25/08/2015 - 15:30

BHP takes big profit hit

25/08/2015 - 15:30

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Mining giant BHP Billiton has posted a dramatic slide in annual profit on the back of plunging commodity prices, with chief executive Andrew Mackenzie flagging further cost cuts.

BHP chief executive Andrew Mackenzie.

Mining giant BHP Billiton has posted a dramatic slide in annual profit on the back of plunging commodity prices, with chief executive Andrew Mackenzie flagging further cost cuts.

BHP reported an 86.2 per cent slide in net profit to $US1.91 billion ($A2.66 billion), with revenue down 21.4 per cent to $US44.6 billion ($A62 billion) for the 2015 financial year.

After adjusting for discontinued operations and exceptional items, BHP’s underlying attributable profit fell 51.6 per cent to $US6.4 billion.

The $US2.9 billion in exceptional items included the impairment of BHP’s Nickel West assets and its onshore US assets, but partially offset by a repeal in minerals resource rent tax.

The company maintained its final dividend of US62 cents a share, fully franked.

Falling iron ore, copper, coal and petroleum prices wiped $US16.4 billion from its underlying earnings, with iron ore the main culprit, as BHP's realised prices fell 41 per cent from the prior year.

“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,” Mr Mackenzie said.

“While we recorded a sector-leading EBITDA margin of 50 per cent, we will cut costs further and exercise our growing capital flexibility to improve our competitiveness and support our progressive dividend policy through the cycle.”

In the short term, he said, the company expected ongoing reforms in China to contribute to periods of market volatility.

“We have lowered our forecast of peak Chinese steel demand to between 935 million tonnes and 985mt in the mid 2020s,” Mr Mackenzie said.

“This backdrop will favour low-cost producers with economies of scale.”

Mr Mackenzie also said BHP would not need the same level of investment as in the past to achieve growth.

“Improved productivity can further stretch the capacity of our existing operations to increase volumes at very low cost,” he said.

BHP closed 1.9 per cent higher to $23.34 each.

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