BHP BHP Group Limited

   By Rhiannon Hoyle 
 

SYDNEY--Mining giant BHP Billiton Ltd. (BHP.AU) swung back to profit in its fiscal first half, reflecting higher commodity prices, continued cost cutting, and the absence of large writedowns that had ravaged its bottom line a year earlier.

The improvement prompted the world's No. 1 miner by market value to more than double its dividend, after only a year ago scrapping a pledge to keep its payout steady or rising because of weak markets.

Global miners have been benefiting from an upswing in commodity prices that's enabled them to rebuild their balance sheets following a deep multiyear downturn. Iron ore almost doubled in value in 2016, and prices for natural resources including coal and crude oil also rose.

BHP on Tuesday reported a net profit of US$3.20 billion for the six months through December, which compared to a loss of US$5.67 billion in the same period a year earlier. The year-ago result was linked to multiyear lows in commodity prices and roughly US$6 billion in one-off charges--mainly write downs against U.S. energy assets.

Underlying profit increased to US$3.24 billion, from US$412 million a year earlier, it said. That prompted an increase in the BHP's half-year payout to 40 U.S. cents a share, from 16 cents this time last year. The miner earlier promised to offer shareholders at least 50% of underlying profits each fiscal half.

"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," said Chief Executive Andrew Mackenzie. BHP recorded its worst-ever annual loss last fiscal year.

Despite the upswing in world commodity markets, BHP said it remains focused on improving the efficiency of its operations and paying down debt, after building up a large pile of borrowings in recent years as the company expanded sites churning out commodities including iron ore and petroleum.

The miner said net debt fell 23% to US$20.06 billion at the end of 2016. It said it is on track to meet a target for US$1.8 billion in productivity gains this fiscal year, excluding any impact from industrial action at its Escondida copper mine in Chile.

Last month the company reported mixed production results for the period. It recorded a 7% decline in copper output, mostly linked to disruptions to its remote Olympic Dam mine in South Australia state. Petroleum production fell 15% after BHP deferred the development of some onshore U.S. fields.

Still, output from its vast iron-ore operations-BHP is the world's No. 3 iron ore exporter-was up 4% as the company increased production from its newest iron-ore mine, Jimblebar, in Western Australia.

BHP said substantial progress was being made on social and environmental remediation programs at its Samarco iron-ore venture in Brazil following a deadly dam spill in 2015. The collapse of a dam built at the Samarco mine that it jointly owns with Vale SA (VALE) released an avalanche of sludge that killed 19 people and polluted more than 400 miles of rivers.

-Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

February 21, 2017 00:57 ET (05:57 GMT)

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