramatic fall in commodity prices.” He furthermore calls BHP’s EBITDA margin of 50% as ‘sector leading’ and promises shareholders that the company is committed to cut costs reduce expenditure.
BHP’s Defends Dividend Policy
One of the biggest questions ahead of BHP’s full year results was the full year dividend and whether the low commodity price environment and the resulting profit declines will force the company to significantly reduce the distribution. BHP has maintained the final distribution at 62 US cents which brings the full-year dividend to 124 US cents, a 2% increase compared to FY14.
BHP’s Share Price Jumps in London
BHP, which is dual listed on the Australian stock exchange as well as the London stock exchange (BLT.L) released its results just before trading in London commenced. The company gained 5.5% during ordinary trading hours in London. Australian investors appeared slightly more cautious as the ASX quoted stock opened slightly lower at $23.20, but gained around 1.4% within the first half an hour of trading. As per the current USD/AUD exchange rate BHP’s full year dividend yields 7.5%, making the stock an attractive income opportunity.
Author: Simon Herrmann
Aug 26, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.