BHP Declares US$5.7Billion Loss; Cuts Dividend
BHP's revenue from Petroleum declined 45%
The world’s largest miner by market value BHP Billiton (ASX:BHP) released their results for the half-year ending 31st December 2015. Highlighted by a significant dampening in global commodity prices, asset impairment charges, along with the financial impacts of the Samarco Dam failure, the diversified miner has declared a US$5.7bn loss for the period.
BHP Announces US$5.7Billion Statutory Loss
Adversely affected by the ongoing decline in global commodity prices, a US$4.9billion impairment charge on the carrying value of Onshore US assets, along with a US$858million bill, in response to the Samarco Dam failure, the company has declared a US$5.7billion statutory loss for the 1HFY16.
On an underlying basis, the group declared a profit of US$412million. Nonetheless, the results remain significantly affected by the continued decline in commodity prices, contracting 92% to the PCP (H1FY15: US$4.9billion).
The ramifications of lower commodity prices can be felt within BHP’s P/L statement. With Iron Ore revenue down over 36% to the PCP, to US$5.3billion (H1FY15: US$8.4billion). Furthermore, revenue from Petroleum remains disrupted from the supply-side strategy implemented within OPEC, declining over 45% to the PCP, to US$3.8billion (H1FY15: US$6.9billion).
CEO Andrew Mackenzie commented on the results: “Slower growth in China and the disruption of OPEC have resulted in lower prices than expected. However, our company remains resilient with assets that generate free cash flow through the cycle and a strong balance sheet.”
Capex Expenditure Reduced
Over the period, capital and exploration expenditure declined over 35%, to US$4.4billion (1HFY15:US$6.8billion). Within the 2016 and 2017 financial years, BHP aims to reduce capital expenditure by a total of US$3.5billion.
At the of the half year, BHP’s net debt is US$25.9billion, a 6.1% increase to the end of FY15 (US$24.9billion). Along with an increase in their gearing ratio to 29.7% (FY15: 25.7%).
As at the 31st December 2015, BHP’s cash balance is US$10.6billion (H1FY15: US$6.1billion).
BHP Management Ends ‘Progressive Dividend Policy’
In response to the challenging global environment BHP faces, the company has decided to cut their dividend, thus ending their ‘Progressive Dividend Policy’. Cutting it over 74%, to US$0.16cents per share, from US$62cents per share paid in the prior distribution period.
Chairman Jac Nasser addressed the change in policy: “We have not made these changes lightly. They are a determined response to changing markets that will also help us to take advantage of the significant opportunities ahead. We remain strongly committed to returning cash to our shareholders and in every reporting period, the Board will assess the possibility of returning additional cash to over that implied by the 50 per cent payout ratio, as we have done in this period.”
The Ex-Dividend and Payment Date are on the 10th and 31st of March 2016 respectively.
BHP Stock Up After Results
As at 11:30am (AEDT), BHP is up nearly 3% to $17.68. In the face of global market volatility in the past year, BHP has lost over 40% of its value.
Author: Ben Khouri
Feb 23, 2016
Ben Khouri is a financial editor for Wise-Owl with a particular focus on the top ASX 300 companies. Having a vast background in economics and finance, Ben provides financial commentary & analysis as well as global market updates, which guide investors in devising investment strategies. Ben specialises in analysing economic data and global events from around the world and examines the impacts they have on the major equity markets.