Melbourne: BHP Billiton, the world’s biggest mining company, reported first-half profit jumped as commodity prices surged on increased demand from China, signalling growing confidence in the rally with a better-than-expected dividend and a bond buyback.
Underlying profit rose to $3.24 billion in the six months through Dec. 31, Melbourne-based BHP said in a statement on Tuesday. That compared to $412 million in the same period a year earlier, when miners’ earnings cratered amid a collapse in prices. The result beat the $2.94 billion average estimate among seven analysts surveyed by Bloomberg.
The interim dividend rose to 40 cents a share, from 16 cents a year earlier, and was higher than the minimum amount set out under a policy that ties returns to profits, BHP said. The payment compared with a Bloomberg Dividend Forecast of 30 cents. The company cut net debt and will carry out a bond buyback of $2.5 billion.
A rebound in commodities from early 2016 has seen the mining sector transformed as China’s stimulus has spurred activity in property and infrastructure sectors, boosting demand for raw materials. BHP cautioned though that improved global growth will delayed by rising political uncertainty, saying the policy platform of President Donald Trump’s administration pointed to a higher-than-envisaged inflation environment.
"It’s still a pretty uncertain world out there, so they are being conservative” in flagging a continued focus on debt reduction, Andy Forster, a Sydney-based senior investment officer at Argo Investments Ltd., which manages about A$5 billion ($3.8 billion) in Australia, said by phone. "They may be cautious that the rally could just as quickly turn back around the other way.”
Copper production guidance for the 12 months to June 30 is under review as a result of industrial action at the Escondida mine in Chile, BHP said. BHP in January forecast total full-year copper output of 1.62 million tons, including about 1.07 million tonnes from Escondida.
"We are confident in the long-term outlook for our commodities, particularly oil, with markets expected to rebalance in the near term, and copper where we expect a deficit to emerge in the early 2020s,” Chief Executive Officer Andrew Mackenzie said in the statement.
Rio Tinto Group, the second biggest miner, this month reported its first full-year profit gain since 2013 and rewarded investors with a share buyback and a bigger-than-expected dividend. Anglo American Plc has reversed a plan to sell key assets, hatched in the depths of the industry’s crisis, amid stronger prices, people familiar with the matter said last week.
Prices for iron ore, BHP’s top earner, surged more than 80 per cent last year as China’s imports hit a record and advanced Monday to the highest since August 2014. The material is likely to be pressured in the short term on moderating Chinese steel demand growth, BHP said.