BHP shares rally despite $6.4bn loss

Added 16th August 2016

BHP Billiton shares were the second highest riser in the FTSE 100, climbing 3.3% to 1076.8p despite reporting record losses in its interim results Tuesday morning.

BHP shares rally despite $6.4bn loss

Net profit dipped to -$6.4bn, making it one of the weakest sets of results in BHP’s history.

The Anglo-Australian mining giant endured a tough 12-month period of crippling commodities prices combined with the costs stemming from the Samarco dam disaster which claimed 19 lives last November.

Falling commodities prices cost the company around $10.7bn during the first half of the year. The Samarco dam failure resulted in $2.2bn in charges out of the $7.7bn BHP spent on exceptional items in H1 2016.

Underlying earnings before interest, taxes, depreciation and amortization fell 44% from the previous year to $12.3bn, while underlying profit slumped by 81% to $1.2bn. BHP’s basic earnings per share toppled 81% to $22.8m.

Despite these pitfalls, the world’s largest mining group said it had managed to nearly halve capital and exploration expenditure to $7.7bn, which allowed for the free cash generation of $3.4bn. BHP anticipates its new operating model will help sustain this reduction of operating costs, creating another $1.8bn in productivity gains and $7bn in free cash flow by next year.

The group settled on a final dividend of 14 cents per share, which BHP chief executive Andrew Mackenzie said reflects the strength of the group’s cash flow generation and balance sheet.

Net debt increased by 7% to $26.1bn from the year prior, a figure which remains “broadly unchanged from December 2015,” the company said. 

On the company’s future progress, Mackenzie commented: “We continue to pursue capital-efficient latent capacity opportunities which will support volume growth of up to four per cent next year, excluding our Onshore US assets where we continue to defer activity to maximise value. In addition, we have progressed high-return growth projects, with investment decisions on the Mad Dog 2 and Spence Growth Option projects expected by the end of next calendar year.

"Over the past five years we have actively reshaped our portfolio, and we are confident we have the right mix of commodities, assets and opportunities to create substantial value over time. 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," he said.

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