BHP ups dividend despite falling profit

Allan Seccombe | Wed, 12 Aug 2009 08:49
[miningmx.com] -- UNLIKE its global resource peers, BHP Billiton not only paid an annual dividend but increased it despite operating profit nearly halving for the year, which was marked by tremendous price volatility.

BHP, the world's largest resources group, paid out a full-year dividend of $0.82/share against the previous year's $0.70. Analysts said the dividend was bang on target with forecasts.

Profits from operations fell to $12.2bn from $24.2bn a year earlier. Attributable profit fell 62% to $5.9bn. Revenue declined 16% to $50bn.

"2009 was probably the most challenging period I can recall," CEO Marius Kloppers said.

Despite those difficult conditions, BHP generated record cash flow of $18.9bn and an industry-beating EBIT margin of 40%, which allowed it to fund capital expenditure of $11bn for the year and increase its dividend, he said. BHP reduced its debt to $5.6bn.

"It leaves us well positioned to invest in growth and participate in opportunistic mergers and acquisitions," he said.

Major diversified companies like Anglo American and Xstrata have witheld their dividend payments.

It was premature to to assume any quick return to "historical trend growth" despite signs of stabilisation across many key indicators, Kloppers said.

"Our outlook is that China has restocked and we'll see that activity pulling back a little bit. Then we certainly see a stabilsation in some of the other major economies -- the EU, Japan, the United States -- and we'll see restocking commence there. We've started to see that. It's a low base at the moment," he said.

"The interplay of all these things leads me to believe it will be 2010 before we see a clean set of underlying demand figures without all of these stocking movements," he said.

Macquarie Research Equities said: "BHP Billiton has been one of the more cautious voices in the commodity space in recent times, and its outlook acknowledges the improvement in the outlook we have seen, but still reads very cautiously."

Looking at nickel, Kloppers said the dynamics of the market had been changed by new technologies and new production being adopted, like the production of nickel pig iron by Chinese blast furnaces and electric furnaces.

"Both these developments have changed the dynamics of the nickel market a little bit and it probably means nickel prices, we believe, will be capped to the upside because we 've got a large installed capacity of ready capacity to kick in when demand picks up," he said.

"It doesn't change our commitment to the product at all and we believe the portfolio as reconfigured is one that we're committed to and in due course we want to grow."