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BHP half-year underlying profit down 8% to $3.7bn

BHP CEO Andrew Mackenzie

BHP CEO Andrew Mackenzie

Photo by Bloomberg

19th February 2019

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Diversified major BHP reported an 8% decrease in half-year underlying profit and said its earnings from its copper division fell sharply in the six months.

Underlying attributable profit fell from $4.1-billion in the half-year ended December 2017, to $3.7-billion in the half-year ended December 2018.

Profit after tax was up by 87% on the previous corresponding period, to $3.76-billion, and included an exceptional gain of $32-million, compared with profit of $2-billion in the prior-year period, which included an exceptional loss of $2-billion.

Revenue only increased by 1% year-on-year in the half-year period to $20.74-billion.

Underlying earnings before interest, tax, depreciation and amortisation (Ebitda) reached $10.5-billion in the six months to December, at a margin of 52% from continuing operations, while net operating cash flows were reported at $6.7-billion and free cash flow at $3.6-billion.

Ebitda from the copper division fell to $1.92-million, from $3.19-million in the half-year ended December, and was offset by higher petroleum and coal Ebitda.

BHP reported a negative productivity movement of some $460-million during the interim period, which reflected a negative impact of $835-million related to unplanned production outages at the Olympic Dam operation, following an acid plant outage in August; the Western Australian iron-ore operations, following a train derailment in November; the Spence operation, where a fire was reported at the electrowinning plant in September; and the Nickel West operations, where a fire at the Kalgoorlie smelter occurred in September.

This impact was partially offset by the build-up of inventory levels during the outages, as well as record volumes from the Jimblebar and South Walker Creek operations.

CEO Andrew Mackenzie told shareholders that a strong second half was expected to partially offset the impacts from operational outages in the first half, with unit costs across the business forecast to improve.

BHP’s productivity guidance is expected to be flat for the 2019 financial year, reflecting the unplanned production outages.

Mackenzie said that the group continued to have a strong balance sheet and that it had returned the $10.4-billion net Onshore US proceeds to shareholders in the form of a $5.2-billion off-market share buy-back completed in December 2018, and a $5.2-billion special dividend paid in January 2019.

BHP on Tuesday announced an interim dividend of 55c a share, which equated to a pay-out ratio of 75%.

Meanwhile, capital and exploration expenditure in the six months to December reached $3.5-billion, with the full-year guidance remaining unchanged at below $8-billion for 2019, as well as for the 2020 financial year.

“We have a portfolio of attractive development opportunities and have recently approved the West Barracouta and Atlantis Phase 3 projects in petroleum, and had early success in our oil and copper exploration programme. We are confident in our plans to increase shareholder value and returns,” Mackenzie said.

The miner is expected to produce between 113-million and 118-million barrels of oil equivalent, between 1.6-million and 1.7-million tonnes of copper, between 241-million and 250-million tonnes of iron-ore, about 43-million to 46-million tonnes of metallurgical coal, and between 28-million and 29-million tonnes of energy coal.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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