BHP Billiton slashes dividend amid plunging commodity prices

Global mining giant BHP Billiton Tuesday posted a first-half net loss of US$5.67 billion and slashed dividends as plunging commodity prices on the back of a slowing Chinese economy hammered the bottom line.

By contrast, France’s Thales rose 5 percent as the company raised its dividend after posting higher-than-expected core profit and record orders in 2015, kicking into a higher gear after years of lacklustre growth.

Underlying profit fell to $412 million at its continuing operations in the six months to December 31, from $4.9 billion a year earlier, Melbourne-based BHP said on Tuesday in a statement.

BHP also ditched its progressive dividend policy – which held that it would pay an equal or higher dividend at each half-year result – to protect its A credit rating, the highest of any decimated mining company.

“While we were prepared for lower prices across our commodities, we now believe the period of weaker prices and higher volatility will be prolonged”, BHP said. JPMorgan Chase & Co. decreased their price target on shares of BHP Billiton plc from GBX 750 ($10.61) to GBX 550 ($7.78) and set an “underweight” rating for the company in a research note on Monday, January 18th.

BHP Billiton now expect commodity prices to remain lower for longer, with greater levels of volatility. BHP plans to adopt a new policy linked to its underlying attributable profit, paying out at least 50% of the total during each reporting period.

BHP produced its Pilbara iron ore at a cash cost of $US15.21 in the first half of the year, and maintained its $US15/t for the rest of the year.

He added that the decision to scrap the progressive dividend policy had not been taken lightly, but that it was “a determined response to changing markets”.

In the clearest sign yet of the deteriorating backdrop for the global mining industry, BHP-the world’s largest mining company by market value-bowed to pressure by slashing its midyear dividend by 74% to 16 cents a share. Glencore and Anglo terminated their dividends past year.

“We have already responded decisively to the changed conditions”, he said.

“We enter this downturn from a position of strength, with the simplest portfolio of highquality assets, sector-leading operating capabilities, rising capital flexibility as current projects are completed and a strong balance sheet”.

The company has fully written down its investment in Samarco, but Mr Mackenzie said it is too early to estimate the full financial impact.

It also launched a management shake-up resulting in the departure from the group of two executives – the president of its Australian iron ore business, Jimmy Wilson, and its petroleum president Tim Cutt.