BHP Billiton posts record final dividend as profit surges

BHP Billiton declared a record final dividend as higher prices and volumes sent the world's biggest miner’s underlying annual profit up by a third, though some investors still managed to find the results a disappointment.

Underlying attributable profit for the year to the end of June rose to $8.9bn (£6.9bn) from $6.7bn a year earlier, below the average analyst forecast of $9.27bn collated by Reuters. The FTSE 100 company's final dividend rose to 63 cents a share from 43 cents a share, taking the 2018 annual payout to 118 cents a share.

BHP’s chief executive Andrew Mackenzie said: "We have announced a record final dividend for shareholders which reflects strong operating performance, solid prices and capital discipline … Our balance sheet is strong, with net debt now at the lower end of our target range, and our investment plans on track across iron ore, copper, coal and petroleum.”

The Anglo-Australian miner has announced or completed the sale of more than $18bn of assets in the past six years, largely in response to tumbling commodity prices in 2015. The sales have helped reduce BHP's net debt to $10.9bn from $26.1bn two years ago. In July the company announced the sale of US oil and natural gas assets for $10.8bn to BP.

Commodity prices have recovered from their lows, prompting a more than doubling of BHP’s share price since early 2016. The company said its 2018 performance was driven by rising prices and an increase in volumes, partly offset by higher costs.

Mackenzie said he expected strong momentum to continue in the company’s “dramatically simplified portfolio”. But the strong dollar, weak Chinese data and concerns about emerging markets have weighed on the shares of BHP and other miners in recent days. BHP warned over the potential impact of the trade wars on global growth, predicting the US would lose out in terms of its international competitiveness.

BHP recorded an exceptional loss of $650m last year linked to the failure of the Samarco dam in Brazil. The disaster at the Samarco iron ore operation in Brazil, a joint venture between BHP and the Brazilian miner Vale, killed 19 people and flooded three communities leaving people homeless. BHP has said it will defend a class action brought by investors over the disaster.

Another disappointment was a halving of the $2bn of productivity gains expected in the new fiscal year, although BHP pledged to make additional savings in 2020.

Shares in BHP fell 2% to 1,610p by mid afternoon on Tuesday.

The financials were "strong but slightly behind our expectations," said broker Shore Capital, "particularly in relation to the bottom line", while others said the US-China trade skirmish was weighing on the shares.

ShoreCap analyst Yuen Low also noted that BHP’s potential ultimate liability for the burst Samarco dam in Brazil remains unclear, with the company recording a $650m post-tax hit in the results. However, Low reminded clients that there is still no provision related to the governance agreement outlined in June 2018, "so we would not be surprised to see further significant impairments come through in FY2019".

Analysts at BMO Capital Markets said the results were "a touch light" versus estimates and flagged rising costs.