BHP Focused on Value, But Mindful Growth Needed, Says CFO
21 November 2018 - 01:15PM
Dow Jones News
By Rhiannon Hoyle
SYDNEY--BHP Group Ltd.'s (BHP.AU) chief financial officer
labelled the miner a value investor, although cautioned the
minerals industry risks investing too little in future projects
amid a sharp focus on shareholder returns.
Companies including BHP, the world's largest miner by market
value, and Anglo-Australian rival Rio Tinto PLC are throwing off
billions of dollars to shareholders via dividends and share
buybacks, making good on a pledge to increase payouts after digging
their way out of a steep market slump.
Value over volume emerged as the mantra of the mining industry
during the downturn, which was characterized by an oversupply of
commodities such as iron ore as miners completed new projects just
as demand began to cool.
"This organization was a growth investor, it made decisions with
a growth mentality," Peter Beaven told an investor briefing in
Australia on Wednesday.
"Today--geez, I'm going to live to regret this--we are a value
investor; we are a deep value investor," he said, referring to a
style of investing focused on undervalued assets that has been
championed by the likes of Benjamin Graham and Warren Buffett.
Still, worries are emerging that miners are sacrificing
opportunities for growth such as building mines or doing deals.
Mr. Beaven said past mistakes continue to haunt the industry.
Miners in recent times wrote down many billions of dollars' worth
of investments bought at near the peak of the last boom. "The
result is that trust has been dented and the industry's license to
invest curtailed," he said.
In 2017, BHP, Rio Tinto, Glencore, Vale and Anglo American PLC
showered investors with dividends worth more than 50% more than the
prior year, according to S&P Global Ratings, which has forecast
even fatter returns in the years ahead.
While payouts have risen, capital spending dropped to US$48.3
billion in 2017 from a peak of US$150.1 billion in 2012, according
to commodities consultancy Wood Mackenzie. That could fall further
over the next few years if more projects aren't approved.
Mr. Beaven cautioned a narrow focus on cash returns might come
at the expense of investment needed for the long run.
"The risk is we confuse no investing with good investing,"
he said. "We need to find a balance."
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
November 20, 2018 21:00 ET (02:00 GMT)
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