Profit at world’s biggest miner BHP jump, but warns on costs, savings

BHP’s revenue from copper surged by nearly 60 percent backed by higher production from its Escondida mine in Chile, above. (Reuters)
Updated 21 August 2018
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Profit at world’s biggest miner BHP jump, but warns on costs, savings

  • The world’s biggest miner said it expected its strong momentum to continue into the medium term
  • BHP paid out a record final dividend of $0.63 a share, up from $0.43 a year ago, on the back of free cashflow of $12.5 billion
MELBOURNE: Global miner BHP posted a 33 percent jump in annual underlying profit and a record final dividend on Tuesday, but flagged a delay in future savings as well as cost pressures at some of its operations.
The world’s biggest miner, which has been focusing on simplifying its business and driving returns to shareholders, said it expected its strong momentum to continue into the medium term.
However, BHP Chief Executive Andrew Mackenzie said the miner was “a little more apprehensive” on the short-term outlook, given trade ructions between China and the United States, and analysts flagged concerns over rising costs.
For the year ended June 30, underlying profit, which excludes one-time gains and losses, rose to $8.93 billion from $6.73 billion, just below an estimate of $9.27 billion according to 15 analysts polled by Thomson Reuters.
BHP paid out a record final dividend of $0.63 a share, up from $0.43 a year ago, on the back of free cashflow of $12.5 billion from a strong operating performance and higher commodity prices. “A pretty solid result really. I think largely in line with what the market expected,” said portfolio manager Andy Forster of Argo Investments in Melbourne. “Definitely the cash flow was strong, the dividend probably a bit stronger than what we expected.”
However, a cut in productivity gains expected in fiscal 2019 — to $1 billion from a previously promised $2 billion — “slightly took the gloss off the results,” he added, although the miner pledged to make the additional savings in 2020.
BHP also noted some cost creep due to geotechnical issues at its Queensland coal operations, rising fuel costs, and pockets of inflation in labor.
“The dividend was better than expected, but the slight fiscal 2018 (earnings) miss and fiscal 2019 cost guidance is likely to cause us to take down estimates modestly,” broker Clarkson Platou said in a report
Shares in BHP fell 1.8 percent in afternoon trading, compared with a 1 percent fall in the broader Australian market and a 0.8 percent dip in rival Rio Tinto.
Including one-time charges, BHP’s profit fell 37 percent to $3.71 billion.
These included a $2.8 billion post-tax charge from the sale of BHP’s US shale oil and gas assets in July which ended a disastrous seven-year foray into shale.
BHP said that it would not make a decision on how to return profits from the sale to investors until it was finalized.
The company also took a $650 million charge for the 2015 Samarco dam failure in Brazil that killed 19 people.
Total revenue rose 20 percent to $45.81 billion. Revenue from iron ore mining, BHP’s biggest division, edged up 1.3 percent, while copper surged by nearly 60 percent backed by higher production from its Escondida mine in Chile.
Revenue from its petroleum division grew 14.5 percent on surging oil prices.
BHP said it cut net debt to $10.9 billion, at the lower end of its $10-15 billion target.


French state-owned bank drops plan to aid trade with Iran

Updated 24 September 2018
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French state-owned bank drops plan to aid trade with Iran

PARIS: French state-owned bank Bpifrance has abandoned its plan to set up a mechanism to aid French companies trading with Iran, in the face of US sanctions against Tehran.
Earlier this year, the bank had said it was working on a project to finance French companies that wished to export goods to Iran despite US sanctions.
“It’s put on hold,” said Nicolas Dufourcq, Bpifrance’s chief executive. “Conditions are not met (...) Sanctions are punitive for companies.”
Bpifrance was working on establishing euro-denominated export guarantees to Iranian buyers of French goods and services. By structuring the financing through vehicles without any US link, Bpifrance thought it was possible to avoid the extraterritorial reach of US legislation.
Dufourcq’s latest comments show how the scope of the sanctions is making trade with Iran increasingly difficult for European companies.
The United States is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
Even though several European countries have said they are seeking to protect their companies from the sanctions, several major companies including oil company Total, Air France-KLM and British Airways have announced they would suspend activities in Iran.
German officials have in recent weeks advocated for the creation of an independent system for cross-border payments to make trade with Iran possible even with the US sanctions.
European Union diplomats have said US President Donald Trump’s positions on trade and on Iran were fueling a rethink about the EU’s dependency on the US financial system.
However, European countries appear to be struggling to find or agree on effective options to tackle the issue.