BHP Pledges Record Payout as Profit Surges -- Update

Date : 20/08/2019 @ 12:14
Source : Dow Jones News
Stock : BHP Group Limited (BHP)
Quote : 36.26  0.29 (0.81%) @ 18:50
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BHP Pledges Record Payout as Profit Surges -- Update

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By Rhiannon Hoyle 

SYDNEY -- BHP Group Ltd. said it would pay a record dividend to shareholders, making it the latest global miner to lift returns even as data point to a global slowdown in economic growth.

BHP benefited from a sharp rise in iron-ore prices as China increased infrastructure spending and as supply was held back by production cuts in Brazil following a second deadly spill of mining waste in the past four years.

On Tuesday, BHP said it would pay a dividend of US$1.33 a share for the full year, above its own policy of returning 50% of earnings to shareholders. The miner reported a US$8.31 billion net profit for the 12 months through June -- its highest in five years -- reflecting the higher iron-ore price and one-off charges much lower than a year earlier.

Underlying profit rose by 2% to US$9.12 billion, the company said.

Mining profits have recovered sharply in recent years, as companies sold assets and focused on producing commodities with better profit margins.

Rio Tinto PLC, the world's second-biggest mining company by market value, said this month it would pay a special dividend and raise its midyear payout. The windfalls came even as its first-half net profit fell because of a write-down of the value of a major copper investment in Mongolia. Last month, Anglo American PLC said it would buy back US$1 billion in stock and raised its interim dividend by 27% as it reported a jump in half-year earnings.

Chief Executive Andrew Mackenzie said that BHP has begun the new fiscal year with positive momentum but that the outlook was clouded by the U.S.-China trade dispute. Mining companies are also having to deal with rising demands by governments as several mineral-rich countries seek more profits from mining projects.

"We are not without some consideration to what might be around the corner," Mr. Mackenzie said.

BHP expects global growth this year to be near the low end of a 3.25%-3.75% range.

The International Monetary Fund lowered its projection last month for global growth to reflect the ongoing fallout from trade tensions. It predicted real global economic growth will slow to 3.2% this year, 0.1 percentage point slower than forecast in April, and down from 3.6% last year.

Any further escalation in the trade war, or loss in business confidence, could damp growth and hurt commodity demand and prices in the year ahead, BHP said.

Much depends on China's response. Beijing has moved to shore up its economy with stimulus, which has buoyed demand for commodities in the mining sector's most-important market. "We continue to enjoy strong sales to China," Mr. Mackenzie said.

Record steel production at Chinese mills contributed to iron-ore prices surging to a five-and-a-half-year high in July. BHP, along with many peers, has faced supply restraints: The Samarco mine that it operates in Brazil with Vale SA remains offline after a tailings dam burst in 2015. A cyclone and a train derailment in Australia meant its iron-ore production was flat last year.

BHP said its annual profit was held back by US$818 million in one-time charges, mostly tied to the Brazilian dam failure. Still, one-time charges were sharply lower than the US$5.23 billion absorbed in the 2018 fiscal year that dragged its net profit down to US$3.71 billion for that period.

Net debt fell to US$9.2 billion at the end of June, below the company's stated US$10 billion-US$15 billion target range.

BHP said it is now seeking to keep net debt between US$12 billion and US$17 billion, following a change to accounting rules. It expects net debt to remain at the lower end of this range in the near term.

Mr. Mackenzie dismissed questions about his tenure at BHP, where he has been chief executive since 2013. The miner is embarking on a new phase after selling unwanted assets, including its U.S. shale operations. "I have all the energy and enthusiasm to continue to lead that," he said.

Write to Rhiannon Hoyle at


(END) Dow Jones Newswires

August 19, 2019 21:59 ET (01:59 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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