By Rhiannon Hoyle 

SYDNEY-- BHP Billiton Ltd. swung back to a profit and more than doubled its half-year dividend, even as it warned of heightened economic uncertainty in the near term.

The world's largest mining company by market value said the threat of rising protectionism risks derailing a recovery in global commodity markets that has pulled the resources industry out of one of the deepest downturns in decades.

In particular, BHP said the policy platform of President Donald Trump's administration could spark trade wars that weigh on business confidence, hurt investment and lead to higher inflation in the U.S. BHP's remarks are stronger than recent statements of other mining executives, some of whom have hailed Mr. Trump's policies as mining-friendly.

BHP and rivals including Rio Tinto PLC have rebuilt their profits on selling commodities like iron ore that form the backbone of infrastructure from highways to high-rise apartment blocks. They have also invested more in copper, anticipating that rising incomes in China and elsewhere will spur demand for a commodity used in consumer products such as saucepans and iPads.

On Tuesday, BHP reported a net profit of US$3.20 billion for the six months through December, compared with a loss of US$5.67 billion in the same period a year earlier when its bottom line was weighed by large write-downs against its U.S. energy assets. Directors lifted the half-year payout to 40 U.S. cents a share from 16 cents this time last year, beating market expectations.

However, BHP Chief Executive Andrew Mackenzie was wary of the protectionist rhetoric coming from the White House, even though a separate campaign pledge by Mr. Trump to unlock US$1 trillion in infrastructure spending could be good for commodity demand.

"Whilst there may be some short-term winners from some policies of protection and increased trade wars, most of us will be losers, and certainly the future demand for our products could potentially suffer if that were to spread," Mr. Mackenzie said.

Mr. Trump has criticized the trade policy of previous presidents and blamed prior trade deals for job losses. One of his first actions as president was to withdraw formally from the 12-nation Pacific trade agreement that had been a flagship policy of the former Obama administration.

Mr. Trump has singled out China for criticism, accusing it of keeping its currency artificially weak to support local manufacturers. BHP said China's exports could be challenged by rising protectionism, which would be a problem for mining companies as Beijing is the top buyer of many commodities including iron ore.

Mark Cutifani, chief executive of London mining giant Anglo American PLC, has cautioned Mr. Trump against pushing the world toward protectionism. Anglo reported on Tuesday that it had returned to profit in 2016.

BHP said it expects global growth to remain between 3% and 3.5% in 2017--with any improvement beyond that level delayed by what Mr. Mackenzie described as "quite a marked rise in geopolitical uncertainty or forecastability."

Mr. Mackenzie said it is too early to comment on how White House policy may affect its investments in the U.S.

BHP's U.S. business centers on oil-and-gas assets, though, that are quicker to ramp up and down than mining operations, he said. "We can respond relatively quickly when the policy outlook is a little bit clearer," Mr. Mackenzie said.

He and BHP Chairman Jac Nasser met with Mr. Trump, then President-elect, in January, during which they discussed the impact the U.S. policy direction could have on resources markets, Mr. Mackenzie said.

He said he also pressed the importance of the international climate-change agreement reached in Paris, which BHP supports, although he declined to comment on Mr. Trump's responses in the meeting.

In contrast to the hawkish U.S. trade policy adopted by Mr. Trump, Asian governments were moving toward increasingly liberal trade regimes, which could be positive for resources demand in many key markets.

BHP's underlying profit--which strips out one-off items--increased to US$3.24 billion in its fiscal first half from US$412 million a year earlier, as it rode the recovery in global commodity markets. The price of iron ore roughly doubled last year from a more than decade low, while commodities including coal and copper also rose.

Mr. Mackenzie said BHP is confident in the long-term outlook for the commodities it produces, particularly oil. Still, the mining company promised to satisfy yield-hungry investors rather than chase expensive acquisitions.

"We were very keen to signal to our shareholders our commitment to strong cash returns," Mr. Mackenzie said.

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

 

(END) Dow Jones Newswires

February 21, 2017 05:40 ET (10:40 GMT)

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