BHP Billiton posts worst profit in 11 years, maintains dividend – by Peter Ker (Sydney Morning Herald – August 25, 2015)

Analysts say BHP Billiton is offering shareholders “the dividend yield of a lifetime”, after it grew dividends by 2 per cent during a year that its profits slumped by 52 per cent to their lowest level in more than a decade.

The $US0.62 dividend announced by BHP on Tuesday confirmed the miner’s pledge to maintain a “progressive” dividend despite the deliberate shrinking of the company through the spin-out of South32 earlier this year.

The pay out came as the resources giant posted a $US6.4 billion underlying profit, which was well below the $US7.5 billion that analysts had expected.

BHP has not posted a profit this low since the earliest days of the mining boom in 2004.  The statutory profit was 86 per cent lower at $US1.9 billion. But despite the result, BHP’s London shares have surged by more than 8 per cent in early trading.

The company’s earnings were always going to struggle amid a broader collapse in commodity prices during the 2015 financial year.

Oil prices fell by 48 per cent during the period, while iron ore and copper fell by 40 per cent and 20 per cent respectively.

Increased productivity and lower costs of production have taken the edge of those falls, but failed to reverse them entirely. But in a big positive, the miner’s debt has continued sliding and was $US24.4 billion at June 30.

Many analysts had predicted BHP would need to increase debt to afford its dividend, and BHP chief executive Andrew Mackenzie sought to highlight the $US1.4 billion reduction in net debt.

“The success of our productivity initiatives generated strong cashflow which supported our dividend commitment, funded continued investment in growth and enabled a reduction in net debt, despite the dramatic fall in commodity prices,” said Mr Mackenzie.

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