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BHP profit tumbles 81% on prices collapse

Aug 16 2016 10:07
David Stringer and Jesse Riseborough

Melbourne - BHP Billiton [JSE:BIL] reported full-year underlying profit declined 81% for the worst result since 2001 after raw materials tumbled to a 25-year low in January.

Underlying profit was $1.2bn in the year ended June 30, from $6.4bn a year earlier, Melbourne-based BHP said on Tuesday in a statement. That beat the $1.04bn average estimate among 19 analyst forecasts compiled by Bloomberg.

BHP follows rival Rio Tinto Group in posting lower profits after prices, including of its top earner iron ore, plunged to about half their 2011 peak on oversupply and slower growth in China, the biggest commodities buyer. The result will likely mark a nadir for BHP, with a rebound in prices and higher output to lift profits this fiscal year, according to Morgans Financial.

“It was always going to be a very tough year operationally,”  Adrian Prendergast, a Melbourne-based Morgans analyst, said before the results. The current year has “volumes flat to recovering across the divisions, along with much better prices in some of their markets, it’s really going to see that recovery in earnings,” he said.

BHP has advanced 13% in Sydney trading since touching an 11-year low on January 21. The 98-member Bloomberg World Mining Index has advanced about 40% after commodities surged the most in the first half since the 2008 financial crisis as China’s economy stabilized and policy makers backed growth.

Long-term outlook

“While commodity prices are expected to remain low and volatile in the short to medium term, we are confident in the long-term outlook for our commodities, particularly oil and copper,”chief executive officer Andrew Mackenzie said in the statement.

BHP recorded a full-year net loss of $6.4bn, the producer said in its statement. That’s the first annual loss since the company was formed in the 2001 merger of BHP and Billiton, according to data compiled by Bloomberg. Underlying profits were the lowest since fiscal 2001, according to the data.

The producer booked after-tax charges of $7.7bn on costs related to the deadly dam spill at its Samarco iron ore joint venture in Brazil and against its US shale assets amid weaker oil prices, BHP said. The November 5 dam collapse in Brazil’s Minas Gerais state released billions of gallons of mining waste through a valley, leaving as many as 19 people dead and hundreds more homeless.

BHP’s full-year dividend fell 76% to 30 cents a share, under a policy set out in February that links the payment to profits.

The average prices that BHP receives for every key product fell in the past fiscal year, it said in the statement. Oil prices plunged 43% in the 12 months ended June 30, as iron ore declined 28% and copper dropped by 23%.

bhp billiton  |  mining  |  earnings reports
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